Its always interesting to read the progress other countries are making with shale gas development. In the case of Poland, their national auditing agency criticized the Polish government for the slow pace at which they are developing out the industry. Poland is in a unique situation whereby it great shale gas potential and currently depends on Russia for about 70% of its natural gas needs. In addition, Poland is building a LNG facility on their northeast coast to import natural gas for domestic consumption and potential transport to Ukraine – another Russian natural gas dependent.
Article: Polish auditors slam government for slow pace of shale gas development
Following up on our early and ongoing coverage of the far reaching geopolitcal and economic impact of shale gas (See HRN Sept. 2010 Natural gas to bring about far reaching geopolitical changes), Ukraine Prime Minister Mykola Azarov has stated in no uncertain terms that his country will cut imports of Russian natural gas by 66% within 5 years.
Azarov’s comments emphasize the Ukraine’s worsening relations with Russia and the failure to re-negotiate a controversial 10-year gas agreement signed in January 2009. At the same time it also emphasizes the growing importance of shale gas reserves within the Ukraine to reduce dependence on Russia for natural gas.
The Ukraine estimates it will import 40 billion cubic meters of natural gas from Russia in 2011. Extensive exploration has already been completed on Ukraine’s shale gas potential, and plans to start shale gas production within years. The hopes shale gas production will reduce natural gas imports 5 Bcm per year.
Estimates are that the Ukraine has between 1.5 trillion and 2.5 trillion cubic meters of shale gas according to statements in June based on preliminary results of a survey that had been financed by the US government. The US government have also been very supportive of Poland’s desire to develop shale gas assets. Support that was confirmed with President Obama’s visit to Poland earlier this year.
Source: Ukraine to cut gas imports from Russia by 66% within 5 years: PM
See Also: June 8, 2011: Poland Targeting Shale Gas With Exxon, Chevron to End Russian Dominance
The Government of Bulgaria is reported to be days away from signing a deal with Chevron Corp to explore a potentially huge shale gas field in northern Bulgaria adding to the growing potential of natural gas having a major geopolitical impact on Europe’s energy market. Bulgaria is added to a growing list of European countries looking to reduce their energy dependence on Russia’s Gazprom.
Early reports have initial estimates of potential reserves between 300 billion and 1 trillion cubic metres of shale gas, which could be enough to meet Bulgaria’s gas needs for the next 300 years. To say the least it could have a major impact on Bulgaria. The opposition Socialist Party and certain green groups oppose exploration and development of the targets due to concerns around the fracking process and potential damage to the environment and water sources.
Bulgarian Energy Minister Traicho Traikov is quoted as stating;
“The use of one’s own resources has a potential that not a single country can allow to neglect. Because it gives security, independence and lower consumer prices”.
Total shale gas reserves in Europe west of Russia is estimated at ~18 trillion cubic meters. Shale gas exploration is already underway in Austria, Germany, Hungary, Ireland, Poland, Sweden and Great Britain. France has banned shale gas drilling over fracking concerns.
See other related stories on Horn River News: Natural gas to bring about far reaching geopolitical changes
Reuters: Bulgaria seeks to ease fears on shale gas drilling
In past articles we have spoke about the dramatic geopolitical impact shale gas discoveries will have on the world. Probably one of the most profound regions to be impacted will be eastern Europe with the potential discovery of huge shale gas deposits in Poland (see Horn River News, April 9, 2010: Polish shale gas to decrease dependence on Russian gas)
Wood Mackenzie estimates that shale gas plays in Poland may reach 48 trillion cubic feet (1,36 trillion cubic metres) and if this proves to be an accurate number, then Poland would become self-sufficient for years to come. Currently, Poland imports as much as 72% of its natural gas needs.
Shale gas exploration and development in Europe is playing out like it did here in North America. Up till recently, the shale gas play in Europe has been about the “land rush” as various companies compete to acquire land licenses for exploration and development. Similar to the shale basins across North America, the land rush to acquire specific assets in the EU has been feverish and includes the participation of some of the world’s largest oil and gas companies.
But now EU shale gas has reached an important milestone in Europe. Conoco Phillips recently completed the first successful well and has a second one scheduled for completion in the coming weeks. These two wells may mark the first shale gas production in Europe, and be the beginning of a dramatic change in the geopolitical influences of Eastern Europe where countries like Poland are eager to dissolve their dependence on Russian natural gas and Russian political influence along with it.
For years, Russia has retained strong political influence over eastern Europe through the control of natural gas supplier Gazprom which supplies about 25% of Europe’s natural gas needs.
A substantial supply of natural gas in Europe from new shale gas discoveries would further add to the overall amount of natural gas competing for energy hungry European customers and perhaps put Russia in a rather uncomfortable position as they lose their past leverage and find themselves desperately fighting for customers. All of a sudden the shoe is on the other foot as it were…
With natural gas reserves potentially realizing a massive increase on a global scale in key areas of energy demand, there could possibly be one of the most dramatic transitions in the global energy mix underway (and we have not even mentioned the possibilities around methane hydrate… that is another story all together).
Natural gas will be the most important fuel source of the next century as it impacts both the global energy mix, and geopolitical stage.
HRN has reported numerous times how shale gas will change the geopolitical landscape of the world. More specifically, how new shale gas discoveries in Europe will reduce EU dependence on Russian natural gas, and reduce Russia’s influence on those that depend on Russian natural gas.
According to a recent London Times article Wood Mackenzie estimates that shale gas plays in Poland may reach 48 trillion cubic feet (1,36 trillion cubic metres). The deposits are said to similar to the Montney basin in British Columbia.
ConocoPhillips has plans to start drilling near the Polish coastal city of Gdansk in May in addition to Exxon-Mobil, Marathon, and Talisman Energy, who all have projects there. If current expectations are confirmed, Europe’s natural gas deposits would increase by 47% which would provide enough natural gas for Poland for some time and have a significant impact on that region’s dependence on Russian natural gas. Poland currently imports 72% of their gas from Russia.
Oisin Fanning, the executive chairman of San Leon Energy, a British company partnered with Talisman Energy is quoted:
“There is a landgrab under way. Poland is going to emerge as a significant gas producer and there is a lot of interest. All of the majors are coming in and Gazprom is looking at this with some alarm.”
Eager to diversify their energy sources and reduce their dependence on Russian gas, the Polish Government is offering attractive terms. Mr. Fanning is quoted:
“These are some of the best fiscal terms in the world. The Government is creating a very large commercial incentive to develop these deposits.”
Russia’s Gazprom will not lose much financially as natural gas will be sold to China who is eagerly increasing natural gas usage. However, the influence that Russia may have over Poland and other EU countries may be dramatically diminished without the leverage of natural gas during cold winter months in Poland.
Times Online: Dash for Polish gas could end Russian stranglehold
Posted in Uncategorized
Tagged ConocoPhillips, EU, Europe, Exxon Mobil, Gazprom, Gdansk, Marathon, Montney basin, natural gas, Oisin Fanning, Poland, San Leon Energy, shale gas, Talisman Energy, wood mackenzie
The international potential of natural gas has a number of shale gas development projects underway. Another Horn River basin in Europe would have a major geopolitical impact on EU / Russian relations.
But according to the Moscow Times, a Gazprom spokesman on Monday dismissed concerns that a growth in the production of shale gas would pose a threat to the company’s foreign sales.
Gazprom spokesman Sergei Kupriyanov reportedly said in an interview with Russia Today television;
“The speculations that shale gas is cheaper than the Russian gas are not true” He added, “It’s a big question whether they are going to make such investments now that the price of gas has dropped on the U.S. market”.
Major natural gas producers in North America have shifted focus to shale gas due to lower production costs. According to various sources, shale gas can reach a break-even point of $4.00 to $4.50 with cost improvements continuing to reduce these costs. Conventional natural gas has a break-even point around $7.00.
Contrary to Mr. Kupriyanov’s statements, major producer continue to invest billions into shale gas plays like BC’s Horn River basin, with many selling conventional producing assets to finance their strategic shift towards shale gas. And apparently low natural gas prices have not delayed plans for two pipelines to carry natural gas from Russia to Germany and Bulgaria under the Black Sea. Mr. Kupriyanov commented that the Nord Stream pipeline (Russia to Germany) was on schedule to be operational in 2011.
In recent years, Gazprom has cut off natural gas supplies to neighboring countries over price disputes. Many European countries are dependent on natural gas imports from Russia. A potential shale gas discovery within the EU or increased LNG imports, would be a welcome alternative to Russian supplies, and would have a big impact on Russian influence in eastern Europe that Moscow leverages as the primary natural gas provider.
Moscow Times: Gazprom: Shale Gas No Threat