By Charles Kennedy:
More than 400 shale oil and gas wells will be drilled outside of the US in 2014, most of them in China and Russia, while Europe largely sits on the sidelines of the so-called revolution, according to energy consulting firm Wood Mackenzie Ltd.
The geological conditions—not to mention the public support—for a shale revolution don’t exist in Europe on the level that they do in the US, but Russia, China, Algeria and Argentina, among others are gaining shale momentum.
Russia alone has the technology, infrastructure, water and political will to be the next revolutionary shale venue—not to mention a lot of sparsely-populated space in which to drill without public backlash. The key venue here is the oil-bearing deposits of the Bazhenov shale place in Western Siberia.
For China, the shale revolution is already underway—at least on paper. Late last year, Beijing released a Cabinet-level White Paper calling for the production of 6.5 billion cubic meters of natural gas from shale formations by 2015, and 100 billion cubic meters by 2020.
In theory, China can compete with Russia in terms of shale development, but in reality, it’s rather far behind.
Algeria has large reserves and greater potential because the government is keen on making it more attractive for foreign investors. Algeria’s shale gas estimates tripled from the initial 231 trillion cubic feet of 2011 to 707 Tcf today, and Europe is eyeing this greedily because it’s easy to get to Europe and could supply the European Union for a decade.
Algeria is also being spotlighted because the government took measures earlier this year to attract more investors specifically to its shale plays, with profits-based taxes to replace gross income taxes and long-term licensing to reduce some of the exploration risk.
While the European Union as a “whole” has virtually no chance of a shale revolution, due to divisions over fracking that take half the plays out of the game, two venues have promise: Poland and the UK. But overall, there probably aren’t enough shale resources in Europe to make it worth all the political upset this would cause.
Fracking in the UK will start next year, after the government lifted an 18-month moratorium imposed when a fracking company found it had accidentally caused earthquakes.
Outside of the EU, we have Ukraine, which is keen to lure investors in to develop its shale potential. There are three key shale plays Ukraine is looking to develop with the help of foreign companies. Together, the three plays contain an estimated 3 trillion cubic meters of gas.
In the first week of November, the government of Ukraine approved a draft agreement with Chevron Corp. for shale gas extraction in the Olesska deposit in the Lviv region, which could produce as much as 10 billion cubic meters of gas annually.
Investment is picking up in Ukraine, as Kiev works to loosen the stranglehold Russia’s Gazprom has on the country and to build its energy independence as well as that of Europe as a whole.
In January, Kiev signed a production-sharing agreement with Royal Dutch Shell, which pledged to invest up to $10 billion to explore Ukraine’s unconventional gas potential.
This piece is cross-posted from OilPrice.com with permission.