Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
There are three major basins in Europe: Southern North Sea (offshore fracking - that's a non starter), Northern Germany, Poland (that's why some people in Poland are dreaming of becoming the next Norway). See this report (page 17) or this report by Eon. The latter report is especially interesting since it's by an energy major and says:

􀁹 Gas prices of $4/mmbtu (~10/MWh) indicate that development, drilling and production is competitive

􀁹 Some studies (BENTEK) estimate breakeven costs below $3/mmbtu (~7/MWh) for various shale plays possible

􀁹 Even conservative estimate (Wood Mackenzie) for breakeven cost lower than current gas forward prices of $7/mmbtu (~17/MWh)

􀁹 Both investment and production decision with very short time lag


Estimates indicate that economical breakthrough requires gas prices above 25/MWh (~$10/mmbtu)

􀁹 European gas forward prices (NBP) currently at 13/MWh for 2012 (~$5/mmbtu)

􀁹 Optimistic estimates put breakeven cost at 14/MWh (~$6/mmbtu) in Hungary and at 25/MWh (~$10/mmbtu) in Poland

⇒ These estimates do not reflect uncertainties such as dry wells, Estimated Ultimative Recovery (EUR), assumed initial production

And thus...
Unconventional gas resources are 7 times smaller in Europe compared to North America 􀁹 Geology of unconventional gas in Europe is not well understood so far 􀁹 Access to resources more difficult than in North America 􀁹 Higher environmental constraints 􀁹 Services more expensive ⇒ Production will be later, slower and more expensive than in North America
They expect 10-15 bcm/year to be produced after 2020 but more and more (the vast majority) of the 600+bcm/year will still have to be imported. So "No 'unconventional gas revolution' in Europe."

Regarding Eon's assumption that "Gas prices of $4/mmbtu (~10/MWh) indicate that development, drilling and production is competitive" one has to say that the question whether US plays are so easily economical is controversial. On the one side there are the industry guys who say it's abundant AND cheap. Then there are people like Arthur Berman who say that the manufacturing model has failed and the current glut keeps gas prices artificially low by draining shareholder equity for drilling. "It seems inevitable to me that it is sort of a bubble phenomenon; but bubbles can go on for 25 years or so, even though everyone knows that's what's happening. As long a capital markets continue to fund these things it's going to keep on going. I'm not saying that's even a bad thing, though I wouldn't put any money in it, that's for darned sure."

The US experience indicates that of those vast areas only a relatively small central area is economically viable for production. So this and more stringent environmental regulations (can't dump millions of liters of drilling fluids by 'surface disposal' and build roads at will) will ensure that Northern Germany probably won't look like this:

Schengen is toast!

by epochepoque on Tue May 31st, 2011 at 05:24:12 PM EST
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