Analysis

Understanding shale gas

 In the second of a two part series on the major issues surrounding shale gas extraction in Central and Eastern Europe, Andrew Ryan looks at how the academic debate could develop.

Fracking in Krynica, Poland.Image licensed on Creative Commons by Karol Karolus.

Fracking in Krynica, Poland.
Image licensed on Creative Commons by Karol Karolus.

It seems that you can hardly get away from shale gas at the moment. There is an unbelievable amount of material out there: from industry and country reports, to newspaper articles and even feature length films. Yet, the majority of this material, most notably those from business intelligence companies, originates from a small cluster of academic work, indicating a dire shortage of these studies.

If you venture into this literature you will come across the same references again and again to the four or five truly original pieces of work, including Florence Geny’s 2010 piece at the Oxford Institute for Energy Research, another by JRC in 2012 and the Kosciuszko Institute’s report in 2011. The rest of the literature can usually be divided up into business intelligence reports and news articles. While generally reliable, the business intelligence reports are usually condensed versions of the aforementioned works, while news articles are overly concerned with the environmental impacts of fracking, public opinion and a frightening amount of guesswork. The literature around this subject is quite the minefield.

I see three ways in which academic research can and should develop:

  1. Firstly, it needs to begin employing mathematical modelling of energy prices and supply and demand in order to gauge the impact of shale gas. This would help predict the actual impact that extraction will have on an EU energy system under climate constraint, price liberalisation and trade balances with Russia. From initial research in this area it seems that there will be only minimal changes in the trade balance, when combined with an increased consumption of gas.
  2. Secondly, more geological research needs to be done. Notwithstanding efforts made by the US Geological Survey among others, Eastern Europe still lags well behind the geological knowledge of shale reservoirs built upon so successfully by the USA. This work can help in two respects. Firstly it can aid exploration companies in finding much-needed sweet spots and secondly it increase overall knowledge of shale plays.
  3. Finally, and this is an imbalance I am attempting to redress, the focus needs to shift away from the determinism of resource estimates and technological ability. Economically viable extraction is not simply a product of the presence and removal of resources. The USA’s success was based on the ability of institutions and companies to encourage and support production. In essence, research is needed to gauge the institutional ability of IOC’s and state giants, to overcome the idiosyncrasies of Eastern Europe and produce a competitively priced substitute to current supplies.
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3 thoughts on “Understanding shale gas

  1. “frightening amount of guesswork.” exactly, Andrew. I just corrected (in 8 points) an article that recently came out in the national news in Italy about shale gas.

    I also think that, as you stressed yesterday at the CEELBAS Energy Roundtable, for CEE there is also a need to differentiate the financial instruments that are available for investing in fracking. State-owned companies can indeed be viable solutions if the state acts as an efficient investment bank (since the extracted product will then be public, there’s also a component of ‘planning’ that might be seen as anti-historical). In the absence of efficiency of the financial institutions, then state-owned, IOCs, or SMEs are doomed to fail. A legal system, in my opinion, is easier done (although in CEE it needs work!) than a financial one.

    Personally, I wouldn’t also exclude the environmental side of the whole thing. Fracking can be dangerous and wasteful and it yields a product that only beats coal and oil in terms of CO2 emissions. And without reducing domestic energy efficiency, a lot of shale gas will be needed. Is that what CEE is after?

  2. I agree with everything you say – particularly about the guess work. You can almost trace back to where, what are essentially ‘lies’ come from.

    I have devoted almost 0 time to the environmental issues, as i have, perhaps wrongly assumed they would be resolved / didn’t exist. From the small amount I have read, it seems with proper regulation it can be made safe. That was the conclusion of the EU report on it anyway. Can be found here – http://ec.europa.eu/energy/studies/doc/2012_unconventional_gas_in_europe.pdf

    cheers

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