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Economic, Environmental and Social Considerations of Shale Gas in the EU

Economic, Environmental and Social Considerations of Shale Gas in the EU. Boyan Kavalov European Commission – Joint Research Centre Institute for Environment and Sustainability Sustainability Assessment Unit. Why shale gas became a topical issue?. High volatility of world energy prices

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Economic, Environmental and Social Considerations of Shale Gas in the EU

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  1. Economic, Environmental and Social Considerations of Shale Gas in the EU • Boyan Kavalov • European Commission – Joint Research Centre • Institute for Environment and Sustainability • Sustainability Assessment Unit

  2. Why shale gas became a topical issue? • High volatility of world energy prices • Increasing geopolitical concentration of world reserves of conventional gas (Russia, Iran, Qatar – 53% of all gas) • Increasing power of Gas Exporting Countries Forum (GECF): 73% reserves, 42% production, 85% flexible liquefied natural gas trade; high membership overlap with OPEC – need to search for alternatives! GECF (BGR)

  3. The shale gas option & the US boom Shale gas deposits US gas supply to 2035 (US DOE – EIA) US: Successful so far , but large uncertainties for the future  • Production / Prices  (TCF / US$/‘000 CF) 20 October 2019 3

  4. Shale gas in Europe 1 Poland: The EU frontrunner (US DOE-EIA) West Europe (US DOE-EIA) Potential identified in a number of countries … but often needs further techno-economic assessments  20 October 2019 4

  5. Shale gas in Europe 2 Eastern Europe (US DOE-EIA) Potential identified also in NMS, AC, CC, PCC… but with even greater uncertainties  20 October 2019 5

  6. ECONOMIC drivers for shale gas Major gas trade movements in the world in 2007 (Bm3) – (BP Review) – Average annual gas prices (US$/MBtu) • US recently: Very limited import options & steady increase in gas prices  • Europe now: A broad spectrum of import options (incl. LNG from US as of 2010) & highly volatile energy markets  20 October 2019 6

  7. Past experience & geological knowledge Shale gas developments in the US (Gas Strategies) • US: Almost 100 years experience, but last 40 years – intensive developments; comprehensive, consistent and coherent geological knowledge (USGS)  • Europe: shale gas in a nutshell, no comparable, consistent and comprehensive EU geological repository (all at member states level)  20 October 2019 7

  8. Population densities World population densities (http://urbancongress.wordpress.com/) • Shale gas deposits – less concentrated and more dispersed that conventional gas deposits – greater land area is technologically needed  • Europeis 3.5 times more densely populated than the US – the high population density may become a main challenge for pan-European shale gas developments  20 October 2019 8

  9. Other factors for shale gas development • Legal status of underground resources: US – private ; EU – state-owned ; • Energy sector structure: US – very diverse, many innovative small players ; EU – highly concentrated (national champions)  / ; • Ownership / operation of pipelines and access to pipeline capacity: US – free market ; EU – liberalisation still (slowly) ongoing  / ; • Regulatory framework for exploration and exploitation of shale gas: US – largely adapted to shale gas , largely at state’s level (decentralised) , tax preferences available ; EU – drafted for conventional gas , member states sovereignty over deposits (large differences amongst countries possible) , EU subsidiarity principle (limited EU intervention allowed) ; Tax preferences subject to EU Single Market and State Aid Regulations  / ; 20 October 2019 9

  10. Assessment of shale gas potential “Home-made” shale gas may not be such a “game-changer” for the EU gas market, as it was for the US gas market  BGR (pct) … but shale gas may play an important role in the energy mix of selected member states US DOE - EIA (Bm3) 20 October 2019 10

  11. ENVIRONMENT: Water consumption http://www.printablemapstore.com/ • Often quoted as the main environmental drawback of shale gas extraction • Site & geologically dependent and widely variable (1,500 - 45,000 m3 / well) • Absolute use may not be so dramatic, unless in dry areas (Europe?) • Water recycling (re-use) possible, but at additional capital and operational costs 20 October 2019 11

  12. Water pollution 1 • Water contamination is the most-widely reported environmental externality • The type and severity of water pollution is site (geologically) specific Shale gas beneath water reservoir (http://coto2.wordpress.com/) Shale gas above water reservoir (http://crudeoiltrader.blogspot.com/) 20 October 2019 12

  13. Water pollution 2 Methane contamination (www.rcgroups.com) Particulate contamination (www.in.reuters.com) • Methane contamination: Detected, but manageable.. and many speculations; • Particulate contamination: Geologically specific, severity – site-specific; • Chemical additives contamination: Theoretical, but still possible, could have dangerous implications (methanol, ethylene glycol…) 20 October 2019 13

  14. Biodiversity & Natural conservation Possible overlap of shale gas exploitation sites with NATURA 2000 sites Natural 2000 Map (EEA) 20 October 2019 14

  15. Local air quality http://marcelluseffect.blogspot.com/ http://wilderness.org/ • Worsened air quality  worsened quality of life (health, respiratory problems) • Possible negative implications on other economic activities (tourism) • Similar air pollution effects from other industrial processes (shale gas not different) 20 October 2019 15

  16. SOCIAL issues with shale gas 1 Opponent’s view (http://www.rainharvest.co.za/) Proponent’s view (Statoil) • Large social opposition in the EU (Not In My Back Yard – 74% of EU citizens) • Employment benefits to be assessed on a case-by-case basis; • Trade-offs with competing economic and social activities, and land uses; • The net employment benefits are the important ones! 20 October 2019 16

  17. Social issues with shale gas 2 • Visual landscape changes... may be significant, but also manageable; • Intensive road traffic… but mainly during the initial stage – noise, air pollution; • Noise and road traffic during operation of wells; 20 October 2019 17

  18. ALTERNATIVE gas supply options to the EU EU delivery costs US$/Mbtu (Oxford Institute for Energy Studies) Alternative gas supply costs to EU, US$/MBtu (OECD-IEA) A number of less-costly alternative gas options may be available to the EU World long-term costs (OECD-IEA) 20 October 2019 18

  19. CONCLUSIONS • … • … • … • 1. It remains to be seen whether home-made shale gas will be a cost efficient tool to secure and diversify EU’s energy supply in an environmentally-compliant and socially-acceptable way. • 2. Importing liquefied natural gas, obtained from shale deposits, and acquisitions of shale gas fields abroad are other options for the EU to benefit of shale gas developments in the world. 20 October 2019 19

  20. Thanks for your attention! Boyan Kavalov Tel: +39 0332 78 56 79 Boyan.Kavalov@ec.europa.eu ? DISCLAIMER: The views expressed in this presentation are the sole responsibility of the authors / speaker and do not necessarily reflect the views of the European Commission. Neither the European Commission, nor any person acting on behalf of the Commission can be held responsible for the use, which might be made of this presentation. 20 October 2019 20

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