Things are shaking up in Germany; not only is there a federal election this coming September, but the most vital and controversial issues seem to be shifting towards energy.
Hydraulic fracturing, or fracking, is taking the forefront in Germany, as the nation faces the potential of hundreds of wells that are thousands of meters deep drilled across the German landscape. The process involves cracking the layer of shale rock below the surface with a high pressure mixture of water, sand and chemicals, and in turn, releasing gas and/or oil for extraction.
In theory, fracking is a magical formula that could revive any floundering nation’s economy. The United States, which is sitting on massive natural gas and oil reserves, could potentially cause a worldwide shift in the geopolitical balance, extracting resources for domestic use to replace imports from Russia and OPEC.
The future of U.S. energy was looking grim until the discovery of these reserves—located in states like Texas, Colorado, Pennsylvania, Louisiana, Utah, and North Dakota—but the industry and the economy as a whole has been able to breathe new life.
The International Energy Agency (IEA) estimates that the U.S. will replace Russia as the world’s largest producer of natural gas in only 2 years, and it could also become the largest supplier of petroleum by the year 2017.
The price of natural gas in the U.S. is at a quarter of what it was in 2008, and fracking could solidify the U.S. as the industrial power that it once was. The government estimates that 600,000 new jobs could be generated, and some experts believe the number to be upwards of 3 million in coming years.
Germany's Chancellor Angela Merkel and her constituents only need to take one look to at North America's success to know that Germany is sitting on a gold mine; According to Bloomberg, deposits are estimated at 2.3 billion cubic meters of shale gas, and if harvested this could boost natural gas output to 100 times the present level.
Though no gas has yet been extracted in Germany, Exxon Mobil Corp. (NYSE: XOM) has begun drilling test wells and has hopes to follow the path of the recent success of natural gas in the U.S. If efforts prove successful, energy in Europe—which relies heavily on Russia for its gas consumption—would be completely transformed.
But in retrospect, what kind of long term affects will be created? This question has divided the country, largely in part to possible adverse effects on the environment and safety concerns.
Malgorzata Klawiter, a shale gas plenipotentiary in Germany, told Bloomberg:
“People in the region have emotional ties to their land, which they've owned for generations.”
These people are making their voices heard, too, and members of the Left Party and Greens have protested fracking operations. Word has spread from the U.S. about contaminated drinking water and methane gas from nearby wells, magnifying fears.
Despite concern, the same fundamental technology has been used since the 1960s for the extraction of conventional gas in the northern German state of Lower Saxony.
Fracking would also help meet standards set forth by Germany’s energy and climate policy. Gas power plants prove more effective at harnessing a reliable power supply, and the burning of natural gas gives off up to 60 percent less CO2 than burning coal.
Merkel’s coalition seems to be marching full steam ahead. In December, the group rejected a motion that called for a ban to fracking.
A paper drafted by the coalition aims at setting rules for the extraction of natural gas by fracking while maintaining healthy environmental standards. The paper states fracking should be permitted pending completion of environmental impact assessments, Bloomberg reports, and fracking would be outlawed in water-protection areas and protect mineral springs.
But on February 1, a resolution was passed urging the government to ban the use of potentially harmful substances until the risks were known. If enacted, it would block fracking until all environmental evaluations are complete—or perhaps longer.
That being said, it should be no surprise that fracking has found itself at the top of Germany’s political agenda. Energy costs have grown after the nation announced it would replace its nuclear power plants with renewable sources, while in the U.S. gas prices remain low. It was only a matter of time until Germany decided to explore its natural resources.
While Germany seems adamant about pursuing this modern technology, not all of Europe feels the same way. The practice of fracking has been banned in both France and Bulgaria. The Netherlands and the Czech Republic also have restrictions.
But others are beginning to open their eyes to the possibilities; the United Kingdom decided to explore the process in December.
Poland’s government is perhaps the most open to the idea of allowing fracking, but even it can't avoid running into walls of opposition—environmentalists, the wildlife experts, and farmers are all hesitant to open the land for exploration.
Reports say that Poland has the biggest reserve of fuel in Europe, and fracking could provide it with independence from Russia.
Yet Poland has seen disappointment as well. In June, Exxon Mobil pulled out of Poland after “disappointing” drilling results from its wells, and Talisman Energy Inc. (NYSE: TLM) may plan to exit and focus efforts in North America, Bloomberg reports.
As for Russia—the natural gas leader of the world whose power rests on revenues generated by gas and oil—the nation will most likely be hit by the surge of natural gas exploration in other parts of the world, especially U.S. efforts that could drive down the costs of energy.
Throughout Europe, the exploration, knowledge, and practice of fracking for natural gas and oil is still in its infancy. But there is strong desire to take that leap, especially in countries like Germany, which has already begun a transition into more sustainable forms of energy use and production.