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Fracking Europe

Situation in Ukraine Highlights European Gas Needs

Written by Brian Hicks
Posted April 10, 2014

While Russia has been busy swinging its big stick around at the rest of the world – vying for control of Crimea and threatening to invade Ukraine, and making greater enemies with the West in the process – other European powers have taken the opportunity to reignite the prospective shale gas revolution.

And why not, the resources are there. Ever since Russia took hold of Crimea last month, the re-energized charge has been led by British Prime Minister David Cameron, who wants Russia to frack off once and for all.

Right now, Russia has a strong hold on the European natural gas supply – about one third of its needs – but as the threat of a Cold War revival looms, the need for European nations to develop their own energy sources becomes all the more pressing.

Fracking, or hydraulic fracturing, has been in Europe for years already, but it is constantly hit by a barrage of environmental bullets – some for good – some not. That resistance has impeded progress.

As the Obama administration wants to begin exporting natural gas to Europe at a premium, Europeans would be foolish not to weigh their own options.

That’s why David Cameron, German Chancellor Angela Merkel and European energy executives are hot to push to fracking in Europe.

Cameron has been quoted recently, saying Great Britain has a “duty” to frack and that it needs to be “a tier-one political issue,” according to The Washington Post, and that “there’s a lot of gas down there, both in the United Kingdom and over vast stretches of continental Europe.”

The Potential

Just how much? The potential is enormous. It’s not U.S. shale boom enormous, but it’s big. Estimates of shale gas reserves by the U.S. Energy Information Administration last year placed the amount of recoverable resources in Europe right around 470 trillion cubic feet – enough to light up Europe for decades to come.

Reserves might not be as big as the U.S., where there is some 567 trillion cubic feet, but if Europe can mirror only a fraction of what the U.S. has been able to accomplish, it could be a tremendous economic boost all around.

Shale oil reserves are also thought to be quite large. Concern for oil isn’t high on the radar, as there are more options to buy, but it’s there, and that too could prove its usefulness in time.

Bottom line: Europe has many more resources than it initially thought, and it’s all just sitting down there waiting to be tapped.

Push & Pull

Environmentalists have a one track mind. I’m all for raising awareness and pushing for clean energy, but sometimes you just have to say okay, let’s at least explore the possibilities here and see what we can come up with.

There is no doubt that the scare tactics have worked on landowners who are proud of their homelands and don’t want to see their countryside turned upside down. I get it. But if things are done the right way, there is a tremendous upside to fracking that must be considered.

So many European nations are as divided on fracking as we are.

The debate is probably most erratic in Germany where there is a de facto moratorium on large-scale extraction of shale gas until further studies can be conducted.

Germany has already said that it will phase out nuclear power over the next decade, which only makes its relationship with Russia stronger. Just last week two new energy deals were signed with Russia’s Gazprom (MCX: GAZP) and Wintershall. At the same time, Chancellor Merkel has been one of frackings biggest proponents, in an effort to steer clear of Russia.

In Poland, where there is an even stronger distaste for Russia, fracking is viewed most favorably. The Polish were supposed to hold great reserves, but those numbers were greatly overestimated, and several companies like Exxon Mobil (NYSE: XOM) have abandoned projects, and only hurt the fracking cause.

Nonetheless, the Crimean crisis has spurred a renewal of efforts to jumpstart fracking again. A recent six-year moratorium was proposed on special taxes for the shale industry that could invite outside interests back to the fold.

The Battle Rages

No matter what, European governments are going to have a hard time convincing Europeans that environmental risks are worth the trade-off of prosperity and self-reliance.

Until regulators can guarantee safety – no earthquakes and healthy water supplies – the battle will be tumultuous, for sure.

The Russian standoff with Ukraine has done nothing to sway those on the side of the “green revolution” that would still much rather see efforts directed at renewable energy like wind, solar, and other alternatives.

Even if Europe lifted all of its restriction today, shale gas production is still about four years away from delivering meaningful production. Just look at the U.S. They’ve been at it for decades and only recently started seeing the benefits.

The battle is on, and it rages like never before. This could be Europe’s turning point.

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