Unconventional energy sources - a new European perspective?

Istvan GyermanUniversity of Pecs, Faculty of Business and Economy

Energy Security: How to ensure supply for the EU and its neighbours?29th April, 2011. Pécs, Hungary

Unconventional energy sources – a new european perspective?

Conventional vs. Unconvenctional

Unconventional gas in the USA and world shale gas resources in the world

Unconventional gas resources in Europe

Unconventional gas projects in Europe

Conclusion

29th April 2011.Energy security: How to ensure supply for the EU and its neighbours?

Conventional vs. unconventionalConventional

Accumulations in medium to highly porous

reservoir with sufficient permeability to allow

gas to flow to producing well Pressure regime tends to move gas towards

producing well (i.e. natural flow)

Unconventional

Deposits of natural gas found in relatively

impermeable rock formations (tight sands, shale

and coal beds) To get resources out of the ground, artificial

pathways (fractures) have to be created Key technologies: horizontal drilling and

Modern, hydraulic fracturing techniques

Consequences

Need to understand geology better Need for much higher number of extraction points

29th April, 2011.Energy security: How to ensure supply for the EU and its neighbours?

Source: DTE Energy, EON (2010)

Unconventional gas in the USA and world shale gas resources by region

US: share of unconventional gas in the total gas output jumped from 44% (2005) to 50 (2008) and projected to rise to almost 60% (2030)

National Petroleum Council (NPC): 34,7 TCM

IEA: 35 TCM

CERA: 3-12 TCM

Source: IEA 2009b

Source: Rogner 1997, Kawata & Fujita 2001, Makinen 2010.

29th April, 2011.Energy security: How to ensure supply for the EU and its neighbours?

Unconventional gas resources in Europe Europe holds diverse inventory

of unconventional gas

Individual size and resource potential in Europe is in same order of magnitude as typical North-American basins

Three major European shale gas basins: Poland, Northern Germany, and Southern North Sea

No production of unconventional gas established yet

Shale gas Tight gas Coalbed methane

Source: Schlumberger, 2009, E.ON 2010.

Geological potential of European region to be utilized in order to improve energy supply!

29th April, 2011.Energy security: How to ensure supply for the EU and its neighbours?

Unconventional projects in Europe - challenges

-Geology and cost structure not well developed

-Research phase

-Mainly state owned mineral rights

- difficulties with licenses and land acces (densily populated)

-Environmental issues

-Well costs

Shell• Three-yearexploratory term inthe Cambrian Alumin southern Sweden• Acquiring seismicdata, drilling pilot in 2010

3Legs Resources• Five licenses toexplore 1 millionacres in the BalticBasin region• 3D-seismic anddrilling withConocoPhillips

ExxonMobil• Holds 400,000 acres in Mako Trough in southeast Hungary• Joint explorationprogram with MOL• $ 300 mn investment

ExxonMobil• 750,000 acres in Lower Saxony Basin• Drilled 3 exploration wellsand another 10 wells planned

Eurenergy Resource• Holds 123,000 acres insouthern England’s Weald Basin• Five-year license forexploration drilling

Eurenergy Resource• Awarded 1.3 million acres in East Paris Basin• Starting drilling program in 2010

OMV• Three-year project in ViennaBasin; very deep• Estimated shale gas potentialat ~ 430 bcm

Source: Wood Mackenzie (2009), E.ON (2010)

29th April, 2011.Energy security: How to ensure supply for the EU and its neighbours?

Conclusions

Unconventional gas resources are smaller than in the USA

Unconventional geology not well understood in Europe

More difficult acces to resources than in the USA

Environmental issues

Costs

BUT:

Unconventional gas will reduce expected import needs and diversify EU supply in a long run

29th April, 2011.Energy security: How to ensure supply for the EU and its neighbours?

Thank you for your attention!

Istvan GyermanUniversity of Pécs, Faculty of Business and Economics

Doctoral School in Regional Policy and EconomicsH-7633 Pécs, Rákóczi út 80

Tel: +36 20 228 3235

istvan.gyerman@externet.hu