More than a few people have asked me for my reading on the Bernstein shale story last week, this via Bloomberg:
The first results from wells in Poland show Europe is unlikely to match the U.S. boom in shale gas, analysts at Bernstein Research said.The development of shale fields in Poland, considered Europe’s best prospect for so-called unconventional gas, will be further held back by a lack of land, water and drilling rigs, Bernstein said
I'm going to have a guest post on this shorty from someone far more knowledgeable than I on Polish geology and shale economics, James Elston of Palladian Energy.
But before then this observation on that very old chestnut, Europe is too crowded. This is nothing new, having been one of the key findings of the Oxford Institute of Energy Studies shale report from last year and one that I had refuted one month in advance (I'd seen Florence's presentations beforehand) both here and elsewhere. But the Europe is too crowded myth is still widely echoed by Green antis and Gazprom. The Gazprom/Bernstein angle also finds it way into Centrica's analysis. Centrica essentially sets UK energy policy by default since there is no one in government clued in enough on energy to contradict them. The overall angle of shale being some far off dream not for the likes of us has been consistently told by doomsayers to validate their investments.
From the Bernstein report itself:
High population density is another problem: Poland has an average 122 people/km2 versus only 32 people/km2 for the US.
While it is an inarguable fact that the USA has 32 people/km2, take away the third of the country made up by Alaska, Wyoming, Montana, Idaho and the Dakotas and a far different picture emerges:
As of November 12, 2011, the United States has a total resident population of 312,593,000, making it the third most populous country in the world. It is a very urbanized population, with 82% residing in cities and suburbs as of 2008 (the worldwide urban rate is 50.5%). This leaves vast expanses of the country nearly uninhabited.
Far better to compare Poland' s122 with Pennsylvania's 109.6. Ohio is just about the same at 109. Anyone hear about how Ohio isn't going to allow shale because it's too crowded? The Bernstein study concentrates on the geology of Lebien Poland in Lebork County, but the demographics there are even more attractive with a population density of only 90/km2.
If people got out of their Mayfair offices slightly more often, they would see that Europe's population is far more concentrated than the US model. Europe emerged in an era when the size of cities, towns and villages depended on walking distance or at most the horse, and huddling together for protection. Europe simply doesn't have the sprawl of the US that developed in the age of the car. There is significant empty space throughout Europe, although perhaps not in Berkeley Square. One example is how the most crowded country in Europe, the largest on shore gas producer and the largest agricultural exporter are one and the same: The Netherlands.
Bernstein's analysis seems more aimed at maintaining the share price of the companies mentioned in the research: Gazprom, Shell, BG and Statoil. Funny how they put Gazprom at the top of the list.
Overall, we continue to believe that European natural gas fundamentals are attractive and a shale gas boom
is not a threat. We estimate European gas demand will grow at 1.8% CAGR between now and 2015, while
domestic supply will fall at 3.5% CAGR in the same time-frame. We therefore remain positive on natural
gas exposed stocks in the region such as Gazprom (90% of total production is gas) and BG (c70% of total
production is gas) which are rated Outperform.
That's their opinion. Over the past few years, people like Ben Dell and Scott Gruber in Bernstein New York has been consistent in pushing an anti shale stance. It didn't make them right then, and it doesn't make them right now.