Pretty poor Ernst and Young report out today recycling the old arguments: Europe is too crowded and too green followed of course by the no service industry and rubbish geology angle. Sound familiar? If you read the Bernstein rebuttal a few weeks back, you'll think this is deja vu all over again. Anyone present at last week's Warsaw conference would have heard John Buggenhagen give an impassioned defense about Europe shale that said the same thing.
E+Y is one of those experts who failed to predict the crash, and some allege actively enabled Lehman Brothers and the collapse of Allied Irish Bank. They also are sure to have many clients who would be strongly impacted by low gas prices and the evaporation of energy insecurity. Shame they'll take on board that famous E+Y expertise. E+Y clients sound like the classic preference bias: They prefer to be wrong in a group than right by themselves.
Notably E+Y seem blissfully unaware of the Cuadrilla discovery, don't mention France at all, and fail to show much knowledge of even conventional geology, let alone unconventional. They have one page on geology:
However, at present there is limited experience of shale gas development in Europe on which to base estimates of potential resources in place. The experience in the US may not be replicable in other countries, as the petro-physical properties of the shale vary from one rock formation to another across different regions. Even within the US, each of the gas shale basins is different and each has its unique set of exploration criteria and operational challenges. A step change in exploration and appraisal drilling activity will be required to gain
a better understanding of the resource potential in Europe. Estimates of technically recoverable shale gas reserves are certain to be revised, upward and downward, over time as new information is gathered. However, even then, there is no guarantee that any confirmed deposits would be economical to develop.
If this sounds like Centrica and Ofgem talking, it is. Classic narrative of conventional wisdom unwilling to even countenance change.
The largest estimated reserves in Europe are in Poland with 5.2 Tcm, which equates to 29% of the European total but less than 3% of global shale gas reserves. Poland is closely followed by France, which has estimated resources of 5.0 Tcm, or 28% of the European total. Only a fraction of this resource base is likely to ever prove commercial and be produced.
And that's it. European shale potential dismissed in four lines!
The worst case fraction of reserves that will become an eventual recoverable resource is likely to be 10%, although there are plenty,including the EIA who talk about 30%. But the 10% of Poland's 5.2 TCM that E+Y sniff so derisively at is 40 years total Polish consumption of 2010. Put another way, if the gas is only from Poland, only from 10% of reserves (bye bye UK, Germany, Ireland, Spain, France, Austria, Ukraine, Hungary, Czech, Bulgarian, Roumanian shale) then produced over 40 years that would still be 14 BCM per year or 25% of EU LNG imports. That 14 BCM is equal to about $4BN per year contribution to the Polish economy. Not worth worrying about?
What I found notable in the report is how much of the conventional wisdom in Europe is parroting Greenpeace or WWF- or Russia. This is only one example
Some commentators have called for increased transparency and disclosure on the chemicals used in the fracking process. Shale producers contend that the composition of fracturing fluids is proprietary information and that fracturing fluids are physically separated from the water table by cement and steel casings.
This is one of the world's "experts" repeating this outdated rubbish. Every single chemical in Europe, and most in North America these days besides, is public information. Anyone should know this, especially some one as pricey as E+Y. The saving grace of the report is that padded out with completely irrelevant phots of gas wells and acreas of white space the entire report can be read, digested and spat out in about ten minutes. You may waste your money with the report but at least you make it back in time.