Shale Gas in Europe: Poland and Ukraine as Pioneers

LONDON — Britain lifted its ban on shale gas exploration on Thursday as it aims to become a European leader in a sector that has transformed the U.S. energy market and counter a fall in the UK’s natural gas production. The green light on shale gas fracking from Energy and Climate Change Secretary Edward Davey comes approximately a year and a half after UK authorities halted the unconventional exploration after the process set off earth tremors at one site.

MOSCOW — Russia’s top crude oil producer Rosneft wants to break the monopoly of another state-owned energy champion, Gazprom, to export gas via pipelines, sources said on Friday, signalling a flare-up between powerful clans. Igor Sechin, a long-standing ally of Russian President Vladimir Putin, transformed Rosneft into the world’s top publicly traded oil producer through the US$50-billion purchase of Anglo-Russian firm TNK-BP last year.

Craig Pirrong submits: Some weeks ago I opined that it was foolish for Poland to lock itself into a very long term contract with Gazprom (OGZPY.PK) (going out to 2037) given the prospects for shale gas. I did a little digging (or should it be drilling?) for information on shale gas prospects in Poland, Ukraine, and elsewhere in Europe, but other things (e.g., life) intervened and I didn’t follow up.

<p>Poland is currently reliant upon natural gas imported from Russia. They shed the iron rule of the Soviet Union only to hand power back to Moscow due to their need for Gazprom’s products.

Russia is launching a strategic drive to unlock its shale oil wealth as crude output stagnates and reserves run low in the West Siberian fields, aiming to replicate America’s technology leap in a near total reversal of policy. The Kremlin has launched an “action plan” to master fracking methods and lure investors into the Bazhenov prospective, a shale basin the size of France to the east of the Urals.

European companies have been a big part of developing Canada’s oil and gas resources, but for entrepreneurial Canadian companies like Vermilion Energy Inc., the new promising frontier is Europe. Urgency to reduce dependence on Russian gas, high natural gas prices, little industry competition and lots of potential to revive mature pools with new technologies is feeding a push to find supplies in both Western and Eastern Europe.

It is no secret that in scrambling to find an alternative to Russia's energy-export dominance, Europe is actively seeking to recreate the US shale miracle (at least superficially, recall that a month ago Germany shelved shale-gas drilling plans until at least 2021, when it would again reassess the shale ban).

Ukraine will take a first major step away from dependency on Russian gas supplies on Thursday when it seals a $10 billion shale gas deal with Royal Dutch Shell. Due to be signed at the World Economic Forum in Davos, the production sharing agreement will mark the biggest contract yet to tap shale gas in Europe and the largest single foreign investment in the former Soviet republic.