CONFERENCE CALL: Shale gas and hot air

By bne IntelliNews March 10, 2010

Matthew Day in Warsaw -

Stick a crowd of energy people in a room today and it won't be long before the words "European" and "shale gas" are mentioned.

The reason for this is that large parts of Central and Eastern Europe appear to be sitting on some of the world's largest deposits of shale gas, and this has got the energy world excited. To quote one executive attending the "III CE Gas Summit 2010" in Warsaw in February: "It is a bit like discovering there's life on Mars, so you can imagine why people are jumping up and down."

Even sober-minded people like Henryk Jezierski, Poland's chief geologist and another attendee at the summit, talked about "great hopes for the future" as he held aloft of piece of gas-bearing rock, explaining that there could be as much as 140bn cubic metres (cm) in Poland alone of unconventional gas – hard-to-get-at deposits of tight and shale gas, as well as coal-bed methane – waiting for energy companies to tap into.

He added that the Polish state has already issued some 44 exploration licenses, some of them to big players like Exxon Mobil and Chevron. This, he said, is ample evidence the energy world has already started beating a path to Poland's door, the country which appears to have the lion's share of shale resources.

The companies elbowing each other in an ungainly queue to get these licenses hope to repeat the success of the industry in the US, where the exploitation of massive unconventional gas deposits revitalised the country's jaded energy sector. Companies have enjoyed a bonanza, and some estimates now say that there is enough shale gas to meet US natural gas consumption needs for the next 100 years.

Technology transfer

Yet despite the palpable air of excitement that pervaded the Warsaw summit, many of those attending made strenuous efforts to keep people's feet on the ground and match reality with expectations.

As many pointed out, nobody has actually started to drill for unconventional gas in Poland. With ConocoPhilips set to sink the first exploration well this spring, it could be four to five years before the world knows just how much exploitable gas lies beneath Poland, and even then it could be another 10 years before any gas starts flowing in commercial amounts.

Getting the gas out is also a vexing problem. Unlike conventional gas, shale gas is locked into rock and therefore requires special drilling techniques and large amounts of resources to extract it and bring it to the surface. Experts at the summit lined up to stress that the technology developed for the US fields might struggle when applied to the different environmental and geological conditions of Europe.

Reinhard Pongratz, business development manager for unconventional resources at Halliburton, pulled no punches in saying that when it comes to technology and profitable European shale gas exploitation, "we need to get better, and we need to become more efficient."

One element that Pongratz highlighted where efficiency would be vital in Poland was water. Shale gas extraction uses a lot of water, and, he added, if thousands of gas wells mushroomed across Poland, then they would suck the country dry. Without improvements in water management, the development of the Polish shale-gas industry could face serious obstacles.

Another sobering aspect was the question of quality. Nobody is really sure just how pure the gas might be once it gets to the surface. If the methane comes mixed with nitrogen, then the energy companies would have to separate the two, and that means more time and money.

Other challenges facing the energy companies lie in the open air. Unlike in the wide-open spaces of the US, in Poland towns, farms and villages clutter the countryside, making, as one executive mentioned over a cup of coffee, "the above-ground environment as important as that as the one below." Those wanting to exploit the gas could find themselves bogged down in negotiations and possible legal battles with farmers, town councils and various ministries as they battle to get the infrastructure in and the gas out.

Yet the talk about the many challenges failed to diminish the feeling of excitement at the summit, with Star Trek-like talk of "new frontiers" and "to boldly go" filling the air. Lets hope it ends up being more than just hot air.

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