Академический Документы
Профессиональный Документы
Культура Документы
revolution or evolution?
Contents
The US experience 1
Geology — replicating the US experience? 2
Gas demand 4
Energy prices 7
Competition from LNG and pipeline gas 8
Driven by advances in technology, such as hydraulic fracturing and horizontal drilling, shale
Introduction gas production in the US has increased at a rapid pace. The country is now largely self-
km^Õ[a]flaffYlmjYd_Yk&9[[gj\af_lgl`]MK=f]j_qAf^gjeYlagf9\eafakljYlagf =A9!$l`]
The transformative impact that shale gas annual average growth rate in shale gas production was 51% over 2008–11. However, the
has had on the outlook for US energy hY[]g^hjg\m[lagf_jgol`oYkka_faÕ[Yfldqkdgo]jaf*()*$jakaf_Zqbmkl,&L`]o]Yc]j
markets has been well-documented. domestic gas price environment led companies to prioritize the development of liquids-rich
The shale gas success story in the US shale deposits. Figure 1 shows the rapid increase in US shale gas production and resultant
has resulted in heightened speculation fall in natural gas prices.
over the potential for shale gas to
transform energy markets in other Figure 1: US shale gas production and natural gas prices
parts of the world. The spotlight is Tcf per year US$/MBtu
now on Europe, where early-stage 18 10
exploration is under way.
16 9
However, a number of issues indicate 8
14
that the experience in the US may not
7
be replicated in Europe. Furthermore, 12
the rapid growth in shale gas production 6
10
has resulted in a corresponding increase 5
in concerns about the impact of the 8
4
development processes on public health
6
and the environment. Opinion on the 3
environmental impact of shale gas and 4
2
its role in the future energy supply mix 2 1
has become increasingly polarized.
0 0
This report looks at the potential for 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
shale gas1 development across Europe
Shale gas production (left axis) Henry Hub gas price (left axis)
and considers what the impact on gas
markets across the continent might Source: US Energy Information Administration
be. While there has undoubtedly been According to the EIA’s Annual Energy Outlook 2013, shale gas production is predicted to
a shale gas revolution in the US, we almost double between 2013 and 2040. A recovery in US natural gas prices from recent
conclude in this report that although lows is also predicted. Companies will need higher prices to support the investment levels
some geological surveys indicate required to maintain or increase production. By 2040, shale gas production in the US is
l`]j]akka_faÕ[Yflhgl]flaYd$k`Yd]_Yk forecast to total 16.7 trillion cubic feet (Tcf), representing half of total US gas production
development across Europe will follow by that time.
a more evolutionary path. We identify
YfmeZ]jg^^Y[lgjkl`YloaddafÖm]f[]
the pace and feasibility of shale gas
development in Europe, including:
The US shale gas success story has heightened speculation over the potential for shale
gas to transform energy markets in other regions. Energy-intensive industries in Europe
and other developed economies are hoping that development of their shale gas resources
will provide access to lower-cost supplies. However, exploration is at an embryonic stage
in many countries. Those hoping for another shale revolution will need to be patient, and
there are no guarantees that the wait will bear fruit.
900 51 8 885
285 17
800
700
605
600
86
500 -83
-43 9 9 9
-39 6
400 -31 -4
300
200
100
0
ce
nd
UK
ia
ia
ia
13
11
ay
en
e
nd
ar
an
ni
in
ai
ss
ar
an
rw
an
ed
la
20
20
Sp
ua
ra
nm
la
rm
lg
Ru
m
Po
Fr
No
Sw
Uk
er
th
Bu
pe
pe
Ro
De
Ge
th
Li
ro
ro
Ne
Eu
Eu
12
10
0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
2040
Predicted gas demand growth will be an important consideration for oil and gas companies =eakkagfk^jgef]o_Yk%Õj]\hgo]j
o`]f[gfl]ehdYlaf_afn]kle]flafk`Yd]_Ykhjgb][lkaf=mjgh]&Afl`]k`gjll]je$\]eYf\ generation would be lower than from
for gas across Europe is likely to remain weak as the region’s economies will be slow to existing coal plants, but the reduction would
recover from the impact of the recession and sovereign debt crises. According to the 2012 fglZ]km^Õ[a]flgfalkgoflge]]ll`]
World Energy Outlook from the International Energy Agency’s (IEA), natural gas demand region’s long-term emissions targets. Under
in the European Union is not expected to rise back above 2010 levels before 2020. The this scenario, governments would need to
weaker demand outlook means that the issue of import dependency has slipped down offer enhanced incentives to companies
the political agenda since 2010. Security of supply concerns have also eased, at least prepared to invest in low-carbon energy
temporarily, with the availability of ample supplies from a wider group of export nations. technologies or reduce the competition for
L`]kmhhdq_dmlafl`]MK`Yke]Yfll`Yldaim]Õ]\fYlmjYd_Yk DF?![Yj_g]k\]klaf]\^gj funding by placing a moratorium on the
North America have been diverted to other destinations, including countries in Europe. In [gfkljm[lagfg^f]o_Yk%Õj]\hgo]jhdYflk&
addition, many European customers took minimum contractual volumes under long-term
Fm[d]Yjhgo]j`Y\Z]]f]fbgqaf_
[gfljY[lk$Yf\[gfk]im]fldqJmkkaYÌkhah]daf]kmhhda]klg=mjgh]\][daf]\&
something of a renaissance in some
The availability of cheaper gas supplies in the US has resulted in a switch from coal to European countries prior to the accident
natural gas in power generation and the displaced US coal supplies have found their way to at the Fukushima power plant in Japan
Europe, where it has undermined the economics of gas as a feedstock for power stations. in March 2011. Since then, a number of
This has seen utility companies increase their use of coal, despite EU environmental countries have announced reviews of the
policies designed to curb the use of fossil fuels in the energy mix. However, longer-term safety of existing nuclear plants or have
carbon reduction targets mean that coal’s revival is likely to prove relatively short-lived. As decided not to extend their operational life.
Figure 4 shows, the power generation sector is likely to drive the increase in gas demand There have also been delays or overturns
in Europe beyond 2020. of earlier decisions to approve new nuclear
build. However, only one country, Germany,
Figure 4: Historical and forecast European gas demand
has actually closed any nuclear stations
Tcf as a result of the Fukushima accident. The
uncertainty over the future of nuclear and
30 renewable energy could lead to a situation
nd
where gas becomes the primary energy
t dema
25 Forecas source in Europe in the next 20 years,
jYl`]jl`YfbmklZ]af_YljYfkalagf^m]dlgY
20 low-carbon economy.
15
10
0
2005 2006 2007 2008 2009 2010 2015 2020 2025 2030 2035 2035
20
18
16
14
12
10
0
2007 2008 2009 2010 2011 2012 2013
Source:L`gekgfJ]ml]jk<YlYklj]Ye
Pipeline gas
Shale gas will need to compete with existing energy sources in Europe, where investments Hah]daf]kmhhda]k^jgeJmkkaYYj]fgl
afaf^jYkljm[lmj]`Yn]Ydj]Y\qZ]]feY\]&JmkkaYklYf\klgZ]hYjla[mdYjdq[`Ydd]f_]\Zq without their own challenges, including
l`]k`Yd]_YkZgge&9dgf_oal`gl`]j9ldYfla[:Ykaf_Ykkmhhda]jk$JmkkaYfgoÕf\kl`Yl the distance of some reserves from
the prospects for a strong mid- to long-term market for LNG imports into North America market and political issues around cross-
Yj]_j]Yldq\aeafak`]\&L`]j]^gj]$alakfglkmjhjakaf_l`YlJmkkaY`YkZ]]fhmZda[dqYajaf_ border gas transit. Further challenges
\gmZlkYZgmll`]naYZadalqg^k`Yd]_Yk&9lhj]k]fl$JmkkaYakl`]eYbgjkmhhda]jg^hah]daf] include the harsh conditions in some
_Yklg=mjgh]Yf\oadd[gflafm]lg^mdÕddl`akjgd]afl`]k`gjllge]\amel]je&@go]n]j$ locations (which means that work may
JmkkaYÌkk`Yj]g^_Ykaehgjlkaflg=mjgh]^]dd^jge,-af*((*lgYjgmf\+*Zq*()*$ not be possible year-round) — the scale
largely due to increased competition from Norway and LNG supplies from Qatar. Figure 6 of investment in the development of new
illustrates this trend. reserves, and how quickly these reserves
can be brought to market. Additionally, to
Figure 6: Share of gas imports to Europe
mf\]jhafl`]\]n]dghe]flg^_YkÕ]d\kaf
100% l`]egj]j]egl]j]_agfkg^=YklJmkkaY$
90%
gas producers will be targeting customers
92.4% in Asian markets that are closer to the
80% 85.1% supply source. New investment will also be
70% required for the infrastructure necessary to
\]n]dghÕ]d\kafegj]j]egl]j]_agfk&
60%
Gazprom is planning to increase its share of
50%
the European gas market via the proposed
40% 45.0% South Stream pipeline, which is targeted to
start supplying southern and central Europe
30%
31.9% beginning 2015. However, the EU has
20% been exploring new gas supply routes for a
10% number of years, in particular the opening
of a southern gas corridor from the Caspian
0%
region, that could help diversify reliance
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
YoYq^jgeJmkkaY&9faehgjlYflead]klgf]
Russia Three largest suppliers (Russia, Norway and Algeria) in this strategy was the June 2013 decision
by the Shah Deniz consortium to choose the
Source: Eurostat
Trans-Adriatic Pipeline (TAP) as its initial
hj]^]jj]\jgml]lg[Yjjq9r]jZYabYfa_Yklg
=mjgh]&L`]ka_faÕ[Yf[]g^l`ak\][akagfak
far greater than the initial volumes that will
be shipped, which will be small in relation
to the size of the European gas market.
It paves the way for potential additional
volumes of gas from the Caspian region and
the Middle East to be supplied to European
countries in the future.
LNG imports
New LNG import capacity is being added in Europe at sites in Italy, Spain, Portugal, France,
Dal`mYfaYYf\HgdYf\&L`]Koafgmbk[a]l]jeafYdaffgjl`o]klHgdYf\akhjgb][l]\lgZ][ge]
operational in 2014. In 2009, Poland signed a deal with Qatargas for gas deliveries for 20
q]Yjk&L`][gfljY[lak]ph][l]\lg^mdÕddgf]%l`aj\g^HgdYf\ÌklglYd_Ykf]]\k&L`]hjgb][l]\
increase in LNG supplies post-2015, coupled with the installation of additional LNG import
[YhY[alqaf=mjgh]$[gmd\j]\m[]l`]f]]\^gjka_faÕ[Yflngdme]kg^Y\\alagfYd_Yk^jge
shale deposits in many countries. Customers in Europe, the Middle East and Asia will be
competing to secure the additional LNG supplies.
In the US, fracturing is largely regulated by individual states, although some would like to
see the Federal Government impose overarching regulations. At present, the EC does not
`Yn]bmjak\a[lagfgn]jkgn]j]a_fklYl]kÌkmZkgaddYokgjj]kgmj[]\]n]dghe]flhjg_jYek&
Member states are responsible for deciding their energy mix, but they have to ensure that
this is done in line with the environmental rules that apply. Existing hydrocarbon regulation
in Europe was drafted by individual countries for conventional exploration and production
activities and may not apply to the development of shale gas deposits or cover the new
processes and technologies involved. A legal assessment conducted by the EC in 2011
concluded that existing EU environmental legislation applies to practices required for
unconventional gas exploration and production from planning to cessation.
However, more information was deemed necessary to determine whether the existing
=Mj]_mdYlgjq^jYe]ogjcakY\]imYl]lgeYfY_]l`]a\]flaÕ]\jakck&9khYjlg^l`]
assessment process, the EC has published three new studies on unconventional resources.
The studies look at the potential effects of these fuels on energy markets, the potential
climate impact of shale gas production, and the potential risks shale gas developments and
associated hydraulic fracturing may present to human health and the environment. The EC
has indicated that it may propose EU-wide legislation covering environmental standards
in shale gas extraction by the end of 2013. The European Parliament is due to vote in late
2013 on whether to include shale gas exploration in an update of the EU Environmental
Impact Assessment Directive. Industry participants are asking for any requirements to
apply only once production begins and a better understanding of the size of the opportunity
has been gained.
Some oil companies may desire common pan-European regulation to make it easier
for them to operate across borders. At present, different national standards and safety
requirements may hinder the transfer of equipment between countries, for example.
However, gaining unanimity among member states of the EU on shale gas regulation is
likely to be an almost insurmountable feat. Poland and the UK are likely to veto any attempt
to limit shale gas development through new EU-wide regulation. To get agreement on
common standards, they may have to be watered down to such an extent that makes them
less stringent than those already in place in some individual member states.
30
20
10
0
Jan. ’05 Jan. ’06 Jan. ’07 Jan. ’08 Jan. ’09 Jan. ’10 Jan. ’11 Jan. ’12 Jan. ’13
While there has undoubtedly been a shale gas revolution in the US, shale gas development in Europe will follow a
egj]]ngdmlagfYjqhYl`&9k\ak[mkk]\]Yjda]j$YfmeZ]jg^^Y[lgjkoaddafÖm]f[]l`]hY[]Yf\^]YkaZadalqg^k`Yd]_Yk
\]n]dghe]flaf=mjgh]3l`]k]^Y[lgjkYj]kmeeYjar]\af>a_mj])(&
Evolution Revolution
Geology and resource potential • Disappointing well results • Early exploration success
• J]k]jn]k^gmf\lgZ]mf][gfgea[ • J]k]jn]khgl]flaYdhjgn]flgZ]
• Unsustainable production rates greater than expected
• JYha\jYeh%mhafhjg\m[lagf
Environmental and social factors • J]kmdlkg^klm\a]kaflg]fnajgfe]flYd • Studies show that hydraulic fracturing
impacts leads to restrictions/bans on is safe to public health and the
use of hydraulic fracturing environment
• Increased public pressure on • Public desire for lower energy prices
governments to halt development
activity until impact is known
Fiscal and regulatory regimes • Potential EU-wide regulation of shale • Incentives provided by individual
gas development countries to shale gas developers
• Inclusion of shale gas in EU • Expedited approvals process for
environmental impact assessment developments
legislation • ?gn]jfe]flkmhhgjl^gjk`Yd]_YkJ<
Energy prices • Competition from LNG and pipeline • Deregulation of gas markets
_Yk^jgeJmkkaYYf\l`];YkhaYf • Limited spot market liquidity
region
• Long-term, oil-indexed contracts not
renewed
• Improved interconnectivity between
gas markets
Gas demand • Slower growth due to measures to • Increased demand for gas as a fuel for
support development of a low-carbon power generation
economy • Gas positioned as a transition fuel to a
• Slow Eurozone economic growth low-carbon economy
Infrastructure and service capabilities • Limited supply of suitable equipment • GadÕ]d\k]jna[]af\mkljqak^YkllgY\Yhl
or skilled personnel to industry needs
• Lack of funds available to invest in new • Technology developments that result in
gas supply infrastructure lower per-well costs
Source: EY analysis
About EY
Dale Nijoka Alexandre Oliveira EY is a global leader in assurance, tax, transaction and advisory services.
Global Oil & Gas Leader Global Oil & Gas Deputy Leader, The insights and quality services we deliver help build trust and confidence
+1 713 750 1551 Emerging Markets in the capital markets and in economies the world over. We develop
\Yd]&fabgcY8]q&[ge +971 4 7010750 outstanding leaders who team to deliver on our promises to all of our
stakeholders. In so doing, we play a critical role in building a better working
alexandre.oliveira@ae.ey.com
world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the
Allister Wilson Alexey Kondrashov member organizations of Ernst & Young Global Limited, each of which is a
Global Oil & Gas Global Oil & Gas Tax Leader separate legal entity. Ernst & Young Global Limited, a UK company limited by
Assurance Leader Moscow guarantee, does not provide services to clients. For more information about
London +7 495 662 9394 our organization, please visit ey.com.
+44 20 7951 1443 alexey.kondrashov@ru.ey.com
awilson@uk.ey.com How EY’s Global Oil & Gas Center can help your business
The oil and gas sector is constantly changing. Increasingly uncertain energy
Axel Preiss
policies, geopolitical complexities, cost management and climate change
Andy Brogan Global Oil & Gas Advisory Leader all present significant challenges. EY’s Global Oil & Gas Center supports a
Global Oil & Gas Frankfurt global network of more than 9,600 oil and gas professionals with extensive
Transactions Leader +49 619 699 96 17589 experience in providing assurance, tax, transaction and advisory services
London axel.preiss@de.ey.com across the upstream, midstream, downstream and oilfield service sub-
+44 20 7951 7009 sectors. The Center works to anticipate market trends, execute the mobility
abrogan@uk.ey.com of our global resources and articulate points of view on relevant key sector
issues. With our deep sector focus, we can help your organization drive
down costs and compete more effectively.
Jane Fitton
Johannesburg
+27 11 77 2 3736
bYf]&Õllgf8rY&]q&[ge