Which way forward for shale gas in Europe?

Speakers: Polak Szymon, Duncan Ian, Lamberts Philippe
Moderator: Lynch Suzanne

On Tuesday 9th of September, at the premises of Science14 Atrium in Brussels, PubAffairs Bruxelles hosted a debate concerning the way forward for EU policies with regard to the issue of shale gas. The debate was moderated by Suzanne Lynch, EU Correspondent for The Irish Times while the discussants were Mr Szymon Polak, First Secretary, Energy Section of the Permanent Representation of Poland to the EU, Dr Ian Duncan MEP (ECR/UK), Mr Philippe Lamberts MEP (Greens/BE). The event was held under the Chatham House Rule.

In the first part of the debate, Ms Lynch introduced the speakers and the main topics which the debate would touch upon. She then asked a yes/no question to the public, which was to be put again to the audience at the end of the debate namely: “Does shale gas constitute a valuable opportunity for the EU?”. She then gave the floor to the discussants who could proceed to give their preliminary statements and to discuss informally about the issues at stake.

Questioned for the first time the attendees’ reply seemed slightly negatively oriented.

Mr Lamberts started his speech by saying that the shale gas issue is twofold as it creates both environmental and economic concerns. He stated that several authoritative sources, such as the International Energy Agency and the Intergovernmental Panel on Climate Change, agree on the fact that it is environmentally sustainable to consume up to one third of the fossil fuels available in the whole world. As a result, it would be more rational, as well as more sustainable to use at least the most easily accessible fossils resources. Mr Lamberts also remarked that such a policy orientation would constitute a constraint which does not go along with an economic vision which considers natural resources as unlimited. With regard to shale gas, he asserted that shale gas extraction has so far proven itself as an environmentally unfriendly method for fossil fuel exploitation and that the economics of shale gas extraction resemble those of a speculative bubble as investment inflow has so far been higher than the profits.

Mr Polak started his preliminary speech by stating that it is necessary to put the shale gas issue into the wider context of the European momentum, as well as approach it from the perspective of security of supply, competitiveness, sustainability and environmental protection. He affirmed that the priorities for the semester have to reflect geopolitical dynamism; in this context, the situation of the Italian Presidency, which announced that it would focus its action, among other issues, on market integration, as well as on security and diversification of energy supplies, slightly resembles the Czech Presidency of the year 2009, when the priorities were swiftly adjusted to address the challenges stemming from the Russia-Ukraine gas dispute. Mr Polak also underlined that one of the positive consequences of the current geopolitical context is that the EU will have to speed up its work to adopt some important and urgent regulatory changes and carry out some crucial infrastructure projects. After the 2009 crisis, the third energy package and the security of supply regulation were adopted, while today we are discussing the concept of the Energy Union in which the importance of indigenous resources is stressed among several most pressing priorities. Mr Polak also stated that in June the European Council welcomed the Energy Security Strategy which fostered a valuable discussion on the current state of European infrastructures, as well as on the importance of the diversification of supply and the need for more proactive external energy policies. Again, Mr Polak underlined that in those documents the importance of the role of indigenous resources, including shale gas, is stressed.

Dr Duncan started his speech by affirming that it is necessary to premise that not all fossil fuels are equal and that the most easily extracted fuels are not always the most efficient as, for example, coal is notably more polluting than gas. He continued by stating that two fifths of the world’s electricity is still generated by coal and that China coal production equals the whole of the Middle East oil production. In addition, he remarked both that coal is the cheapest fuel in several EU members states and that coal imports by Germany and the UK increased by twenty six percent in the year 2011. In Dr Duncan’s opinion, this is the background against which the gas issue should be considered, as, on the one hand, it is undeniable that fossil fuels are finite, while, on the other hand, it is also of extreme importance to understand that the shale gas production is not a financial bubble, but rather a more long-standing resource which has already produced benefits both for large companies and consumers. Dr Duncan also acknowledged that the main challenge of shale gas remains the fracking technique, but he added that much progress towards less harmful techniques is being made. He concluded by stating that the main reducer of greenhouse gas emission has been the United States thanks to shale gas extraction which in Europe should assume the role of a “bridging energy source”.

A first point of discussion consisted of shale gas as a speculative bubble. Mr Lamberts affirmed that, for example, both the sub-prime and the Spanish housing market bubble have lasted for years and continued by stating that current financial trends indicate that there is still more interest in speculatively-oriented rather than in productivity-oriented investments. He concluded by saying that there are many examples in which investments forecasts from the industry resulted in a failure. Dr Duncan replied to this question by asserting that, given the evidence coming from the US shale gas exploitation, a bubble would have been already exploded as this type of economic phenomena is normally short-termed. Dr Duncan explained that, in his opinion, the subprime or the Spanish housing bubble are not appropriate comparisons for shale gas production as this fossil fuel has already proven to be economically viable in the US. On the same issue, Mr Polak affirmed that several authoritative analysis on the energy world market point out that, for example, investments in gas production and LNG exports will rise significantly in the years to come, not only in the short term, but also in a mid and long term perspective. Several countries around the world plan to significantly rise their LNG exports capacities also because of shale gas developments. These phenomena go along with massive investments, while several important actors around the world, including China and Russia, are planning to further enhance their effort towards LNG production. He concluded by stating that given both the global and the European experience, it is very difficult to induce the industry to make long term investments if the industry considers it too risky. From the scale of the worldwide investments, Mr Polak remarked that we can observe main global companies currently considering the shale gas business as both profitable and promising. As a result, affirming that shale gas is a speculative bubble does not seem to fit the business reality.

Another point of discussion consisted of the implication of the Ukrainian crisis and the issue of energy independence. On these issues Mr Lamberts remarked that Europe’s energy independence is a priority for the European Union, nevertheless he expressed his concerns about the way in which the EU is going to achieve this goal. Mr Lamberts stated that even in a renewable-maximised energy mix, other energy resources such as gas are important in order to guarantee energy independence, however, the real questions are the definition of Europe’s energy needs, as well as the investment facilitation towards an environmental friendly energy transition. For these very reasons, energy efficiency and consumption avoidance should be also put forward in the lists of the priorities as there is a scarcity of investment capacity in these domains and in renewable energy resources. On the same point of discussion, Mr Duncan warned of the risks of energy supply disruption due to external dependency and reminded us that the importance of reliable energy sources as renewable energies, although high, would not compensate for a lack of energy production in Europe. Mr Polak affirmed that crises have the positive effect of giving the impetus to decision-makers and stakeholders. In addition, he noted that the European Union is trying to reduce its over-dependence on external supplies, while giving itself affordable alternative options to oil and gas imports. In his opinion, the important issue is not about achieving a full energy independence, but rather about addressing the challenges stemming from the problems of a single source dependency. For this very reason, the EU has taken several decisions and official stances in order to find alternative options and solutions such as energy efficiency, renewable energy sources, new technologies and, inter alia, shale gas extraction and infrastructure developments. This process includes also the strengthening of a proper functioning and transparency of the internal gas market as well as the introduction of more efficient EU security of supply mechanisms.

The final part of the debate and the Q&A session also covered the following issues: the current EU Commission’s non binding proposal on shale gas, the continental approach to energy and the issue of the energy union, the question whether European energy policies should be EU competencies, the issue of energy distribution and the interconnection across Europe, the NYMBY syndrome, the possible stances of the new European Commission and the Parliament towards the shale gas issue, energy efficiency and the financial crisis, the matter of environmental risk and liability, water fracking, the trade off between environmental damage and price reduction, the Polish experience with shale gas, the matter of risk mitigation and EU-Russia and EU-US relations.

Questioned for the second time as to whether shale gas constituted a valuable opportunity for the EU the audience did not substantially change its rather negative orientation.

Do you want to go further into the issues discussed in our debate? Check our list of selected sources which we have provided for you

European Science and Technology Network on Unconventional Hydrocarbon Extraction, European Commission

Unconventional gas, Studies & Evaluations , European Commission

Journal of Unconventional Oil and Gas Resources, Elsvier

Shale gas, The Greens – European Free Alliance

Shale gas – an EU analysis, Shale Gas Information Platform

The global impact of shale gas, Project Syndicate

Why “energy independence” means less power for the US, not more, European Energy Review

Can europe frack Itself to Energy Independence?, Foreign Policy

EU unveils shale gas guidelines, European Voice