Caspian Report - Issue: 07 - Spring 2014

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Frank Umbach 70 The UK government is currently seeking new ways to simplify the permissions process for British shale gas projects. and subjective argumentation as well as a trend of ignoring the broad knowledge base and modern methods of geo-scientific exploration. It also pointed out that this allegation of missing data on regional assessments is not supported by facts. The political debate moved away from an outright national ban of hydrofracking to the question how far to legislate environmental safeguards before the national parliamentary elections in September 2013. German Federal Institute for Geosciences and Natural Resources (BGR) July 2012 – Germany’s Shale Gas Reserves: • Total shale gas reserves: 6.8-22.6 tcm; • Technically recoverable reserves: 0.7-2.3 tcm (10% of total shale gas reserves) • ExxonMobil estimate of Germany’s exploitable reserves: 827 bcm • Conventional Gas reserves in comparison: 150 bcm In November 2013, the new grand coalition government agreed on a “temporarily fracking ban”, until environmental issues like the use of toxic chemicals are resolved. Until non-toxic fracking fluids are available, the agreement is not a strict ban but rather a temporary moratorium. The German EU Energy Commissioner Gunther Oettinger repeatedly warned the previous German government against fully rejecting the shale gas exploration through fracking technology. In the summer 2013, three geological research institutes, the BGR in Hannover, the German Research Centre for Geosciences (GFZ) in Potsdam and Helmholtz Centre for Environmental Research in Halle launched a programme to support the exploration of the country’s shale gas potential by making the shale gas industry more environmentally friendly and the fracking technology “greener”, by developing biological alternatives to the chemicals being used for fracking, for instance. Poland Poland itself still generates more than 90% of its power from coal, but is seeking to replace part of its coal consumption with gas. In 2012, Poland produced 5.5 bcm of conventional gas in its own country. But that covered only 30% of its domestic gas consumption, 16 bcm in total. The shale gas reserve estimate from the Polish Geological Institute (PGI) in March 2012 revised downwards the estimates of national reserves to around 2 tcm, in contrast to EIA’s optimistic forecast of 5.3 tcm. Its technically recoverable gas reserves may amount to just 346-768 bcm. But these published figures included only archival data, predominantly from exploration testing in the 1960s and 1970s. The preliminary estimate will be upgraded and revised on an annual basis. But even the lowest estimate of 346 bcm of

Global shale gas map. shale gas reserves would satisfy Poland’s domestic demand for 35 years. The government’s proposed taxes exceeding 40%, for instance, have raised concerns among energy companies as they face exceptionally capital investments. Difficult geology, a non-competitive service sector, poor infrastructure, lengthy permissions processes, an uncertain regulatory and tax environment as well as lack of rigs have hindered development. In addition, preliminary costs per well have increased to US$15 million – nearly three times the cost in the U.S. As a result of the failure to provide an attractive investment climate, the uncertainties and bureaucratic constraints as well as unrealistic expectations for the short-term future, the pace of shale gas exploration in Poland has clearly slowed down in 2013. For the industry, 287 wells still remain open for exploration, but at the present rate, the exploration process may not end before 2037. The government and Polish industry representatives still expect that domestic shale gas production will be significantly cheaper than Russian gas. In contrast to public opinion in Germany and France, the pro-shale gas policies are supported by more than 70%. The government has In contrast to public opinion in Germany and France, the pro-shale gas policies are supported by more than 70%. promised to change its shale gas regulations to speed up its exploration and announced last May that it will not collect taxes on the production of shale gas until 2020. 71 CASPIAN REPORT, SPRING 2014

Frank Umbach<br />

70<br />

The UK government is currently seeking new<br />

ways to simplify the permissions process for<br />

British shale gas projects.<br />

and subjective argumentation as<br />

well as a trend of ignoring the broad<br />

knowledge base and modern methods<br />

of geo-scientific exploration. It<br />

also pointed out that this allegation<br />

of missing data on regional assessments<br />

is not supported by facts. The<br />

political debate moved away from<br />

an outright national ban of hydrofracking<br />

to the question how far to<br />

legislate environmental safeguards<br />

before the national parliamentary<br />

elections in September 2013.<br />

German Federal Institute<br />

for Geosciences and<br />

Natural Resources (BGR)<br />

July 2012 – Germany’s Shale<br />

Gas Reserves:<br />

• Total shale gas reserves: 6.8-22.6<br />

tcm;<br />

• Technically recoverable reserves:<br />

0.7-2.3 tcm (10% of total shale gas<br />

reserves)<br />

• ExxonMobil estimate of Germany’s<br />

exploitable reserves: 827 bcm<br />

• Conventional Gas reserves in comparison:<br />

150 bcm<br />

In November 2013, the new grand<br />

coalition government agreed on a<br />

“temporarily fracking ban”, until environmental<br />

issues like the use of<br />

toxic chemicals are resolved. Until<br />

non-toxic fracking fluids are available,<br />

the agreement is not a strict<br />

ban but rather a temporary moratorium.<br />

The German EU Energy<br />

Commissioner Gunther Oettinger<br />

repeatedly warned the previous<br />

German government against fully<br />

rejecting the shale gas exploration<br />

through fracking technology. In<br />

the summer 2013, three geological<br />

research institutes, the BGR in<br />

Hannover, the German Research<br />

Centre for Geosciences (GFZ) in<br />

Potsdam and Helmholtz Centre for<br />

Environmental Research in Halle<br />

launched a programme to support<br />

the exploration of the country’s<br />

shale gas potential by making the<br />

shale gas industry more environmentally<br />

friendly and the fracking<br />

technology “greener”, by developing<br />

biological alternatives to the<br />

chemicals being used for fracking,<br />

for instance.<br />

Poland<br />

Poland itself still generates more<br />

than 90% of its power from coal,<br />

but is seeking to replace part of<br />

its coal consumption with gas. In<br />

2012, Poland produced 5.5 bcm of<br />

conventional gas in its own country.<br />

But that covered only 30% of<br />

its domestic gas consumption, 16<br />

bcm in total. The shale gas reserve<br />

estimate from the Polish Geological<br />

Institute (PGI) in March 2012<br />

revised downwards the estimates<br />

of national reserves to around 2<br />

tcm, in contrast to EIA’s optimistic<br />

forecast of 5.3 tcm. Its technically<br />

recoverable gas reserves may<br />

amount to just 346-768 bcm. But<br />

these published figures included<br />

only archival data, predominantly<br />

from exploration testing in the<br />

1960s and 1970s. The preliminary<br />

estimate will be upgraded and revised<br />

on an annual basis. But even<br />

the lowest estimate of 346 bcm of

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