Monday, February 23, 2015

Chevron Pulling Back on European Shale Gas

When we first started talking about shale gas, what seems like eons ago, one of the exciting potential shale locations was Eastern Europe, specifically in Poland and to a lesser degree in Romania and Ukraine.  Chevron was behind most of those efforts, but the company announced this week that it is pulling out of Romania after having shut down in Poland and Romania, citing it as a business decision.

Big Oil and shale gas prospecting is a bad match.  The degree of difficulty in European shale gas is high, and it's not a matter of technical feasibility.  Big Oil loves technical problems where they can deploy hundreds of engineers and loads of money.  What they have in Europe is a bucket of hassle without the clear return.  There is no whale there.  That's not to say there isn't a potential for shale gas production, it's just a bad fit for a Major.

On the whole, drilling for shale gas in Europe is going to be tough.  There is a lot of resistance on the ground and there is no built-in group of supporters in the form of landowners that will personally benefit from the production and literally spread the wealth through indirect economic impacts that will drive local economic growth.  The shale resource is uncertain and the population density is not favorable to widespread drilling.  While it is a good thing for a European country to produce its own gas an not be beholden to Russia, the political will in democratically elected governments is not strong enough to make it happen.

What they really need is more LNG import facilities to be able to tap into gas resources elsewhere in the world because self-generated natural gas will continue to be a distant dream for the continent.  Lithuania is already on top of it...

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