Thursday, November 22, 2012

Unconventional Gas: Potential Energy Market Impacts in the European Union

Executive summary / Background

This report investigates the potential impact of unconventional gas, most notably shale gas, on European Union (EU) energy markets.

It should be noted that Commission services are currently examining whether the environmental challenges of unconventional gas production can be effectively managed through existing regulation, monitoring and the application of industry best practices. In this vein, the Joint Research Centre (JRC) has prepared a report reviewing the literature on environmental impacts. The present report examines only the potential benefits of shale gas exploitation and should be seen together with the associated JRC report addressing environmental issues.

In February 2011, the European Council stated that: “In order to further enhance its security of supply, Europe's potential for sustainable extraction and use of conventional and unconventional (shale gas and oil shale) fossil fuel resources should be assessed.” This report is a preliminary attempt to respond in part to this call by providing reliable facts for EU policy‐makers.

Fossil fuels, such as oil, natural gas and coal are by far the largest sources of energy in the EU and are widely projected to dominate the European energy mix through to at least 2030. The European Commissions Energy Roadmap 2050 identifies gas as a critical fuel for the transformation of the energy system. The substitution of coal and oil with gas in the short to medium term could help to reduce emissions with existing technologies until at least 2030‐2035.

Conventional gas currently dominates worldwide natural gas production, accounting for over 85% of total marketed output today. In recent years, however, two key developments have shifted the focus to so‐called 'unconventionals'. The first has been mounting concern that growing demand for energy worldwide would outstrip supply. The second factor has been a dramatic increase in unconventional gas production in North America, to roughly 50% of domestic production.

The International Energy Agency (IEA) has estimated that ‐ under the right conditions ‐ unconventional gas may meet more than 40% of the increased global demand for gas by the year 2035. However, many questions still remain about how easily unconventional gas resources can be developed outside North America.

Unconventional gas resources are thought to be, geographically, broadly distributed across all continents, including Europe. Their potential development may therefore offer a number of security‐of‐supply benefits for the Union: lower natural gas prices; more readily available gas on the European market; easing tightness in global energy markets; and adding diversity to the EU's gas supplies.

However, the growing focus on unconventional gas has not come without controversy. Notably, it has been argued that there may be several negative environmental and climatic aspects to its production. In addition, more and cheaper (unconventional) gas may challenge investment in coal, nuclear and renewables, as well as the established gas business model. And, of course, questions have been raised about the size of the recoverable resource base.

Full report published by Joint Research Centre (European Commission)  you would download here.

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