Abstract
European countries are currently exploring strategies to ensure a strong level of security of energy supply while decreasing its reliance on natural gas imports. With the strong surge in shale gas developments in the USA, similar ambitions have been the ongoing subject of inquiry in Europe. Detailed knowledge about extraction costs is a key issue in determining future shale gas investments in Europe. The paper at hand analyses the potential of European shale gas resources, highlighting their competitiveness against conventional natural gas. It examines the current volume of shale gas resources in Europe and performs a detailed cost calculation to provide an estimation of shale gas production costs. The results indicate that under current market conditions the repetition of the US shale gas boom is by all measures improbable in Europe. Furthermore, in the case that natural prices were to return to historically higher levels, only a few highly productive shale gas formations would be economically competitive.
Zusammenfassung
Nach dem Erfolg der Schiefergasförderung in den USA vor zehn Jahren, stellt sich die Frage, inwiefern sich diese Entwicklung in Europa wiederholen kann. Vor diesem Hintergrund analysiert dieses Papier die Wirtschaftlichkeit einer möglichen Schiefergasförderung an verschiedenen europäischen Standorten und bewertet die Wettbewerbsfähigkeit gegenüber konventionellem Erdgas. Das aktuelle Aufkommen von Schiefergas in Europa wird untersucht und die jeweiligen in der Bestandsliteratur ausgewiesenen Abschätzungen zu Ressourcen und Reserven diskutiert. Darauf aufbauend wird eine Kostenkalkulation zur Abschätzung der Schiefergasförderkosten vorgestellt. Die detaillierte Betrachtung der unterschiedlichen Kostentreiber zur Schiefergasförderung bietet anschließend einen Ansatz, um zukünftig weitere Förderkonzessionen in Europa zu diskutieren. Die Ergebnisse der Kostenkalkulation für einzelne europäische Schiefergasformationen zeigen, dass unter derzeitigen Marktbedingungen eine Wiederholung des US Schiefergas-Booms in Europa äußerst unwahrscheinlich ist. Die berechneten Förderkosten übersteigen zum einen deutlich die US-amerikanischen und zum anderen liegen sie über den Spotmarktpreisen. Weiterhin zeigen die Analysen, dass bei einem erneuten Anstieg des Erdgaspreises lediglich hochproduktive Gasformationen wirtschaftlich förderbar wären.
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Notes
The scope of the work involves the investigation of European onshore shale gas formations. Offshore shale gas resources are not evaluated due to limited data availability. Furthermore, the report does not consider the ecological effects of shale gas production but rather focuses solely on the economic costs.
Expressed in equations, a general form of the decline rate can be written as \(a=kq^{b}\), with a being the decline rate, k being a constant, q representing an equation for the production flow and b representing the decline curve exponent. Exemplarily shown for the exponential decline, the EUR that symbolizes the cumulative production of the whole can be calculated by \(Q=\frac{q-q(t)}{a}\) with Q representing the cumulative production (cf. Fekete (2014)).
Total yearly gas demand in the European Union was approximately 409 bcm in 2014 (Eurogas 2015). Although this GIP figure is significantly larger, it has to be kept in mind that the GIP is set in relation to total resources (and not on a yearly basis) and significant uncertainties are included. This amount could satisfy natural gas demand for 40 years.
The large discrepancy between the EIA (2013) and USGS (2012) estimates results primarily form differing methodological considerations with EIA utilising empirical data from US shale plays as analogues for the lack of empirical data for wells in Poland while USGS refrained from doing this and maintained more conservative estimates for e. g. per-well recoveries in comparison to those obtained at US wells. In addition, USGS (2012) excluded certain shale formations in their estimate.
Pearson et al. (2012, p. 95) estimate the cost for field development and infrastructure to amount to 30% of drilling and completion costs. However, in the calculation performed in their report they designate field construction costs as totalling 50% of the sum of drilling and fracturing costs. Thus, adhering to the numbers used in their calculations, we assume the higher percentage value.
In this approach, the EUR values depends only on the scenarios in Table 3, based on literature. A more refined estimate would involve deriving a relative rate related to the TRR that depends on the size of the shale gas formation. However, this would require empirical data for different shale gas formation, which is currently not available.
We use future prices as reference prices in order to have a transparent benchmark for shale gas in the European market. However, we are aware that bilateral contract prices are often higher and also still important in the European gas market.
In reality, the amount of a shale gas in a shale gas formation tends to rise with increasing depth like Sect. 3.2 has shown. Consequently, this simplification of equally distributing the amount of shale gas about the whole formation is a shortcoming of the research resulting from insufficient data published.
However, it has to be kept in mind that prices at a level of up to approx. 35 €/MWh, which were observed back in 2008, would increase the number of economically viable shale gas fields.
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Riedel, T.G., Schubert, D.K.J., Hauser, P. et al. Analysis of the Potential Economic Viability of Shale Gas Resources in Europe. Z Energiewirtsch 41, 283–298 (2017). https://doi.org/10.1007/s12398-017-0210-2
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DOI: https://doi.org/10.1007/s12398-017-0210-2