Interfax: European politicians yet to realize shale gas production unprofitable – expert

(Interfax – VERONA, Italy, October 18, 2013) Many European politicians do not realize that their countries would not benefit from producing shale gas, the head of contract structuring and pricing at LLC Gazprom Export, Sergei Komlev believes.

“I think that there is no full understanding of this problem in Europe, particularly an understanding of the production costs of this issue. European countries are discussing, for example, how to get the public to permit drilling next to their land and homes. They’re discussing issues of secondary importance in terms of the economics of shale gas,” Komlev said Thursday in an interview with Interfax.

“However, the main problem of shale gas is it high production cost,” Komlev said on the sidelines of the second Eurasian Forum in Verona. He said Europe does not have the conditions needed to ensure low production costs for shale gas. In the United States, the low cost of such gas is due to the availability of specialized companies, trained workers and equipment, he said.

“In Europe the situation is completely different. There are no qualified workers here, there’s not enough equipment. And if shale gas production begins in Europe, the production cost of this gas could be three times higher than in the United States,” Komlev said.

“Such gas can have only local applications, in other words be shipped to the domestic market and even so in small amounts, because it’s simpler to buy cheaper Russian gas,” Komlev said.

In addition, Europe does not have much available space suitable for shale gas production, he said. “Europe is a densely populated region. In addition, shale gas production requires a huge amount of water that must then be treated. This could also be problematic,” Komlev said.

Another participant in the forum, the director of the Upstream Gas division at Italy’s Enel, Marco Arcelli agrees. In his presentation he argued that Europe cannot produce shale gas on a scale comparable to the United States. In addition, such shale gas would only be used to partially offset the decline in production at conventional European gas fields.