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Concerns about fracing are causing Europe to miss out on shale gas boom

Europe’s loss is the United States’ gain with respect to shale gas production, says the chief executive of the world’s largest petrochemical group. Mohamed al-Mady, head of Saudi Arabia’s Sabic, recently told the Financial Times that Europe will likely lose new petrochemical investments to the US and other countries because of its concern about hydraulic fracturing and its failure to allow shale gas development to proceed. Canada, China, and the Middle East also will be beneficiaries, he added.

France is one European nation that has already banned fracing technology due to its concern about water contamination and other environmental issues. Other countries appear reluctant to allow shale development as well. This is occurring despite the fact that much of Europe currently is over-dependent on natural gas from Russia, which controls pricing and delivery and has a virtual monopoly on gas in some European states.

Meanwhile the abundant supply of domestic natural gas in the US has driven down prices and created a demand for cheap gas to generate electricity, which also helps power generators meet federal environmental standards.

In addition, some US shale gas contains ethane, which can be converted into ethylene to make numerous petrochemical products, including plastics.

The United Kingdom and Poland seem to be bucking the European trend against shale gas development. The government of the United Kingdom said Dec. 13 that it will permit the resumption of shale gas exploration, including horizontal drilling and hydraulic fracturing, which are essential to the economics of shale development.

Ed Davey, the UK’s energy and climate change secretary, said the government will allow shale development to resume, but that any fracturing activity would be subject to new controls aimed at mitigating the risk of seismic activity (i.e., earthquakes) in the surrounding area.

Exploratory fracing has been suspended in the UK since May of 2011 after two small seismic tremors were detected near the country’s only fracing operation in the Bowland Basin, east of Blackpool in Lancashire, northern England. The British Geological Society recently reported that the area around Blackpool may hold as much as 300 trillion cubic feet of gas, at least 50% more than was previously thought.

In his Dec. 13 announcement, Davey said that shale gas represents a promising new potential energy resource for the UK and could contribute significantly to the nation’s energy security and reducing its reliance on imported gas.

“My decision is based on the evidence,” said Davey. “It comes after detailed study of the latest scientific research available and advice from leading experts in the field. We are still in the very early stages of shale gas exploration in the UK and it is likely to develop slowly. It is essential that its development should not come at the expense of local communities or the environment. [Fracing] must be safe and the public must be confident that it is safe.

The government of Poland has also been active in encouraging shale gas development within that Eastern European nation. However, exploration to date has not been encouraging, and some multi-national firms, including Exxon Mobil Corp., have withdrawn from the country.

Although Poland and the UK are hopeful, it remains unclear as to whether either will enjoy the widespread economic benefits of shale gas development that are occurring in North America. 

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