Despite some alarmist headlines earlier this year declaring that Europe’s shale dream was essentially still-born after the exit of some very high-profile majors, the reality is that opportunities remain for those prepared—or able—to play a long-term game.

Along with cautious but steady progress in terms of European legislation, and with the emergence of the U.K. as the main cheerleader for the creation of a shale industry, the signs are more positive than most outside observers—and environmental campaigners—would have us believe.

Much of the apparent gloom in terms of shale’s future in Europe stems from the decisions by companies such as Chevron to pull out of its activities in Romania, Poland and Lithuania and relinquish its concessions there, marking the end of its efforts in the region. However, like other aspects of the company’s business such as deepwater and other remote offshore projects, its decision was purely a business one, Chevron said.

Economic mismatch

Its European shale projects simply did not match up economically compared on a competitive basis to other investment opportunities.

At the time of its exit from Romania in February, Chevron made clear comments to Reuters. “Chevron intends to pursue relinquishment of its interest in these concessions in 2015,” said Kent Robertson, media relations adviser for Chevron. “This is a business decision [that] is a result of Chevron’s overall assessment that this project does not currently compete (favorably) with other investment opportunities in our global portfolio.”

That includes, for example, other competing emerging frontiers close by within Europe itself, such as the Black Sea’s more realistic offshore potential, where Chevron and Exxon Mobil are already involved.

But Robertson was not delivering a damning verdict on behalf of the U.S. major on the potential of European shale, just noting that it cannot compete commercially at this time. Chevron has four wholly owned concessions in Romania alone that are now up for grabs after deciding, following exploratory drilling last year in the Bârlad concession in Vaslui County, eastern Romania, and carrying out analysis of 2-D seismic on two of its three Dobrogea region concessions, that it was time to exit.

Other concessions in Europe (mainly Poland, Ukraine and Hungary) have also been exited in recent times by companies including Total, Exxon Mobil, Marathon Oil and Shell.

Silver lining for shale

However, Europe has come through plenty of testing times in the past.

And as the region recently celebrated VE (Victory in Europe) Day to mark the end of World War II, there are plenty within the upstream sector who still see a silver lining for Europe’s nascent shale industry and strong political will to establish more energy independence and less reliance on Russian gas supplies.

This year has already seen some significant developments in the political arena, with the inclusion of shale gas in the EU’s “Energy Union” strategy and the publication of a European Commission (EC) “Scoreboard,” meaning shale gas remains firmly on the EU agenda.

The Energy Union package laid out a framework strategy for creating a European energy union. The aim is to try to bring to reality domestically produced energy, including unconventional and conventional fossil fuels as well as renewables, to contribute toward decreasing Europe’s energy import dependence. Politically driven situations such as the ongoing and violent Ukraine crisis have only underlined the importance of firming up alternative energy sources.

Shale gas scoreboard

The EC’s shale gas scoreboard, meanwhile, gives a breakdown of responses from all 28 member states as to how they intend to apply the commission’s recommendation (published in January last year). So far a total of five states (the U.K., Denmark, The Netherlands, Poland and Romania) have stated that they have licensed fracking or plan to do so. Another six (Austria, Germany, Hungary, Lithuania, Portugal and Spain) are still considering the possibility of exploring for shale gas.

Another EU program to promote domestic resources will feature among other moves a specific initiative on how shale gas can be developed, supported by its already established European science and technology network on unconventional hydrocarbon extraction. The network’s first meetings took place earlier this year, with the main objective initially to collect, analyze and review results from European exploration projects and assess technological developments.

U.K. momentum

Things are currently most advanced in the U.K., where early this year the government’s Innovate UK organization (formerly the Technology Strategy Board) confirmed that 19 companies will share up to £2 million (US $3.1 million) to fund new solutions to unlock the potential of shale gas in the U.K.

The winning projects will explore new innovation in areas ranging from water treatment and monitoring techniques to well drilling and design technology.

There has also been a small but meaningful handful of shale gas wells drilled already this year in northeast and southeast England, with more lined up before the end of 2015. There also was the very heavily publicized announcement of a sizeable conventional oil find at Horse Hill in the Weald Basin of southern England, which in reality remains subject to very substantial further assessment.

Southern comfort

But the discovery has reignited belief that southern England has real resource potential for both conventional and unconventional reserves.

The British Geological Society last year estimated that the Weald Basin could hold up to 4.4 Bbbl of shale oil, although it stressed that these figures did not take into account the likely recoverable reserves. It also is worth remembering that commercial reserves of onshore oil and gas in England is nothing new—Perenco’s conventional Wytch Farm oil field near Poole on the south coast is the largest onshore oil field in Europe and has been producing since 1979, while there are 13 small producing conventional sites in the Weald Basin already.

European shale oil and gas drilling is in its early infancy, but onshore conventional activity in pristine areas of natural beauty has been taking place for decades, such as on Perenco’s Wytch Farm Field in Dorset, England. (Source: Perenco)

Following the re-election to U.K. government of the largely pro-shale Conservative Party, it is also expected by mid-year that the results of the 14th onshore licensing round will be announced, which will provide more clarity as to how shale gas will continue to be assessed in the U.K.

There is growing awareness within the U.K. generally that as its mature North Sea sector continues to inexorably decline in terms of production levels, shale is seen as part of a broader future energy solution for the country.

Post-Chevron Poland

In Poland the industry is certainly not dead post-Chevron, with the Polish government developing its legislative framework further to create a more conducive environment for the industry.

It is presently finalizing a draft law to simplify administrative procedures for companies applying for licenses, and this follows several reforms to both its geological and mining laws and the taxation framework last year.

Interestingly, the Polish government is also finalizing the first joint governmental report on shale gas, carried out in cooperation with the U.K., which is expected to provide a definitive guide to the issues around the development of a commercial shale gas industry in Europe and an in-depth overview of the potential benefits that shale gas will bring.

One thing remains clear—Europe’s shale breeze continues to blow, but gently. The rocks were always going to be very different than those encountered in North America, and considerably more research is required if they are eventually to be exploited, as knowledge of the continent’s shale geology remains in its infancy. Hundreds, if not thousands, of wells will need to be drilled, just as in the U.S., before Europe’s shales are fully understood. But with political will behind it and a slow but steady increase in public understanding, shale remains one of the region’s best bets for energy security and a bridge toward meeting Europe’s low-carbon goals.

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