Even the supporters of Europe’s shale potential seem half-hearted. An oil and gas industry-backed online information site states underwhelmingly, “The International Energy Administration has estimated that Europe could hold trillions of recoverable cubic meters of shale gas across several member states. It is as yet uncertain exactly where reserves are located, how large they are or whether they are commercially viable.”

To paraphrase: “Europe could have lots of shale gas, but then again it might not, and we’re not sure where it is anyway.”

Thus is the current state of the industry in Europe. One thing that is safe to say is that it is in a nascent stage. This is not to dismiss the fact that there is already real activity underway. Countries such as Poland have seen a good number of early wells drilled, but when the approximately 50 to 60 unconventional wells in that country are compared to the 400,000-plus wells drilled in the U.S., it pales into insignificance.

The key word remains “potential” for Europe, especially if not including Russia in the conversation. Much of the difficulty for the continent is because of its very fragmented identity—the U.S. is of course one single massive country and market, and it is no accident that activity is advancing more rapidly in other similarly large countries such as Russia, China and Australia.

Europe, by comparison, is not a single cohesive market, despite the existence of the EU. In the long term, it is highly likely that shale gas and oil will be developed, but that development will vary greatly from country to country.

On the one hand, there are those countries that are fervently anti-hydraulic fracturing, such as France, where a total ban remains in place and looks unlikely to be removed. On the other, there are those countries, including the U.K. and Poland, that are politically at least strongly in favor of it.

Current status

So what is the current status?

The EU decided to defer the decision on whether to carry out shale exploration activity to each member state, meaning the national governments retain the right to decide if and where they want to search.

As a result, the countries where activity is currently moving are the U.K., Poland, Germany, Romania and Denmark. Bulgaria, France and Spain remain subject to moratoriums at present.

U.K.

The U.K. has significant shale gas potential. Last year the Department of Energy and Climate Change (DECC) published a study by the British Geological Survey (BGS) on the volume of gas in the Bowland and Hodder shales in the north of England. That study concluded the total amount of gas in place there was 37.6 Tcm (1,328 Tcf).

More recently it did a similar study on Scotland’s potential in the Midland Valley Basin, which raised the total claimed U.K. shale reserves figure to about 42 Tcm (1,409 Tcf) of gas and 6 Bbbl of oil for the Bowland and Midland Valley basins combined.

In Scotland the play can be considered stacked like some shale plays in the U.S. such as the Spraberry and Wolfcamp, according to the report. The BGS pointed out that while it did not examine the hybrid conventional, tight oil and tight gas potential of the play, “evidence of numerous oil and gas shows in wells suggests that tight oil/gas could be a complementary resource in the Midland Valley of Scotland.”

Unproven

The U.K. remains, of course, almost entirely unproven, with analyst Wood Mackenzie saying that with only six wells targeting shale plays drilled so far, “much remains to be seen from the initial well results in order to prove the commercial viability.”

The list of companies who could join the search may well grow as the government recently launched its 14th onshore licensing round. Licenses are available in areas that include the Bowland and Midland Valley basins.

According to Wood Mackenzie, a number of barriers still remain to be overcome to reach commercial production. “Fundamentally our view hasn’t changed since we assessed the commercial viability of U.K. shale gas in 2012, when we forecast production from the U.K. alone was unlikely to have a material impact on the U.K.’s gas price dynamics out to 2025,” said Lindsay Wexelstein, head of U.K. upstream research, in a statement. “The launch of the long-awaited 14th U.K. onshore licensing round is a significant step in the development of the U.K.’s shale gas industry as it could spur the investment and exploration activity required to test the unproven subsurface.”

14th round

The 14th licensing round is the first one for six years, and it is expected that licenses will be awarded in the next 12 to 18 months. Backed by a British government that is publicly committed to developing shale resources in the face of increasing energy prices, declining North Sea output and threats to energy security due to events such as those in the Ukraine, the U.K.’s Business and Energy Minister, Matthew Hancock, commented recently in a statement on the licensing round that “ultimately, done right, speeding up shale will mean more jobs and opportunities for people and help ensure long-term economic and energy security for our country.”

A program to try to better inform the public (and counter the very proactive environmental campaign against any fracking in the U.K.) has seen the BGS also release a series of maps to help illustrate the relationship between groundwater and fracking. While the report acknowledges that water is a “resource that needs effective long-term protection,” the maps illustrate the distances that separate shale gas deposits and water aquifers. The Bowland Shale, for example, lies at least 800 m (2,625 ft) below principle aquifers. This means it is highly unlikely that hydraulic fracturing could have any impact on aquifers since the micro fractures created by the process typically extend less than 180 m (591 ft) upward from the wellbore, it said.

DECC has to date awarded 334 landward licenses for onshore petroleum and gas exploration. A report by the U.K.’s Institute of Directors also has suggested that shale gas development could bring with it investment of as much as £3.7 billion (US$5.9 billion) per year and create up to 74,000 jobs.

Most of the current shale exploration activity is being driven by Cuadrilla Resources Ltd., which plans to drill up to four exploration wells at its proposed Roseacre Wood and Preston New Road sites in Lancashire, England.

IGas Energy, meanwhile, is expected to announce initial gas-in-place estimates in the East Midlands, England, and the first results from the ongoing core analysis of its exploration well at Barton Moss. It will also commission an independent review of the combined group's assets since its acquisition earlier this year of Dart Energy.

IGas also is planning the acquisition of 3-D seismic across some of its acreage with a view to submitting applications for multiwell sites for drilling and hydraulic fracturing of gas from shale in first-half 2015.

Poland

The Polish Parliament’s Lower House voted recently on a set of amendments to its existing Geological and Mining Law, which will clarify licensing procedures for investors as well as offering greater security.

The new provisions are expected to come into effect Jan. 1, 2015. Poland also is looking into a new tax bill on shale gas development which, to encourage investment in its nascent shale gas industry, will probably only be brought into effect around 2020. In March this year the government gave its full backing to shale gas, with Prime Minister Donald Tusk saying that shale gas extraction would be exempt from tax until 2020 and Minister of the Environment Maciej Grabowski stating that shale gas was his priority this year.

The country’s potential shale reserves are believed to be extensive, but much more exploration drilling remains to be done. In 2012 the Polish Geological Institute issued estimates for its shale gas resources, with the conservative range put at 346 Bcm to 768 Bcm (12.2 Tcf to 27 Tcf) while the higher end estimate was up to 1.9 Tcm (67 Tcf).

A separate study that year conducted by Saponis Investments SP, however, indicated a potential 376 Bcm (13.3 Tcf) of shale gas in just three concession areas in northern Poland, painting a much more optimistic picture than that of the Polish Geological Institute.

There are currently more than 100 concessions for shale gas covering 88,000 sq km (34,000 sq miles), with at least 60 wells drilled so far and up to 40 more planned by year-end—making it by far Europe’s most active actual shale explorer at present.

Denmark

Although a recent entrant into the shale gas sector, Denmark has a supportive government and also a public that, according to surveys, appears to agree that shale gas should be a part of the country’s future energy mix.

One Danish local council—Frederikshavn—recently decided to allow exploration drilling for shale to take place for the first time in the country.

Germany

Germany is estimated to hold significant resource deposits, and with its ongoing strategy to phase out nuclear power, shale is seen as a significant potential new energy source.

In 2012 the country’s Federal Institute for Geosciences and Natural Resources estimated that between 70 Bcm and 230 Bcm (2.5 Tcf and 8 Tcf) of shale gas reserves could be extracted. Last year the U.S. Energy Information Administration (EIA) came up with a figure for Germany—with no drilling having yet taken place, of course—of 481 Bcm (17 Tcf) of technically recoverable shale gas reserves.

Germany is heavily dependent on gas imports from Norway and Russia and is keen to achieve better energy independence if it can. However, the current government is firm in saying that shale gas development will not take place until concrete evidence has been demonstrated that the process is safe. Despite this, earlier this year the region of Lower Saxony said it was in favor of hydraulic fracturing and put forward a draft proposal for a decree on the permission of exploration and extraction of natural gas through fracking.

Romania

Romania lifted its moratorium on fracking last year, with the country’s National Agency for Mineral Resources now underway with a study to determine the level of potential shale gas resources. The EIA estimates Romania’s unproven wet shale gas technically recoverable resources at 1.4 Tcm (51 Tcf), which makes it the third-largest in Europe behind France and Poland.

Chevron has been present in Romania for some time and holds a number of concessions, mainly in the counties of Constanţa and Vaslui. It also began actual exploration work in late 2013. The operator has gone on record as saying that its investment in Romania alone could total $600 million over the next 15 years. State company Petrom also is undertaking preliminary analyses of its concessions.

Above-ground challenges

Throughout Europe it is largely the above-ground challenges that remain most daunting. The process of obtaining planning permission to drill, frack and test wells is strewn with red tape and necessary environmental procedures, supplemented often by vigorous anti-fracking campaigns in densely populated areas.

It is also much more expensive than in the U.S. as a lack of pipeline infrastructure in some parts of Europe such as Poland means a well can cost up to three times more than in the U.S. More powerful rigs and pumps also are needed as most of Europe’s shale lies deeper than in the U.S., further meaning more fracking fluids also are needed.

The U.K. is also a good example of the red tape issue. Wood Mackenzie said that successful bidders on licenses will have to undertake extensive public engagement and consultation exercises before planning applications are even submitted to local councils.

The industry is essentially heavily regulated by four layers of oversight, including the U.K. Environment Agencies, the Health and Safety Executive, the Mineral Planning Authorities

and DECC. The onshore industry also already has to comply with 17 different EU directives. Each well also requires up to nine separate environmental permits and has to reach binding agreements on noise, hours of operation and other local social issues.

But Wood Mackenzie also highlighted positive moves by the U.K. government to lure and support shale gas developers. “The U.K. government has introduced fiscal incentives that will support the development of succinct shale gas pads,” the analyst said. “Given land access issues in the U.K., these are likely to be more palatable development concepts for local communities and planning authorities, but their viability will depend on the geology and presence of commercial shale gas reserves.”

The pad allowance cuts the tax on a portion of production income from 62% to 30% at current rates, according to the U.K. treasury department.

Positive moves like this indicate that Europe’s time is coming, but it will be a slow process. Experts have gone on record as saying that up to 300,000 wells may be required to get the potential shale gas reserves out but that up to 1,000 will first need to be drilled before Europe truly understands its shales and whether they can be produced commercially.

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