Will the shale boom ever reach Europe’s shores? It has had a remarkable impact in the U.S. Thanks to fracking, American chemicals and steel companies pay two-thirds less than European counterparts for natural gas, according to Eni, the Italian oil and gas firm. They pay half the cost for electricity. The International Energy Agency expects U.S. manufacturers’ share of global energy-intensive exports to grow slightly over the next two decades on the back of cheap energy, against a 10 percent decline in Europe. Thanks in part to the lower energy prices, the Boston Consulting Group reckons the U.S. will create up to 5 million factory and services jobs by 2020.
In theory, Europe could have cheaper energy too. It has vast quantities of shale gas, particularly under France and Poland. But there are problems. Europe’s shale layers are deeper, making it more expensive to extract than in the U.S. Difficulties have led Exxon, Talisman and Marathon Oil to throw in the towel in Poland.
There is also a lack of direct economic incentives. In the U.S., landowners share in the spoils because they own the subsoil. In Europe the profits usually flow to governments. This is no-hard-and-fast rule: fracking is banned in the state of New York and is thriving in Alberta where the subsoil is owned by the Canadian government. But social, political and environmental attitudes weigh more heavily in Europe.
It is more densely populated and that makes fracking more disruptive. Gas is released after blasting underground rock with explosives and pressurized water, sand and chemicals. That creates environmental concerns and understandable reticence by those who live near potential drill sites. In addition, water is hard to come by in certain parts, such as Spain. France has banned the practice.
It is too early to write off European shale gas reserves. U.S. exports of liquefied natural shale gas should also keep a lid on global gas prices, and that helps lower costs for Europeans. Old world economies can find competitive advantages in less energy-intensive industries. Gas is one of the less significant costs when it comes to hand-stitching a Christian Dior gown.
Cheaper energy would provide just the fillip Europe needs. Sadly, it is a pipedream.