Secretary of State Hillary Clinton said U.S. energy companies can help Ukraine reduce its dependence on Russian natural gas.

Commenting after her meeting with Ukrainian President Viktor Yanukovych, Clinton said that the United States would be interested in investing in Ukraine’s energy sector,  including shale gas production.

“Investing in the energy sector is one of the best ways the U.S. and other countries can help Ukraine,” she said.

“An energy sector built on transparency, market pricing and efficiency can put a permanent end to the crises that have beset the Ukrainian energy market.”

Later in Warsaw, Mrs Clinton also discussed Poland’s shale gas deposits.

Speaking at a joint press conference with Clinton, Polish Secretary of State, Radek Sikorski said that he saw a convergence of views on energy security issues and is happy that Poland and the US will cooperate on the extraction of recently discovered shale gas deposits in Poland.

“I am pleased with our talks, which were devoted to a large degree on energy cooperation and energy security,” Sikorski said. “I see a tremendous convergence of views on these issues.”

Source: thenews.pl, Businessweek

The Kyiv Post reports that the Ukrainian government is in talks to acquire shale gas knowledge.

“We are in talks on the acquisition of techniques for shale gas extraction,” said First Vice Prime Minister Andriy Kliuyev.

He also noted that the government is considering the alternative of collecting methane released when extracting coal.

Earlier this month, Fuel and Energy Minister Yuriy Boiko said that Ukraine plans to sign contracts with U.S. companies for unconventional gas production prior to the end of this year,

Minister Boiko stated that Ukraine’s shale deposits appear to be amongst the most prospective in Europe.

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Ukraine plans to sign contracts with U.S. companies for unconventional gas production prior to the end of this year, according to Fuel and Energy Minister Yuriy Boiko.

U.S. companies have taken an interest in potential coal-bed methane and shale gas resources in Ukraine.

“I am sure that we will formalize the agreements by the end of this year. We have very good perspectives for production of shale gas, but better perspectives for coal-bed methane production,” Minister Boiko said in an interview with Ukraine’s Inter television channel.

RIA Novosti reported the Minister said, that according to preliminary forecasts, Ukraine will be capable of producing over 7 billion cubic meters of these alternative energy resources annually commencing in three to four years.

Ukranian News Agency reported that on Wednesday, First Vice Prime Minister Andrii Kliuev announced plans to increase its domestic output of natural gas by 100% or 20 billion cubic metres to 40 billion cubic metres a year, over the next ten years.

The minister stated that Ukraine’s shale deposits appear to be amongst the most prospective in Europe.

“We have held a series of negotiations and are now preparing areas for this,” he said.

Huge discoveries of natural gas promise to shake up the energy markets and geopolitics. And that’s just for starters.

Over the past decade, a wave of drilling around the world has uncovered giant supplies of natural gas in shale rock. By some estimates, there’s 1,000 trillion cubic feet recoverable in North America alone—enough to supply the nation’s natural-gas needs for the next 45 years. Europe may have nearly 200 trillion cubic feet of its own.

We’ve always known the potential of shale; we just didn’t have the technology to get to it at a low enough cost. Now new techniques have driven down the price tag—and set the stage for shale gas to become what will be the game-changing resource of the decade.

I have been studying the energy markets for 30 years, and I am convinced that shale gas will revolutionize the industry—and change the world—in the coming decades. It will prevent the rise of any new cartels. It will alter geopolitics. And it will slow the transition to renewable energy.

To understand why, you have to consider that even before the shale discoveries, natural gas was destined to play a big role in our future. As environmental concerns have grown, nations have leaned more heavily on the fuel, which gives off just half the carbon dioxide of coal. But the rise of gas power seemed likely to doom the world’s consumers to a repeat of OPEC, with gas producers like Russia, Iran and Venezuela coming together in a cartel and dictating terms to the rest of the world.

The advent of abundant, low-cost gas will throw all that out the window—so long as the recent drilling catastrophe doesn’t curtail offshore oil and gas activity and push up the price of oil and eventually other forms of energy. Not only will the shale discoveries prevent a cartel from forming, but the petro-states will lose lots of the muscle they now have in world affairs, as customers over time cut them loose and turn to cheap fuel produced closer to home.

The shale boom also is likely to upend the economics of renewable energy. It may be a lot harder to persuade people to adopt green power that needs heavy subsidies when there’s a cheap, plentiful fuel out there that’s a lot cleaner than coal, even if gas isn’t as politically popular as wind or solar.

But that’s not the end of the story: I also believe this offers a tremendous new longer-term opportunity for alternative fuels. Since there’s no longer an urgent need to make them competitive immediately through subsidies, since we can use natural gas now, we can pour that money into R&D—so renewables will be ready to compete without lots of help when shale supplies run low, decades from now.

To be sure, plenty of people (including Russian Prime Minister Vladimir Putin and many Wall Street energy analysts) aren’t convinced that shale gas has the potential to be such a game changer. Their arguments revolve around two main points: that shale-gas exploration is too expensive and that it carries environmental risks.

I’d argue they are wrong on both counts.

Take costs first. Over the past decade, new techniques have been developed that drastically cut the price tag of production. The Haynesville shale, which extends from Texas into Louisiana, is seeing costs as low as $3 per million British thermal units, down from $5 or more in the Barnett shale in the 1990s. And more cost-cutting developments are likely on the way as major oil companies get into the game. If they need to do shale for $2, I am willing to bet they can, in the next five years.

When it comes to environmental risks, critics do have a point: They say drilling for shale gas runs a risk to ground water, even though shale is generally found thousands of feet below the water table. If a well casing fails, they argue, drilling fluids can seep into aquifers.

They’re overplaying the danger of such a failure. For drilling on land, where most shale-gas deposits are, the casings have been around for decades with a good track record. But water pollution can occur if drilling fluids are disposed of improperly. So, regulations and enforcement must be tightened to ensure safety. More rules will raise costs—but, given the abundance of supply, producers can likely absorb the hit. Already, some are moving to nontoxic drilling fluids, even without imposed bans.

But the skeptics aren’t just overstating the obstacles. They’re missing two much bigger points. For one thing, they’re ignoring history: The reserves and production of new energy resources tend to increase over time, not decrease. They’re also not taking into account how quickly public opinion can change. The country can turn on a dime and embrace a cheaper energy source, casting aside political or environmental reservations. This has happened before, with the rapid spread of liquefied-natural-gas terminals over the past few years.

In short, the skeptics are missing the bigger picture—the picture I think is the much more likely one. Here’s a closer look at what I’m talking about, and how I believe the boom in shale gas will shake up the world.
One of the biggest effects of the shale boom will be to give Western and Chinese consumers fuel supplies close to home—thus scuttling a potential natural-gas cartel. Remember: Prior to the discovery of shale gas, huge declines were expected in domestic production in U.S., Canada and the North Sea. That meant an increasing reliance on foreign supplies—at a time when natural gas was becoming more important as a source of energy.

Even more troubling, most of those gas supplies were located in unstable regions. Two countries in particular had a stranglehold over supply: Russia and Iran. Before the shale discoveries, these nations were expected to account for more than half the world’s known gas resources.

Russia made no secret about its desire to leverage its position and create a cartel of gas producers—a kind of latter-day OPEC. That seemed to set the stage for a repeat of the oil issues that have worried the world over the past 40 years.

As far as I’m concerned, you can now forget all that. Shale gas will breed competition among energy companies and exporting countries—which in turn will help economic stability in industrial countries, and thwart petro-suppliers that try to empower themselves at our expense. Market competition is the best kryptonite for cartel power.

For one measure of the coming change, consider the prospects for liquefied natural gas, which has been converted to a liquid so it can be carried in a supertanker like oil. It’s the easiest way to move natural gas very long distances, so it gives a good picture of how much countries are relying on foreign supplies.

Before the shale discoveries, experts expected liquefied natural gas, or LNG, to account for half of the international gas trade by 2025, up from 5% in the 1990s. With the shale boom, that share will be more like one-third.

In the U.S., the impact of shale gas and deep-water drilling is already apparent. Import terminals for LNG sit virtually empty, and the prospects that the U.S. will become even more dependent on foreign imports are receding. Also, soaring shale-gas production in the U.S. has meant that cargoes of LNG from Qatar and elsewhere are going to European buyers, easing their dependence on Russia. So, Russia has had to accept far lower prices from formerly captive customers, slashing prices to Ukraine by 30%, for instance.

But the political fallout from shale gas will do a lot more than stifle natural-gas cartels. It will throw world politics for a loop—putting some longtime troublemakers in their place and possibly bringing some rivals into the Western fold.

Again, remember that as their energy-producing influence grew, nations like Russia, Venezuela and Iran became more successful in resisting Western interference in their affairs—and exporting their ideologies and strategic agendas through energy-linked deal-making and threats of cutoffs.

In 2006 and 2007, disputes with Ukraine led Russia to cut off supplies, leaving customers in Kiev and Western Europe briefly without fuel in the dead of winter. That cutoff effectively shifted Ukraine’s internal politics: The country turned away from the pro-NATO, anti-Moscow candidate and toward a coalition more to Moscow’s liking.

It looked like the U.S. and Europe would see their global power eclipse as they kowtowed to their energy suppliers. But shale gas is going to defang the energy diplomacy of petro-nations. Consuming nations throughout Europe and Asia will be able to turn to major U.S. oil companies and their own shale rock for cheap natural gas, and tell the Chavezes and Putins of the world where to stick their supplies—back in the ground.

Europe, for instance, receives 25% of its natural-gas supply via pipelines from Russia, with some consumers almost completely dependent on the big supplier. In the wake of Russia’s strong-arming of Ukraine, Europe has been actively diversifying its supply, and shale gas will make that task cheaper and easier.

Shale-gas resources are believed to extend into countries such as Poland, Romania, Sweden, Austria, Germany—and Ukraine. Once European shale gas comes, the Kremlin will be hard-pressed to use its energy exports as a political lever.

I would also argue that greater shale-gas production in Europe will make it harder for Iran to profit from exporting natural gas. Iran is currently hampered by Western sanctions against investment in its energy sector, so by the time it can get its natural gas ready for export, the marketing window to Europe will likely be closed by the availability of inexpensive shale gas.

And that may lead Tehran to tone down its nuclear efforts. Look at it this way: If Iran can’t sell its gas in Europe, what options does it have? Piping to the Indian subcontinent is impractical, and LNG markets will be crowded with lower-cost, competing supplies.

It’s admittedly a long shot, but if the regime acts rationally, it will realize it has a chance to win some global goodwill by shifting away from nuclear-power efforts—and using its cheap natural-gas supplies to generate electricity at home.

Overall, the Middle East might get a bit poorer as gas eats into the market for oil. If the drop in revenue is severe enough, it could bring instability.

Shale-gas development could also mean big changes for China. The need for energy imports has taken China to problematic nations such as Iran, Sudan and Burma, making it harder for the West to forge global policies to address the problems those countries create. But with newly accessible natural gas available at home, China could well turn away from imports—and the hot spots that produce them.

The less vulnerable China is to imported oil and gas, the more likely it would be to support sanctions or other measures against petro-states with human-rights problems or aggressive agendas. Moreover, the less Beijing worries about U.S. control of sea lanes, the easier it will be for the U.S. and China to build trust. So, domestic shale gas for China may help integrate Beijing into a Pax Americana global system.

With natural gas cheap and abundant, the prospects for renewable energy will change just as drastically. I have been a big believer that renewable energy was about to see its time. Prior to the shale-gas revolution, I thought rising hydrocarbon prices would propel renewables and nuclear power into the marketplace easily—albeit with a little shove from a carbon tax or a cap-and-trade system.

But the shale discoveries complicate the issue, making it harder for wind, solar and biomass energy, as well as nuclear, to compete on economic grounds. Subsidies that made renewables competitive with shale gas would get more expensive, as would loan guarantees and incentives for new nuclear plants. Shale gas also hurts the energy-independence argument for renewables: Shale gas is domestic, just like wind and solar, so we won’t be shipping those dollars to the Middle East.

But that doesn’t mean we should stop investing in renewables. As large as our shale-gas resources are, they’re still exhaustible, and eventually we will still need to transition to energy that is cleaner and more plentiful. So, what should we do?

First, avoid the urge to protect coal states and let cheaper natural gas displace coal, which accounts for about half of all power generated in the U.S. Ample natural gas for electricity generation could also make it easier to shift to electric vehicles—once again helping the environment and lessening our dependence on the Middle East.

Then, I think we still need to invest in renewables—but smartly. States with renewable-energy potential, such as windy Texas or sunny California, should keep their mandates that a fixed percentage of electricity must be generated by alternative sources. That will give companies incentives and opportunities to bring renewables to market and lower costs over time through experience and innovation. Yes, renewables may seem relatively more expensive in those states as shale gas hits the market. And, yes, that may mean getting more help from government subsidies. But I don’t think the cost would be prohibitive, and the long-term benefits are worth it.

Still, I don’t believe we should set national mandates—which would get prohibitively expensive in states without abundant renewable resources. Instead of pouring money into subsidies to make such a plan work, the federal government should invest in R&D to make renewables competitive down the road without big subsidies.

In the end, what’s important to understand is that shale gas may be the key to solving some of our most pressing short-term crises, a way to bridge the gap to a more-secure energy and economic future.

The trade deficit has crippled our economy and shows no signs of abating as long as we remain tethered to imported energy. Why ship dollars abroad where they can destabilize global financial markets—and then hit us back in lost jobs and savings—when we can develop the resources we have here in our own country? Shall we pay Vladimir Putin and Mahmoud Ahmadinejad to develop our natural gas—or the citizens of Pennsylvania and Louisiana?

By: Amy Meyers Jaffe

Ms. Jaffe is the Wallace S. Wilson Fellow for Energy Studies at the James A. Baker III Institute for Public Policy at Rice University and co-author of “Oil, Dollars, Debt and Crises: The Global Curse of Black Gold.”

Source: Wall Street Journal

EuroGas, Inc. today announced that through its subsidiary, EuroGas Polska sp.z o.o., it has entered into a confidentiality agreement with Total E&P Activites Petrolieres (Total), a wholly owned subsidiary of Total S.A., one of the world’s largest oil companies. The agreement was entered into in connection with the evaluation and possible acquisition by Total of certain rights held by EuroGas Polska’s wholly-owned West Ukrainian subsidiary in an onshore region in Western Ukraine. Total has also been evaluating the Bieszczady concession in Poland, in which EuroGas owns a 24% interest.

The properties under evaluation by Total are situated on a coal bed methane (CBM) concession near the Ukrainian/Polish border on which EuroGas was the first foreign oil company to drill a CBM well in Ukraine in 1998. This area within the Ukrainian part of the Lublin trough is offsetting recently acquired shale gas concessions by ExxonMobil, Chevron, Marathon Oil and Polish Oil & Gas (PGNiG) within the Polish part of the Lublin trough on the Polish side of the Polish/Ukrainian border.

“Over the past 13 years we have done a considerable amount of geological and technical research and have compiled an extensive database of old wells drilled in Western Ukraine,” said Wolfgang Rauball, Chairman and CEO, EuroGas. “Our research indicates that the thickness of the shale gas formations under EuroGas’ area in the Western Ukrainian portion of the Lublin trough is substantially thicker than those found in the successful shale gas fields in the United States.”

Mr. Rauball went on to state, “We are pleased that Total is interested in our unconventional gas assets in Ukraine in addition to its ongoing evaluation of our concession interest in the Bieszczady project with Poland’s national oil & gas company PGNiG as operator. The Bieszczady concession was acquired by EuroGas in 1998 and farmed out to PGNiG in 2007 with EuroGas retaining a 24% working interest.”

Source: Marketwatch

Ukrainian Prime Minister Mykola Azarov’s recent (unsuccessful) trip to Moscow to ask for a discount on natural gas imports was yet another reminder of Ukraine’s energy dependence.

Hopes run high that shale gas extraction, a  technology revolution that is already transforming production in the United States, offers hope to wean energy-hungry Ukraine off its reliance on Russian energy imports

With shale gas – natural gas trapped in rock rather than porous reservoirs – already accounting for  for 20 percent of U.S. production., energy giants such as Royal Dutch Shell and TNK-BP are now eyeing Ukraine as a potential source.

“We are interested in various opportunities,” said Patrick Van Daele, Shell’s country chair in Ukraine. “However, more technical data will have to be obtained to make definite statements about the country’s hydrocarbon resources, especially unconventional ones.”

The new shale gas technology has transformed production in the United States by opening up vast sources of hard-to-reach gas. The rise of unconventional gas is already challenging the global dominance of major gas producers, such as Russia, forcing Gazprom to show rare flexibility in its supply contracts.

Having missed out on the shale technology revolution in the United States, multinationals don’t want to miss future opportunities in Europe.

The International Energy Agency has estimated that Europe, which gets 25 percent of its gas from Russia, has around 35 trillion cubic meters of unconventional gas reserves – half of which is in shale. That’s around six times its remaining conventional gas reserves.

Energy giants such as ExxonMobil and ConocoPhilips are parked in Ukraine’s backyard. ExxonMobil is already drilling in Germany, ConocoPhillips is exploring in Poland and Austria’s OMV is test drilling at home.

The new technology requires work in wide-open spaces, making it more suitable to a country like Ukraine, which could possess some of the most promising shale deposits, than densely-populated Europe.

“No real work has been performed on Ukraine’s shale gas opportunities, though geologic conditions theoretically exist,” said Edward Chow, a senior fellow in the energy and national security program of the Center for Strategic and International Studies in Washington.

The complexity of extracting shale gas means that Ukraine will need international help and long-term thinking to unlock supplies.

“The U.S. experience testifies that development of the unconventional gas reserves requires years of dedicated exploration effort and the drilling of a large number of wells, inevitably leading to quite substantial investments,” Van Daele said.

He added that unlocking gas resources will be “technically challenging and extremely costly,” and require “significant financial, technological, manpower and infrastructure resources.”

This is likely to be a major stumbling block. Analysts caution that the country’s long history of stifling foreign investment into the hydrocarbons sector means the trips to Moscow to ask for gas discounts are unlikely to end soon.

“Lousy domestic policy remains the single greatest impediment to gas investments in Ukraine,” said Chow.

Not only foreign start-ups such as Cadogan and Cardinal complained about official pressure on their companies, ranging from price ceilings on gas sales to their licenses being challenged in court. Even larger players, such as Houston-based Marathon, the fourth-largest U.S. integrated oil and gas company, closed up shop in Ukraine in mid-2008.

Chow also questioned Ukraine’s interest in capitalizing on its hydrocarbon resources. “Ukraine already has an abundance of conventional gas and coal bed methane opportunities, so why bother with shale gas, which is much more difficult to extract?” he asked.

Valentyn Zemlyansky, spokesman for Ukraine’s state oil and gas company Naftogaz Ukrayiny, said his company is nevertheless “very interested in developing new, non-traditional sources of gas.” And the country boasts large shale deposits. “But for now, no large-scale geological studies aimed at mining shale gas are being conducted,” he told the Post. Ukraine’s Energy Ministry, however, held a meeting in March, and “it was noted that in order to increase the effectiveness in studying and organizing the mining of shale gas in Ukraine, experienced foreign companies must be attracted,” he added.

Shale gas production costs are high, which means the cost of conventional gas has to justify the additional efforts. The team of President Viktor Yanukovych has already pledged to try and renegotiate lower gas prices with Moscow, rather than sticking to the more transparent market scheme agreed under Prime Minister Yulia Tymoshenko.

Moscow, which has been accused of using its growing gas exports to Europe as a geopolitical weapon, is not likely to welcome any attempt to loosen its energy stranglehold.

Efforts led by the United States and the European Union to circumvent Russian gas supply lines have met with Kremlin hostility. Last month, Gazprom deputy chief Alexander Medvedev called shale gas “dangerous,” saying he doubted whether European environmental regulators would allow it.

In the short run, the new shale technology could actually hurt Ukraine, said Chow of the Center for Strategic and International Studies, as it has already reduced the amount of gas transited from Russia to Europe.

“Shale gas is a threat to Ukraine in the short to medium term and an opportunity in the medium to longer term, assuming it gets its gas sector policy right one day,” he said.

Source: KyivPost

BP Plc’s Russian venture, TNK-BP, is considering unconventional gas opportunities in eastern Europe, as hard-to-extract deposits start to “make sense” with available technology and pricing conditions.

“That’s a game changer,” Chief Operating Officer Bill Schrader said in an interview. “It will have an impact globally. As economic activity recovers, that gas will be developed.”

TNK-BP, owned equally by BP and a Russian group of billionaires, is looking at former Soviet republics “where we can bring technology that we have, or even BP has, in exploiting tight gas,” Schrader said. Ukraine and other eastern European countries are possible areas, and the company is assessing the geological potential, he said.

BP, Europe’s second-largest oil company, said in November it plans to produce the world’s first coal-bed methane for liquefaction with Italy’s Eni SpA. In 2008, the British oil producer bought Arkansas shale assets from Chesapeake for $1.9 billion and assets in Oklahoma for $1.75 billion.

Record prices for natural gas pushed the U.S., the world’s biggest energy consumer, to tap unconventional sources of the fuel, Schrader said. U.S. success in extracting gas from shale, or rock formations, has spurred interest in Europe, which may compete with liquefied natural gas, or LNG, and pipeline supplies.

TNK-BP’s gas output is mostly a byproduct of crude oil production, as its natural-gas developments in Russia are restrained by access to OAO Gazprom’s pipeline network.

Strategic Sense

Gas makes up about 12 percent of TNK-BP’s total production, Schrader said in the interview late yesterday on a flight to Moscow from Nizhnevartovsk, the western Siberian region that accounts for about 51 percent of the company’s crude output.

“We would like to do more gas,” Schrader said. “We would like to do it even outside Russia where the technology and the experience we have actually make strategic sense.”

Potential gas projects will depend on the cost of access, operating environment and available connection to customers, according to Schrader. While investors seek to develop cheaper resources first, it is important to look at the economics of delivering the fuel to the market, he said.

European shale could be sufficient to displace the equivalent of about 20 million tons a year of LNG by 2015 and about 60 million tons a year of capacity by 2020, JPMorgan Chase & Co. said in a report on Feb. 9.

TNK-BP plans to produce about 11.6 billion cubic meters of gas this year. Of that, only 2.7 billion cubic meters will be produced at its ZAO Rospan International natural-gas unit. That is the volume granted by Gazprom in the Russian pipeline network. TNK-BP could pump 3.2 billion cubic meters this year while the potential is estimated as much as five times higher, Schrader said.

“The cost curve on gas is very interesting,” Schrader said. “It goes from very inexpensive, delivered in terms of costs to producer, up to something quite high for LNG that moves around the world. If you can break into that curve somewhere, you are in the business.”

Reported by Anna Shiryaevskaya in Moscow

Source: Bloomberg

Nearly all the major oil companies are looking across Europe for shale gas, an unconventional energy source that has transformed the U.S. energy market, industry researchers said on Thursday.

They warned, however, that it will be difficult to replicate the same success as there were not enough rigs available and Europe lacks some of the conditions that have made the shale gas boom possible in North America.

Rising shale gas production has raised hopes that the United States country will soon be able to cover all its gas needs domestically.

Europe relies mainly on natural gas supplies from Russia, Norway and north Africa and significant shale gas finds could make the continent less reliable on imports.

“There are at least 40 companies looking for shale gas in Europe,” Florence Geny, a research fellow at the Oxford Institute for Energy Studies, told Reuters on the sidelines of an energy seminar in the Norwegian capital.

All the major oil companies are present on the market, she said, apart from Britain’s BP, Royal Dutch Shell was looking in Sweden and Ukraine, Exxon Mobil in Germany, while ConocoPhillips and Chevron were in Poland.

Unlike in the U.S., however, Europe does not have as many as land rigs available to search for shale gas. “In Europe we have currently 20 land rigs. In the U.S., they have at least 1,500, maybe closer to 2,000,” said Jarand Rystad, founder of a Norway-based research consultancy for the oil industry.

“The U.S. has a well-established big industry with a low-cost structure and with skilled crews. It will take time to develop the same industry in Europe,” he told Reuters.

Another challenge is getting drilling permits in densely-populated Europe. “It is more challenging in Europe to get a license because of the local impact and the availability of water resources,” said Geny.

The academic also said tax breaks introduced in the U.S. in the 1980s to stimulate drilling helped develop the industry and that the geology of shale gas is more complicated in Europe than in the U.S.  “Production in Europe is at least a decade away,” she said.

Reported by Gwladys Fouche in Oslo

Source: Reuters

European shale gas plays continue to draw interest across the industry, with both major international oil companies and smaller independent producers rushing to snap up acreage across the continent.

Europe’s unconventional gas potential is estimated at a relatively modest 510 trillion cubic feet, compared with North America’s 6,000 Tcf and China’s 4,000 Tcf.  Nevertheless, factors such as proximity of the resource to markets and a political drive to reduce energy dependency on Russia make European shale gas an attractive proposition.

Poland in particular has seen a scramble to acquire exploration acreage.  The country recently issued 44 shale gas licenses covering hundreds of thousands of acres, with US majors ExxonMobil, Chevron and Marathon Oil among the companies picking up permits.
ConocoPhillips is also active in Poland through its joint venture with Lane Energy, a subsidiary of UK-based 3 Legs Resources. A consortium led by Conoco will be the first to drill for shale gas in Poland in the middle of this year, according to Henryk Jezierski, the country’s chief geologist.

Exxon also has positions in Germany and Hungary. The oil giant expects to drill 10 test wells this year in Germany’s Lower Saxony basin but it has not announced any further plans in Hungary after disappointing results last year. Exxon and partners Mol and Falcon plugged and abandoned a well they drilled in Hungary’s Mako Trough after it produced more water than gas. Meanwhile, Royal Dutch Shell started a test drilling program in southern Sweden in January. It plans to have drilled three wells by the end of March.   Shell is also testing shale formations in the Ukraine along with several exploration programs outside of Europe. For example, Shell and PetroChina signed an agreement in November to jointly develop shale-gas resources in southwestern Sichuan province. BP and Sinopec are in talks intended to produce a similar agreement.

Back in Europe, smaller firms are also flocking to shale plays. So far this year, EuroGas Ukraine Ltd, a subsidiary of New York based EuroGas acquired three unconventional gas concessions in eastern Ukraine, while Vancouver-based Realm Energy said it had submitted applications for oil and gas rights in seven European countries, extending over 1.5 million acres of land.  Realm is collaborating with oil field service giant Halliburton to explore and develop shale plays in Europe and elsewhere.

The rush to emulate the success of the North American shale gas boom in Europe drew a skeptical response from the chief executive of one of the leading US shale gas producers last week.  “It is a little bit curious if not a little bit funny that a lot of the majors that missed the US shale plays are now describing themselves as shale experts and Poland and places like that,” Chesapeake Energy’s Aubrey McClendon told the Credit Suisse Energy Summit in Vail, Colorado.
 McClendon noted that Chesapeake had looked into the global potential for shale gas as part of its joint venture with Norwegian firm Statoil. “I haven’t seen anything yet that is going to rival anything we’re doing in the US from a return perspective,” he said.
 He went on to say that he thought companies would have a hard time in Europe because it would be hard to find viable plays with the necessary combination of factors: “the right rocks”, reasonable commercial returns, favorable laws, infrastructure and indigenous demand for gas.

By Deirdre Daly for Oil Daily