Shell recently announced it is not going to renew its exploration licenses in Scania (Southern Sweden) after the analysis of the 3 wells drilled showed that no gas could be produced from the Alum shale there. In addition to the exploration analysis results, other factors are not helping the unconventional gas case in Sweden. I will highlight 3 of them:
- Natural gas demand: with 43 Bcf of natural gas imported, Sweden is a limited natural gas consumer (Europe imports about 9400 Bcf/y).
- The electricity mix: it is “relatively” cleaner than the rest of the world: about half of the power generated in Sweden is from hydropower, the other half being nuclear power.
- Sustainable power potential: it is huge. Whereas the power consumption in Sweden is about 135 TWh/y the economical renewable power potential is 170 TWh/y mostly from potential hydropower and biomass (see Table 2-2)
Therefore the need for unconventional gas development is somehow limited in a country with this type of energy mix.
In Germany and Poland (which technically recoverable reserves are estimated to be about 187 tcf) however, where supermajors are also drilling for unconventional gas (see video) , the situation is different:
- Natural gas demand: it is high. With 2008 Bcf of natural gas imported annually Germany is the third largest natural gas importer in the world. Poland with its 400 Bcf of natural gas imported annually is the 16th.
- Electricity mix: it is not clean. With 50% of power generated from coal and 27% from Nuclear power Germany has a large improvement potential. Poland, with 92% of power generated from coal is at the very beginning of a greener electricity mix strategy.
- Sustainable Power potential: it is important. In Germany, power consumption is about 547 TWh/y and the economical renewable power potential is about 433 TWh/y, mostly from potential wind power and biomass (see Table 2-2). In Poland, sustainable energy could power the country at 100%. Indeed, the power consumption in Poland is about 129 TWh/y and the economical renewable power potential is about 130 TWh/y, mostly from potential wind power and biomass.
This means that even if exploratory results for unconventional gas are conclusive, Germany and Poland will still have the opportunity to invest in renewable energy production or unconventional gas…or both. Any of these strategies would eventually improve their coal based electricity mix and create economic growth.
Investing in unconventional gas development is a risky process and each project, each country and each unconventional gas formation is different and should be assessed thoroughly with a holistic risk based approach to increase the chance of success.
