Waiting for a European Shale Craze

Jazz. Blue jeans. David Hasselhoff.

Europeans have gone wild for each of these American exports. Will oil and gas shale drilling techniques soon be added to that list? That really depends on the success of the first few development programs, but given the knowledge accumulated by global service providers like Schlumberger (NYSE: SLB  ) and integrated producers like Statoil (NYSE: STO  ) , I would think the odds of this technology taking off are pretty strong.

One place where expectations are running very high is Poland. Last year, we detailed the rush of players including ConocoPhillips (NYSE: COP  ) and Marathon Oil (NYSE: MRO  ) into the country. Chevron (NYSE: CVX  ) and Talisman Energy (NYSE: TLM  ) have also stepped in here, and plan to kick off drilling programs in 2011.

As for actual drilling results, those are scanty so far. Lane Energy, which is partnered with Conoco, drilled its first Polish shale well back in June, reaching total depth in late July. The well was drilled vertically, in order to establish productivity in one or both of the shale rock formations being targeted in the region. If the play looks commercially viable, Lane and other operators will begin drilling horizontally through the shale layers. That technique, plus multi-stage hydraulic fracturing, is a key contributor to the North American shale bonanza.

Schlumberger recently reported that it helped Lane to deliver the well under budget and under time, but didn't comment on flow rates. A second well started drilling in late August. Meanwhile, Halliburton (NYSE: HAL  ) announced last month that it completed Poland's first shale frac job for state gas company PGNiG.

The "science project" stage is clearly under way in Poland, but how soon should we expect commercialization? Poland's economic minister, taking a hatchet to the hype, says seven to ten years. If that's true, we may have several more years of press releases discussing Poland's shale gas potential, rather than meaningful production increases, ahead of us. The same goes for other basins in Europe, where various barriers are likely to prevent an overnight shale sensation.