Back in July, in an email exchange with Foolish oil patch pro carbonates, I threw out the following idea: "If I were in exploration, I feel like I'd be looking for shale plays over in Europe. Given the urgency to wean off Russian gas, it seems like the wind would really be at one's back."
My correspondent heartily agreed, saying that it's "just a matter of time before gas shales become common plays in every part of the world."
We've documented Royal Dutch Shell's
From academia to government, and from small independent-exploration shops to the world's oil-and-gas supermajors, this idea of shale gas as a global game-changer really seems to be gaining traction.
The Germans head to Houston
Rice University's Baker Institute recently hosted Christian Wulff, prime minister of the state of Lower Saxony in Germany, who delivered a speech on the importance of unconventional resources and renewable energy for a cleaner future. But his Excellency didn't travel all the way to Texas just to deliver a feel-good presentation. Like Texas, Lower Saxony is a major domestic supplier of both natural gas and wind energy. An executive from Horizon Wind Energy was on hand to discuss ways to structure policy to spur growth at the lowest cost, and event sponsor ExxonMobil
After meeting with ExxonMobil representatives, Wulff announced that the company will spend at least 100 million euros on unconventional gas drilling in Lower Saxony before next summer. The company began drilling there last year, and it seems very keen on this basin, across which Exxon acquired 1.3 million acres of leasehold in 2007. That's almost as big as Chesapeake's position in the massive Marcellus shale.
Conoco turns its eyes east
In August, ConocoPhillips
Following Conoco's Poland deal, Exxon confirmed that it has also grabbed acreage in the country. The rock looks good, royalty rates are low, infrastructure is in place, and gas-hungry Western Europe is right nearby. As Conoco's exploration chief put it, "What's not to like about this type of play?"
Conoco has cast its shale sights even further east lately, in announcing a cooperation agreement with PetroChina
The biggest loser
I could go on detailing shale targets around the world, but they remain highly speculative targets at this point. Some shales will prove economic, and others won't. It is next to impossible to pick winners at this point. It's a lot easier to pick losers. Take Gazprom, for example.
Russia's gas giant currently has quite a firm grip on the European gas supply, as highlighted by periodic supply standoffs with Ukraine over the past few years. The success of American shale plays ought to keep the flow of liquefied natural gas cargos heading toward higher-priced markets across the Atlantic. A steep change in European domestic gas supplies, such as the one we've experienced in the U.S., would really shift the market balance dramatically. Lower Saxony surely isn't the only regional government that grasps this opportunity.
Sure, regulatory hurdles are likely to be a concern in many European jurisdictions, but given the alternative of remaining dependent on the kindness of Russians, bureaucrats may become quite a bit more accommodative of natural gas drilling going forward.