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as the manufacturing and petrochemicals sectors begin to revive. European industrialists are, Professor Stevens says, extremely disquieted about their competitive position compared to their American rivals.
“The plentiful supply of shale gas and its low price has also had the effect of pushing coal out of the energy market in the US and the US is now a major exporter of coal, particularly to Europe. However, demand for a domestic European gas supply is likely to pick up strongly, I believe. One reason for this is that European regulatory restrictions on gas-fi red power stations are receding. Between 1975 and 1990, there was legislation against building a gas-fi red power station in Europe as it was regarded as a primary fuel.” Today the picture is very different and as regulatory restrictions are lifted in the UK, so they are lifted across Europe, he points out.
Professor Paul Stevens, Distinguished Fellow, Chatham House
In the meantime, China has been tipped as the next epicentre for a shale revolution. Shale gas resources are considerable and the prospects for bringing them on-stream are better than in Europe. China has invested in the necessary expertise and has a large number of recoverable reserves. It is not without its own issues, however. Most of its shale gas resources are in the west of the country, which is arid, and hydraulic fracturing requires access to water. Additionally, China is no longer immune to community opposition. Increasingly, local communities are beginning to exert themselves and quiet acquiescence is not a given.
The shale gas revolution in the US has had considerable impact on the dynamics of the international energy markets. Exploration activity has led to a glut in supply and the domestic gas price has fallen dramatically. That has made the US very competitive and demand for gas is quite buoyant in the US,
“ “ © 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
DEMAND FOR A DOMESTIC EUROPEAN GAS SUPPLY IS LIKELY TO PICK UP STRONGLY.
So supply and demand for gas in Europe are going to increase. “There will be shortages and gluts, but as we go into the future I think we can talk about a ‘golden age’ of gas,” says Stevens. Will UK shale gas production play a substantial role? “The UK will probably start producing shale gas in the next fi ve years but there are many barriers to overcome before it is produced in any signifi cant quantities”
Emma Wild
Head of Upstream Advisory Practice, UK Tel:+44 (0)20 73116008
emma.j.wild@kpmg.co.uk
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SHALE GAS
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