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The Other Shoe: European Shale Gas

The hunt is on for shale gas in Europe and it's likely to be successful with a "substantial impact on global gas markets," according to a recent analyst's report. That impact could come as early as 2015.

The research paper by J.P. Morgan's Australia Equity Research branch pointed to "a land grab" in Europe over the last two years by the majors who don't want to miss out on the shale boom there as they did in North America. Given the high success rate in the U.S. for shale finds and the number of large players "chasing elephant-sized fields" in Europe, "we are optimistic about the chances of success."

Several shales are due to be tested in Europe this year, the J.P. Morgan report said, with the encouragement of European governments anxious to reduce their dependence on Russian gas. ExxonMobil has staked out "positions in Germany, Hungary and also had applications in Poland. ConocoPhillips, Chevron and Marathon also are in Poland."

Smaller companies also are piling on with land grabs all over Europe (see NGI, Feb. 1). With all this going on "the potential for these unconventional resources in Europe is enormous," and shale gas "has the potential to displace significant LNG [liquefied natural gas] volumes." Prospects also are being explored in China by combinations of western firms with PetroChina and Sinopec.

J.P. Morgan projects U.S. shale gas production could grow by 2015 to near the current rate of the global LNG market, while European shale production could grow in the same time period to displace the equivalent of about five LNG trains. By 2020 European shale gas could displace 15 LNG trains.

The analysis sees the U.S. as having zero need for LNG imports as the result of shale gas development, cutting into global demand for LNG. Adding European and possibly Chinese shale gas to the mix will further shrink the market for LNG, which would be narrowed to focus more on Asian needs.

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