Frost & Sullivan: Need for Energy Independence Trumps Political and Economic Arguments against Hydraulic Fracking in Europe

MOUNTAIN VIEW, Calif., Oct. 29, 2013 /PRNewswire/ -- Under immense pressure from green think tanks and political lobbyists, the governments of France, the United Kingdom, Denmark, and the Netherlands, have either suspended or slowed down hydraulic fracking for shale gas extraction. However, the overwhelming economic benefits and promise of energy independence are likely to initiate changes in the long term to revive drilling activities.

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North America has sustained drilling activity through significant improvements to water management, greater efficiency in drilling operations, and reductions in on-site air pollutants from trucks, drilling machinery, and even methane gas recapture from flaring. North America owes most of these successes to significant industry collaboration, while remaining environmentally compliant. Furthermore, the U.S. Environmental Protection Agency has rolled out several useful environmental studies, and in all likelihood, will make regulations more stringent.

"As every region and location is different, they are not all equally economically viable in terms of recoverable product, even if they have a large volume of reserves," said Frost & Sullivan Energy & Environment Industry Analyst Ankur Jajoo. "Yet, it is important to resume drilling activity in the interest of lower energy costs, both regionally and globally."

Similar to North America, the European Union can learn through trial and error to arrive at winning strategies. For instance, it could better deal with issues relating to unconventional drilling by taking away a few lessons from the drilling project in Poland, where there were multiple challenges of low production volumes of gas, difficult geology, and high drilling costs in densely populated areas.

Before process improvements can be initiated, exploration companies have to ensure acceptance and adoption by governments and citizens. Companies will do well to invest in education campaigns to help end users understand the benefits of the new technologies.

According to Bloomberg Energy Finance, the cost of production in the United Kingdom is at least 50 percent higher than in the United States. These costs could climb down in the future through rapid technological advancements in drilling and logistical efficiencies in the value chain.

"Rather than levy higher taxes on consumers of commodity products such as gasoline, jet fuel, diesel fuel, and heating oil, governments have an opportunity to earn that tax revenue from increased oil and gas activity," noted Jajoo.

If more countries were engaged in drilling, the improved infrastructure of pipelines and liquefied natural gas terminals throughout Europe will make the transportation far more economical and greatly develop the end-user market for natural gas.

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SOURCE Frost & Sullivan