Natural Gas: A Bubble of Expectation?

Dimiter Kenarov is a Bulgarian freelance journalist based out of Istanbul, Turkey. He is a contributing editor at The Virginia Quarterly Review. His writing has appeared in Esquire, Outside, The Nation, Boston Review, The International Herald Tribune, The Virginia Quarterly Review, The Believer, and The Pulitzer Center on Crisis Report. His work has also been twice anthologized in The Best American Travel Writing.

How did your interest in shale gas lead you to start the project, “Shale Gas: From Poland to Pennsylvania”?

My interest in shale gas was initially sparked by the environmental movements in Eastern Europe, particularly in Bulgaria and Romania, and the resurgence of civic activism around shale gas issues. But I chose to look at Poland more closely because Poland is spearheading the development of shale gas in Europe right now. European countries are reacting differently, but Poland is one country that has fully embraced shale gas. At the same time, Pennsylvania acted as a good counterpart to Poland because the Marcellus shale in Pennsylvania has really been the hotbed of hydraulic fracturing in the United States.

What is currently happening in Poland with regards to natural gas?

Right now Poland is still in the exploration stages, but has given concessions to about a third of its territory, 90,000 kilometers. In total, 111 concessions have been given to around 30 companies. When this whole thing started in 2009 and 2010 it was sort of a free for all. Land was very cheap, about a hundred dollars per acre, and companies were just moving in and buying huge swaths of land.

Currently, the projections are not very optimistic as far as developing this resource in an economically viable way. What has happened is that the U.S. Energy Information Administration announced in April 2011 that Poland has 5.3 trillion cubic meters of gas – enough for 300 years of supply.

Then the U.S. Geological Survey, together with the Polish Geological Institute, came out last year (2012) and said the reserves are 90 percent lower…only enough for 35 to 40 years.

Up until now, Poland has drilled 33 wells, which is drilled in the Marcellus in two weeks. There are 33 wells, only ten of which have been fracked. Only two have been horizontally drilled, which is the only real way to find out the amount of resources. 

Now, this has not been encouraging. Exxon left. They drilled a few wells and then thought it was uneconomical. ConocoPhillips has also given up some of its concessions. 

When the big numbers from the U.S. Department of Energy came out a lot of companies were excited. But the shale in Poland is about 1.5 times deeper than Marcellus shale, and the service sector is not well developed, so it is much more expensive to drill. The price per well went up to $15 million per well, as opposed to about five million dollars per well for the Barnett Shale in Texas.

It seems that there was a huge bubble of expectation in Poland. I think people are slowly starting to realize that the only way you can make this thing develop is if it’s cheaper than the Russian gas. In the end price is all that matters. If what you are developing is more expensive than what Russia offers, then the company cannot sustain this.

Energy independence seems to be the goal of many countries, including the U.S. and Poland. Can you describe how the general reaction to natural gas has been different in Poland and the U.S.?

Energy independence is a nice sound bite, but in such an interconnected world of trade I think that it is impossible. Second, energy security doesn’t necessarily equal energy independence. The two terms are not equal. The U.S. has been trying to become energy independent since the seventies. Looking at the consumption of energy in the United States, it is almost impossible to fill that huge gap. The gap is enormous. Next, the U.S. imports only about 15 percent of its oil from the Middle East, while the rest comes from Canada, Nigeria, and Venezuela. Second of all, gas has a completely different function than oil. It is usually used in energy generation and the production of fertilizers, while oil is used primarily in transportation. The idea that U.S. involvement in the Middle East would suddenly stop if you drill more wells for gas…well, no, that will not happen. Foreign policy is more complex than that.

In Poland, the idea of energy independence is equally problematic. Shale gas will not make the country energy independent – it will, at best, help diversification and maybe, just maybe, if the economics are right, it can  help drive down the prices of Russian gas. But if we look at the issue closely, Poland is largely energy independent, at least in terms of electricity generation, as it is the second biggest coal producer in Europe after Germany. Gas is mainly used in industry and is only around 12 percent of Poland’s energy mix, a third of which comes from Polish conventional gas wells. So, in total, Russian gas provides only about eight percent of Poland’s energy needs. In my opinion, the development of shale gas could actually threaten Polish energy security. If Poland decides to increase the share of gas in its energy mix and these shale reserves prove short lived, then the country could become even more dependent of Russian gas imports in the long term.

Your project discusses the impacts shale gas may have on global politics. In what ways do you see shale gas in Poland influencing geopolitics?

The thing about Poland that people have to understand is that the issue of shale gas is extremely politicized. It is much more so than the United States. The main issue is that Poland is importing much of its gas from Russia, who has been Poland’s nemesis throughout recent history. Russia is probably the biggest threat that Poland sees. Whether it is real or not is another question.

The other element is actually U.S. foreign policy because Poland is one of the closest European partners of the U.S. The State Department has been very much involved in promoting shale gas through its Global Shale Gas Initiative (GSGI). I spoke with some people from the foreign ministry in Poland who said that this is probably one of the most important projects right now between Poland and the U.S. In a sense, the U.S. sees development of shale gas in Eastern Europe as a tool to limit Russian energy markets and thus decrease Russian political influence in the region. It’s a pipedream, in my opinion. On the other hand, LNG (liquefied natural gas) trade could perhaps have a much more significant impact in that direction.

The biggest criticism of natural gas has been how it affects those living in the areas where fracking occurs. How real are the impacts from fracking?

The environmental impacts in the U.S. are very real and significant. I’ve met farmers with polluted wells, people whose health has been impacted, or the health of their farm animals. These are not isolated cases, as some have tried to suggest. The industry has definitely improved its practices, but even so the main issues can’t be mitigated endlessly through technology or regulation. They are just part of large-scale hydrocarbon exploitation; they come with the territory. Simply put, compared to conventional gas development, unconventional gas requires a significantly larger number of wells, so the land impact is bigger. And that’s unavoidable. And then there’s the whole gas infrastructure: pipelines, access roads, compressor stations. In places like Texas or North Dakota or Oklahoma, where population density is lower, production is less controversial, but in places like Pennsylvania residents have been more vocal. I sometimes think that if the industry had not moved to Pennsylvania and Ohio – and now trying to go into New York – fracking may have never become an issue. What’s happening though is that now the line between residential and industrial areas has been erased, so people are forced to live with that industry and suffer all of its impacts.

Is natural gas the right road to continue down as the world looks for avenues by which to deal with the issue of climate change?

No. Shale gas is not a solution in any way to the climate issues. I think it’s good to have it as a backup. This industry could be perhaps developed in less populous areas; maybe there is space for the natural gas industry, but in a minor way. I dislike the way it has been hyped up, as if suddenly it is going to take over the world, and everybody is going to produce shale gas, and it will save us from global warming and push out coal. This is simplistic, and doesn’t take into account foreign policy, economics of production, and many other factors.

You also have to do the cost benefit analysis. Is it worthwhile destroying rural communities, and doing all of this industrial development? If it’s just a short term benefit, is it worth it? I think that for the U.S. to really move forward there needs to be a clear policy from the top towards renewables. Imagine if we hadn’t discovered a way to extract gas from shale or oil from tar sands. Would we have been worse off for that? I think, if we had our back to the wall, we would have found good renewable solutions anyway.

There is always a place for fossil fuels. We are not going to live on wind and sun, not in the short term, but I feel that shale gas is just another way to postpone our investment in renewable energy. We are constantly thinking, “Oh let’s just put it off for the future. It’s going to be fine.”  Yet we are constantly developing new technologies to extract even harder to find fossil fuels in more remote places of the world instead of actually using investments for something that may not be as profitable at first, but which will benefit our society in the long term.

Feature Photo: cc/(wcn247)