Drawing on his 'Fossil and Nuclear Fuels: The Energy Outlook' report for the Energy Watch Group, Werner Zittel explains how shale gas production in Europe will be expensive to extract and not make a significant impact on European gas prices or the import dependency of select EU Member States.

1. ludwig bölkow
systemtechnik
Shale Gas – European Perspectives
Dr. Werner Zittel
Ludwig-Bölkow-Systemtechnik GmbH · Ottobrunn
Zittel@LBST.de
European Parliament, Brussels, 14th May 2013

2. ludwig bölkow
systemtechnik
• Survey of conventional gas production and demand
• Natural gas prices
• Unconventional gas resources in Europe
• Example Poland
• Example - Germany
• Summary

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systemtechnik
Natural gas production in Europe

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0
10
20
30
40
50
60
70
80
1950 1960 1970 1980 1990 2000 2010
Billion m³/yr
Data Source: IHS 2006, BP 2012
Germany
Poland
Italy
Year
Natural gas production in Italy, Poland and Germany

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systemtechnik
2
4
6
8
10
12
14
1980 1990 2000 2010
Billion m³/yr
Source: Department of Energy, Nov 2012
Natural gas production in Denmark

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systemtechnik
Each area corresponds to the
Combined contribution from all
Fields developed in one year
Year
billion m³/yr
Source: DTI May 2012
Natural gas production in UK

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systemtechnik
0
20
40
60
80
100
120
1980 1985 1990 1995 2000 2005 2010
NPD, Feb 2013
Billion m³/yr
Troll
Sleipner-Ost
Asgard
Ormen-
Lange
Snoehvit
Kvitjeborn
Natural gas production in Norway

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systemtechnik
Natural gas production in the Netherlands and Forecast
Source: NL – oil and gas portal 2012
Groningen
Small fields
To be discovered
Known undeveloped fields

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0
20
40
60
80
100
120
1960 1970 1980 1990 2000 2010 2020 2030
Billion m³/yr
Datenquelle: NL Olje- en Gasportaal 2012
Yet to find
Yet to develop
Other producing fields
Groningen
Offshore fields
Small onshore fields
Natural gas production in the Netherlands and Forecast

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systemtechnik
Natural gas prices and demand

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systemtechnik
0
100
200
300
400
500
600
1990 1995 2000 2005 2010
Index
(1990=100)
EU 1990=100
US 1990=100
BAFA 1990=100
Source: BP Statistical Review of World Energy 2012, BAFA 2013
Natural gas price in USA, Europe and Germany

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0
5
10
15
20
25
30
35
1990 1995 2000 2005 2010
Source: Import prices: http://www.bmwi.de/BMWi/Navigation/Service/bestellservice,did=53736.html
Industry prices: http://www.bmwi.de/Redaktion/Inhalte/Downloads/egasjahr-september-2003,property=pdf.pdf
2003 LBST estimate
€/MWh (EURO)
Natural Gas import price
Germany
http://www.bafa.de/1/de/service/statistiken/energieinfo/
Natural gas price in Germany

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systemtechnik
0
20
40
60
80
100
120
1965 1975 1985 1995 2005
Bcm
Germany United Kingdom
France Czech Republic
Denmark Finland
Greece Hungary
Republic of Ireland Italy
Netherlands Norway
Poland Portugal
Spain Austria
Belgium & Luxembourg Slovakia
Natural Gas consumption in Europe
Source: BP Statistical Review of World Energy 2012, IEA Monthly Natural Gas Survey January 2013

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systemtechnik
0
50
100
150
200
250
300
350
400
450
500
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Bcm
Slovakia Belgium & Luxembourg
Austria Spain
Portugal Poland
Norway Netherlands
Italy Republic of Ireland
Hungary Greece
Finland Denmark
Czech Republic France
United Kingdom Germany
Natural gas consumption in Europe
Source: BP Statistical Review of World Energy 2012, IEA Monthly Natural Gas Survey January 2013

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systemtechnik
Shale gas Resources

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systemtechnik
Shale gas
Tight gas
CBM
Source: Schlumberger 2009
Potential gas shales in Europe (2009 view)

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systemtechnik
Assessed Shale gas basins
With Resource estimate
Without resource estimate
Soure: World Shale Gas
Resources: An initial Assessment
Of 14 Regions outside the United States,
US-EIA, April 2011
Shale gas basins in Europe (2011 view)

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systemtechnik
0
1000
2000
3000
4000
5000
6000
7000 conv.Gas reserves
conv. Gas
reserves
Natural gas reserves in Europe ?
Source: DENA/BGR 2012
Bcm

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systemtechnik
0
1000
2000
3000
4000
5000
6000
7000
conv. Resources
conv. Reserves
Natural gas reserves and resources in Europe?
Source: DENA/BGR 2012
Bcm

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systemtechnik
0
1000
2000
3000
4000
5000
6000
7000
CBM - Resources
Shale Gas
Resources
conv. Resources
conv. Reserves
Natural gas reserves and resources in Europe?
Source: DENA/BGR 2012
Bcm

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systemtechnik
Natural gas reserves in Europe
• Natural gas reserves in Europe are small and in decline
• Unconventional natural gas reserves are zero!
• Unconventional natural gas resources possibly are large,
however the validity of data is uncertain
(huge discrepancies betwen different estimates)
• The „below ground“ factors are irrelevant,
important is the size and speed of possible new well developments

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Break Even Costs

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Deutsche Bank Assessment: Europe (25 Jan 2013)
May-13

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systemtechnik
Wood Mackienzie Assessment UK 2013
• „[…] the commercial viability of the UK’s shale
resources is yet to be proven and will only be
possible if the subsurface is as good as the
very best shale plays in North America.“
Niall Rowantree, Wood Mackenzie, Petroleum Review, March 2013
May-13

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systemtechnik
ZEW Expert Survey
• Survey of 200 scientific and industrial experts: „Above which
stable level of wholesale gas prices do you expect a significant
increase in the production of unconventional natural gas in the
EU?
• Average of answers: 40-50 EUR/MWh (15 – 19 $/mmBtu)
May-13
Source: ZEW Energiemarktbarometer, Schwerpunkt Energiemarkt, Sonderteil ZEWnews, Januar/Februar 2013
EUR/MWh
Cal 15
NBP

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systemtechnik
ZEW
Deutsche Bank Research:
The development of shale gas wells in Europe
requires rising natural gas prices
of 40-50 €/MWh
in average

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systemtechnik
Production scenarios

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systemtechnik
Historical data: OECD 2008,, NPD 2012, BP 2012; Forecast: LBST 2013
UK: DTI (2012 aus Jan-Jul extrapoliert);
0
200
400
600
800
1960 1980 2000 2020
LNG_
Imports from North Africa
Imports from Russia
Norway
other
Denmark
Germany
Italy
Netherlands
UK
Demand (WEO 2012)
Billion m3/yr
Demand
WEO 2012
Europe: natural gas production (EWG-scenario) and demand (WEO 2012)

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systemtechnik
Historical data: OECD 2008,, NPD 2012, BP 2012; Forecast: LBST 2013
UK: DTI (2012 aus Jan-Jul extrapoliert);
0
200
400
600
800
1960 1980 2000 2020
LNG_
Imports from North Africa
Imports from Russia
Norway
other
Denmark
Germany
Italy
Netherlands
UK
Demand (WEO 2012)
Billion m3/yr
Demand
WEO 2012
Import demand
Europe: natural gas production (EWG-scenario) and demand (WEO 2012)

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systemtechnik
Historical data: OECD 2008,, NPD 2012, BP 2012; Forecast: LBST 2013
UK: DTI (2012 aus Jan-Jul extrapoliert); WEO 2012
0
200
400
600
800
1960 1980 2000 2020
LNG_
Imports from North Africa
Imports from Russia
Norway
other
Denmark
Germany
Italy
Netherlands
UK
WEO 2012 incl. Shalegas
Demand (WEO 2012)
Billion m3/yr
?
Demand
WEO 2012
Production
WEO 2012
Import demand
Europe: natural gas production (EWG/WEO 2012) and demand (WEO 2012)

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systemtechnik
Historical data: OECD 2008,, NPD 2012, BP 2012; Forecast: LBST 2013
UK: DTI (2012 aus Jan-Jul extrapoliert); WEO 2012
0
200
400
600
800
1960 1980 2000 2020
LNG_
Imports from North Africa
Imports from Russia
Norway
other
Denmark
Germany
Italy
Netherlands
UK
WEO-2012 conventional
WEO 2012 incl. Shalegas
Demand (WEO 2012)
Billion m3/yr
?
Shale gas
(WEO 2012)
Production
WEO 2012
Demand
WEO 2012
Europe: natural gas production and demand; expected shale gas production
(WEO 2012)

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systemtechnik
Source: WEO 2012
Unconventional gas production in 2035 as seen by IEA in WEO 2012

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systemtechnik
USA Austria Germany
Producing gas wells 461,388 206 516
Producing oil wells 363,459 689 1128
Share of domestic production ~90 % ~ 10% ~ 10%
Population density and present oil/gas activity

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0
200
400
600
800
1000
1200
1400
1600
1800
2000
jan
aug
mrz
okt
mai
dez
jul
feb
sep
apr
nov
jun
jan
aug
mrz
okt
mai
dez
jul
feb
sep
apr
nov
jun
jan
aug
mrz
okt
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Mill. m³/month
Assumption:
65 new wells per month (=780 wells/yr)
For 48 month (=3120 wells)
IP 1,5 Million m³/month
EUR= 28 Mio. m³/well
Decline 5.5% per month
WEO 2012 Scenario: required wells to produce 20 billion m³/yr shale gas

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systemtechnik
0
200
400
600
800
1000
1200
1400
1600
1800
2000
jan
aug
mrz
okt
mai
dez
jul
feb
sep
apr
nov
jun
jan
aug
mrz
okt
mai
dez
jul
feb
sep
apr
nov
jun
jan
aug
mrz
okt
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Mill. m³/month Assumption:
40 new wells per month (=480 wells/yr)
For 48 month (=2000 wells)
IP 2,5 Million m³/month
EUR= 45 Mio. m³/well
Decline 5.5% per month
WEO 2012 Scenario: required wells to produce 20 billion m³/yr shale gas

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systemtechnik
0
200
400
600
800
1000
1200
1400
1600
1800
2000
jan
aug
mrz
okt
mai
dez
jul
feb
sep
apr
nov
jun
jan
aug
mrz
okt
mai
dez
jul
feb
sep
apr
nov
jun
jan
aug
mrz
okt
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Mill. m³/month Assumption:
40 new wells per month (=480 wells/yr)
For 100 month (=4000 wells)
IP 2,5 Million m³/month
EUR= 45 Mio. m³/well
Decline 5.5% per month
WEO 2012 Scenario: required wells to produce 20 billion m³/yr shale gas

37. ludwig bölkow
systemtechnik
WEO 2012 Scenario: required wells to produce 20 billion m³/yr
• The production of 20 billion m³/yr in 2030 would amount to
2-3% of European gas demand
• The production of 20 billion m³/yr of shale gas in Europe would
require 500 – 800 new wells per year
(Based on EUR of 30 – 45 million m³/well and 5.5% monthly decline rate)
• About 140 rigs are operating in Europe
of which at least 80 rigs are drilling for oil
• Such a senario would require the 5 – 10 fold increase of drilling activity
• The European infrastructure is not adapted to such activities
(Few rigs, too less educated staff, no regional gas gathering and
transport infrastructure…)

38. ludwig bölkow
systemtechnik
Example Poland
Production Net imports Price Import cost
Coal ~ 80 Mt/yr -4 Mt/yr ~ 100€/t --
Oil < 1 Mt/yr ~27 Mt/yr ~ 600 €/t ~16 billion €/yr
Natural
Gas
43 TWh/yr
(4.3 bcm/yr)
95 TWh/yr
(9.5 bcm/yr)
~ 30 €/MWh ~ 3 billion €/yr
Source: OECD Energy Balances of OECD Countries

39. ludwig bölkow
systemtechnik
The replacement of 50% of Polish gas imports by domestic shale gas
production
would require the production of 3 billion m³/yr shalegas
This would require the completion of
about 5-10 new wells per month, or 60 – 120 new wells per year
[Assumption: EUR = 30-50 million m³/well; 5.5 % monthly decline rate]
WEO 2012:
The average EUR per shale gas well amounts to 1 bcf (~27 million m³)
Example Poland

40. ludwig bölkow
systemtechnik
Example Germany

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systemtechnik
Source:
Risikostudie Fracking,
Exxon Dialogprozess, May 2012
Unconventional gas in Germany

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systemtechnik
km
km
Potential field development in NRW (200 km²; 22 well pads; 14 wells/pad)
Well pad (100x100 m²)Village+200m
House+100m
Pipeline
Gas purification plant

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systemtechnik
0
1.000.000
2.000.000
3.000.000
4.000.000
5.000.000
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
TJ
Natural gas supply (including exports) and consumption in Germany
Source: BAFA 2010 (Werte für 2010 aus Jan – Okt extrapoliert)
Production in Germany
Consumption
100 bill. m³
10 bill. m³

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systemtechnik
0
1.000.000
2.000.000
3.000.000
4.000.000
5.000.000
1998
2001
2004
2007
2010
2013
2016
2019
2022
2025
2028
TJ
Natural gas supply (including exports) and consumption in Germany
Source: BAFA 2010 (Werte für 2010 aus Jan – Okt extrapoliert)
Production in Germany
(from 512 gas wells)
Consumption
100 bill. m³
10 bill. m³

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systemtechnik
0
1.000.000
2.000.000
3.000.000
4.000.000
5.000.000
1998
2001
2004
2007
2010
2013
2016
2019
2022
2025
2028
TJ
Natural gas supply (including exports) and consumption in Germany
Source: BAFA 2010 (Werte für 2010 aus Jan – Okt extrapoliert)
Production in Germany
(from 512 gas wells)
Consumption
100 bill. m³
10 bill. m³
Scenario calculation with
30 new well developments/yr
for 8 years:
250 shale gas wells with
cumulative production of
14 billion m³

46. ludwig bölkow
systemtechnik
Summary

47. ludwig bölkow
systemtechnik
Summary
• Conventional gas production is in steep decline (in Europe)
• Gas companies expect rising gas prices
• Europe is densely populated, oil and gas drilling activity is low
• Drilling sites are close to or in cultivated agricultural areas
=> conflicts with interests of rural population are apparent
• The contribution of domestic shale gas production to EU gas supply
will be small (~ 2 – 3 % according to WEO 2012)
=> domestic shale gas production will not have an influence on gas prices
=> unconventional gas production in Europe will not solve any
future European energy supply problem,
moreover the focus on it may delay investments into adequate technologies

48. ludwig bölkow
systemtechnik
Thank you!

49. ludwig bölkow
systemtechnik
Assumptions:
Initial production: 4 mill m³/month/well
Decline rate : 7% per month
cum production: 50 mill. m³ per well
Drilling activity: 30.000 m per year
Scenario with 120 new wells within 4 years (cum production: 7 billion m³)

50. ludwig bölkow
systemtechnik
Scenario with 240 new wells within 8 years (cum. Production: 14.3 billion m³)
Assumptions:
Initial production: 4 mill m³/month/well
Decline rate : 7% per month
cum production: 50 mill. m³ per well
Drilling activity: 30.000 m per year
(depth: 1000 m per well)

51. ludwig bölkow
systemtechnik
Source: LBEG, annual reports 1997 - 2010
Gas production from „Söhlingen“

52. ludwig bölkow
systemtechnik
Source: LBEG Annual Report 2010
Proven and Probable Gas Reserves in Germany (conventional)
1980 2010
Year
400
100
200
300
Billion m³
Proven Reserve
Probable Reserve

53. ludwig bölkow
systemtechnik
Source: Grünspecht February 2012
Possible Production Scenario in „Weinviertel“
50 well pads
with 25 wells each
~5 km

54. ludwig bölkow
systemtechnik
Assumptions:
Cum production per well: ca. 70 mill. m³
Decline rate 6% per month
Drilling activity: 60.000 m/year
Austria: Scenario calculation 70 production wells within 6 years
(depth 5,000 m)
Gas consumption of Austria
Cumulative production until 2030: ~ 6 billion m³