Russia inflames environmental fears to dominate energy market
We lost Bulgaria. We are likely soon to lose the Czech Republic. We gained Ukraine. Poland has always stood with us. Germany hedges its bets. France definitely is not with us. The United Kingdom probably will side with us. The Baltic States would love to join us if they have the resources. A fierce battle rages over Romania.
The adversary is Russia, a petro-state that projects power through control of the European energy market. President Vladimir Putin’s regime depends on selling hydrocarbons. That pays for the Russian state and for a patronage system that keeps his supporters and backers in clover.
Many of Gazprom’s decisions are political. It pays for long pipelines to bypass Ukraine. Political appointments and scams are costly. Analysts estimate that Gazprom needs to charge about $12 per 1,000 cubic feet of natural gas to break even. It collects about $16 per 1,000 cubic feet in Eastern Europe. In the United States, the cost is about $2.
The price of natural gas in America dropped because hydraulic fracturing glutted the market with cheap gas. There are no such commercial wells in Europe.
If hydraulic fracturing can be used on a commercial scale in Europe, the price of natural gas there will plummet. It could force Russia to start working for a living and would have radical political repercussions.
Almost all European countries have some shale gas deposits. Commercial use of those resources would increase energy independence, reduce demand for gas imports and thus reduce prices, improve the balance of trade and create local jobs. Three European countries, Poland, France and Ukraine, have potential deposits that may turn them into gas exporters.
The Polish reserves are deeper and older than the American ones. Drilling technology will have to evolve to adjust to the local geological features, as it has in the Barnett and Marcellus shale formations. Exxon has beat a retreat from Poland for now, but other, smaller companies are continuing to explore. Ukraine has just opened its territory to bids for shale gas exploration.
Unlike Poland and Ukraine, France has no history of Russian domination. Most of its energy comes from nuclear power. Russia is just its third-largest natural gas supplier, after Norway and Algeria. When environmentalist groups protested against the potential use of hydraulic fracturing in France, there was no interest group on the other side of the debate. Yet Total is using the technology outside France. Given the French economy’s dire straights, a decision to start exploiting France’s domestic gas resources has obvious advantages, even if hydraulic fracturing needs to be rebranded.