IEA: Shale Gas Boom At Risk Over Environment Failings

IEA: Shale Gas Boom At Risk Over Environment Failings

LONDON - Global exploitation of shale gas reserves could transform the world's energy supply by lowering prices, improving security and even curbing forecast carbon dioxide emissions, but the industry might be stopped in its tracks if it doesn't work harder to resolve concerns over its environmental safety, the International Energy Agency said Tuesday.

The IEA's report shows how the shale gas industry, which has already dramatically altered the energy landscape in the U.S., stands at a tipping point that will determine how it spreads across the rest of the world.

"If the social and environmental impacts aren't addressed properly, there is a very real possibility that public opposition...will halt the unconventional gas revolution in its tracks," resulting in the loss of an historic opportunity to provide cheaper and more secure energy to the some of the world's largest consumers, said IEA Executive Director Maria van der Hoeven at a press briefing.

However, if the industry follows a set of "golden rules" recommended by the IEA it can win public support, allowing natural gas to become the fastest growing energy source over the next two decades, the IEA said.

For companies involved in the industry, this is an, "immediate issue...that could have global implications," said Fatih Birol, the IEA's chief economist, in an interview with Dow Jones Newswires.

Shale gas has only become a major energy source in recent years, as a process called hydraulic fracturing that releases the gas from the impermeable rock in which it is trapped has entered widespread use. It has already produced a boom in natural gas production in the U.S., driving prices to 10-year lows, but is only beginning to spread elsewhere.

The industry's nascent international expansion has already attracted a significant level of opposition, notably in Europe, from groups concerned about the risks of water contamination, earth tremors or the release of greenhouse gases. Hydraulic fracturing has been banned in France and Bulgaria and temporarily halted in the U.K.

Opponents of shale gas drilling have legitimate concerns, but all of them can be dealt with adequately with existing technology and best practice, said Birol. The IEA's golden rules would only add around 7% to operating costs, he said.

These include carefully choosing drilling sites to avoid earth tremors, using the highest standards of well design to avoid groundwater contamination, properly disposing of waste water and eliminating all emissions of polluting gases from the well head, the IEA said.

Environmental group Greenpeace, which opposes all exploitation of unconventional gas reserves, criticized the IEA for not proposing specific procedures for preventing many of these environmental hazards, particularly the venting of the potent greenhouse gas methane from wellheads.

One past critic of the shale gas industry's methane emissions--Craig Mackenzie, head of sustainability at the GBP142 billion asset manager Scottish Widows Investment Partnership--said the IEA's rules would make a big difference if widely adopted.

"The whole industry hasn't yet got behind this agenda," he told reporters in London, but some companies such as Royal Dutch Shell PLC (RDSB) have already adopted best practice similar to the IEA's new rules and are implementing them in China, which has the potential to be a major shale gas producer.

If the shale gas industry follows its blueprint, the IEA said that between 2010 and 2035 natural gas could be by far the fastest growing fuel, with consumption increasing by 50% to overtake coal as the world's second largest source of energy.

Countries that were net importers of natural gas in 2010 are likely to be the biggest winners, as they increase domestic energy production and reduce the power of major exporting regions like Russia and the Middle East, the IEA said.

Natural gas prices would be around 30% lower in most major markets than they would otherwise have been, reducing the import bills of major consumers like the European Union and China by tens of billions of dollars, it said.

None of these gains will occur if the lack of public acceptance stifles the industry at this early stage, the IEA said. In this scenario, global emissions of carbon dioxide would actually be 1.3% higher, because carbon-heavy coal would make up a greater share of global energy supplies.

The IEA's Birol said that despite the benefits of switching from coal to gas, energy efficiency, renewable energy and carbon capture and storage are still needed to prevent dangerous climate change.

Copyright (c) 2012 Dow Jones & Company, Inc.


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Dimitrios Mavrakis | Jun. 5, 2012
Although there is a lot of discussion concerning the environmental issues on shale gas there is not enough arguments on the real environmental implications. How real is that shale gas can contaminate the water layers and why this is not a risk for the conventional natural gas exploitation. What is the need for water? Do we need water in all phases of shale gas exploitation or only for the initial one and how much water do we need? A lot of general arguments but not enough information about the real figures.

tom seeliger | Jun. 4, 2012
The false prophets of " GLOBAL WARMING CAUSED BY MAN " and the EPA minions of the extreme left administration of the USA would love to see the shale gas and oil drilling stopped ,but they are not worried about your water wells etc. they have a far greater agenda .

Phillip Fields | Jun. 4, 2012
This problem has a reasonable fix having come from a conservation/ water quality background and a lot of dealing with the public. The problem for me is I cant get into the oil and gas industry to help because the want oil and gas experience to get into an HSE position. The culture of oil and gas seems to be a closed one, and that appears to be part of the problem.

David P. Cole | Jun. 1, 2012
Karen: Your report by the IEA is so on target. I think the risk is more in the direction of countries and companies forging ahead with the use of chemicals when there is an absence of knowledge of the available technology such as Ecospheres clean water for clean energy. It is available, here and now. While Rigzones III Part article on the use of water is and was a great start, the lead presentation on Ecosphere needs to be on national and international news on a near daily basis.

adam | Jun. 1, 2012
Whats wrong with working within the a set enviornmental criteria? Rest of the world sees it, but in the US, it is called bad for business, and advocates of enviornmentally responsible developments are called socialists. If you ask most all companies, they will tell you that all they want is regulatory certainity on this issue. If you are a mom-pop operation (i.e. multi-million dollar copany, as opposed to multi-billion dollar company) and cannot handle the liability if something goes wrong, you should not be in this business. Parts of rural US are becoming industrial wastelands due to unregulated fracking. It is not just about drinking water for people, it is also about farming, ranch land, parks and wildlife,a nd basic quality of life which is the American dream. We do not want to become a country where no one can live in rural areas, or retire out in the countryside? As bad as enviornmental enforcement is in China, they are even putting into effect environmental rules to protect natural lands and drinking water supply as there is a lot of shale type gas in China and its in early stage of development.

Phil Eyler | Jun. 1, 2012
I like how they say peoples concerns can be dealt with "adequately". I guess it depends on what your definition of "adequate" is.

Errol Sonnier | May. 30, 2012
What does Greenpeace and the IAE run their Homes, Cars and Shepard Vessel on? You got is Fossil Fuel Baby. When they run of Sunshine, I and the world will start paying attention.

biogeo | May. 30, 2012
When people get cold enough or run out of cash anyone can drill for oil and gas.

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