Warsaw, 9 April 2010

Shale gas may help to bolster the energy security of eastern Europe, particularly of Poland, but it is not a panacea and should be developed as part of a wider mix of policies, a senior U.S. energy official has told Reuters. Major energy companies are scrambling for drilling rights in Poland and other countries across Europe to hunt for shale, an unconventional energy source packed into tight rock formations that has transformed the U.S. energy market.

Europe currently relies mainly on natural gas supplies from Russia, Norway and North Africa. Accessing suspected large shale reserves could make the continent far less dependent on imports.

"We certainly see it (shale) as a major opportunity, but we also think it's important to manage expectations," Richard Morningstar, U.S. Special Envoy for Eurasian Energy, told Reuters in an interview.

"Development of shale projects takes time as does development of any other project, such as pipelines or LNG (liquefied natural gas) facilities. It really ought to be looked at as a significant element in a balanced energy policy."

Chevron Corp , Exxon Mobil and Marathon Oil Corp are among firms to have won exploration licences in Poland, which is hosting a conference on Thursday on shale gas.

"I think what Poland is doing -- developing its LNG facility on the Baltic coast and working on interconnections with Germany, working on various other alternatives, all these elements including shale are important," Morningstar said.

Poland imports about two-thirds of the 14 billion cubic metres of its annual gas consumption from Russia. Domestic extraction stood at 4.1 billion cubic metres last year.

Technical Challenges

ConocoPhillips is due to open the first shale gas extraction site in Poland very soon near the Baltic coast. Tapping shale gas deposits, which lie at depths of 2 to 3 kilometres, require expensive and complex drilling techniques.

Unlike the U.S., Europe does not have many land rigs available to search for shale gas. "The geology here looks good, but... there are a number of technical issues," Morningstar said, adding the environmental impact in relatively densely populated Europe was also a factor to be considered.

He cited Ukraine, Hungary and Bulgaria as some of the other countries with shale gas potential. "(Shale) certainly can be a way to increase the region's energy security, depending on what the results are of all these projects... It's not a question of being independent from Russia; it's a question of having overall energy security."

"I'm sure the countries from this region will be receiving gas from Russia for the foreseeable future, but diversity is also important and that diversity can take many forms," he said.

The Polish government is keen to encourage shale gas exploration but also recently clinched a long-delayed deal with Russia's Gazprom designed to secure natural gas deliveries until 2037. Russian Prime Minister Vladimir Putin said on Wednesday he expected the deal to be signed shortly.

Morningstar played down concerns in Poland over the planned Nord Stream gas pipeline that will link Russia and Germany via the Baltic Sea, bypassing Polish territory. Construction is set to start shortly. "I don't think it needs to change the energy security balance in the region," he said.

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