Berlin, 9 November 2010

The search for unconventional gas in Europe will not quickly generate new supplies to help the region cut its dependency on imports, an energy security expert at the International Energy Agency (IEA) said on Monday.

"Europe's shale gas potential has to be better known and there is the issue of the projects' acceptability," said Didier Houssin, director of energy markets and security at the Paris-based IEA in conversation with Reuters at a conference.

"We are just at the exploration stage, so significant shale gas production would take time to be put on stream," he said.

Germany's North-Rhine Westphalia state government last week said it had awarded exploration licences to ExxonMobil and nine other firms including from Australia and Canada to search for the so-called unconventional gas.

Exploration technology for shale gas has improved dramatically in recent years, causing a gas glut in North America with knock-on effects for the global market. As the hunt for new resources becomes cheaper and more promising, European countries such as Poland, Germany and, outside the EU, Ukraine, are embarking on shale gas searches.

Houssin said this made sense -- while the U.S. imported less liquefied natural gas (LNG), leaving more for others, Europe was overcoming the recession, and Asia, notably China, had an insatiable hunger for energy.

"Gas demand has the potential to increase much quicker than supply, especially in China and India, and if the power sector is very much going to be based on gas (-fired generation), there may be a sharp increase in demand," he said.

"Europe will have to compete with Asia for supply whether it is LNG or pipeline gas," Houssin said. "In that context, if we had ... important potential of unconventional gas in Europe, it would help diminish the pressure for imports.

Europe also wants to diversify away from key supplier Russia because of the chance of Russia rowing with transit country Ukraine over pipeline access and fees, as it did in the 2006 and 2009 winters, when this caused serious disruptions.

Houssin said there was also the question of how readily people in densely-populated Europe would accept such projects. Plans for new infrastructure such as in the case of power cables, pipelines and nuclear plants have brought protests.

Turning to the situation in the coming winter, which some weather forecasters expect to be colder than average, Houssin said European gas stocks were very high, allowing some leverage in a crisis.

"Of course one needs to be prepared, but Russia and Ukraine have negotiated agreements that should allow them to avoid a big crisis," he said.

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