Europe Goes Unconventional

The Nubucco Pipeline, the Middle East, N Africa and now shale gas. Russia, Yugoslavia - you guys better work out your differences, or Europe is going to leave you out in the cold (link).

Exxon Mobil Corp. is now exporting expertise and technology it developed in North America to gas markets in Europe. In Germany, for example, drilling and testing activity on licenses covering 1.3 million acres of the Lower Saxony Basin started in 2008.

The company also has a joint exploration program with MOL Hungarian Oil & Gas PLC in the Mako Trough in southeast Hungary. It will evaluate its findings for two to three years before deciding whether production would be commercially viable, the company said.

Meanwhile, the U.K.'s biggest gas supplier, Centrica PLC is moving beyond its traditional emphasis on searching for gas under the sea by looking to former mines to tap coal-bed methane.

It plans to drill two exploration wells in 2010, rising to eight by 2014. It has three onshore U.K. licenses in South Wales. Centrica cautions there is still a long lead period before coal bed methane, or CBM, can be produced on any commercial scale.

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The volume of unconventional gas isn't yet significant on a U.K.-wide scale, supplying enough electricity for only 1,200 homes, but the potential is there, analysts say. Some forecasts suggest unconventional gas could make up 10% of U.K. supplies by 2020.

A recent report by energy consultancy Wood Mackenzie said production of CBM in the U.K. is commercially feasible at the current gas price as well as under longer-term projections. The report estimated there could be as much as four trillion cubic feet of gas available in the Cheshire Basin, at the heart of the U.K. gas market.

Another independent, 3Legs Resources from the Isle of Man, has licenses covering more than a million acres in the Baltic Basin region of Poland, where it is targeting shale gas. Company Director Kamlesh Parmar said that 3Legs has started field work to obtain seismic data in the region and plans to drill its first exploration well in early 2010.

Despite uncertainty over the scope of European resources, Wood Mackenzie's manager of unconventional gas research, Rhodri Thomas, said "there could be a material impact on European markets in 10 years plus if unconventional gases do take off."

- Brewskie