Unconventional energy sources - a new European perspective? Energy Security: How to ensure supply for the EU and its neighbours? 29th April, 2011. Pécs, Hungary Unconventional energy sources - a new European perspective? Istvan Gyerman University of Pecs, Faculty of Business and Economy

Unconventional energy sources – a new european perspective? Conventional vs. Unconvenctional Unconventional gas in the USA and world shale gas resources in the world Unconventional gas resources in Europe Unconventional gas projects in Europe Conclusion Energy security: How to ensure supply for the EU and its neighbours? 29th April 2011.

Conventional vs. unconventional Accumulations in medium to highly porous reservoir with sufficient permeability to allow gas to flow to producing well Pressure regime tends to move gas towards producing well (i.e. natural flow) Unconventional Deposits of natural gas found in relatively impermeable rock formations (tight sands, shale and coal beds) To get resources out of the ground, artificial pathways (fractures) have to be created Key technologies: horizontal drilling and Modern, hydraulic fracturing techniques Consequences Need to understand geology better Need for much higher number of extraction points Source: DTE Energy, EON (2010) Energy security: How to ensure supply for the EU and its neighbours? 29th April, 2011.

Unconventional gas in the USA and world shale gas resources by region US: share of unconventional gas in the total gas output jumped from 44% (2005) to 50 (2008) and projected to rise to almost 60% (2030) National Petroleum Council (NPC): 34,7 TCM IEA: 35 TCM CERA: 3-12 TCM IEA: 35 TCM these reserves are enough to substitute natural gas imports for 40 years at current levels Source: IEA 2009b Source: Rogner 1997, Kawata & Fujita 2001, Makinen 2010. Energy security: How to ensure supply for the EU and its neighbours? 29th April, 2011.

Unconventional gas resources in Europe Europe holds diverse inventory of unconventional gas Individual size and resource potential in Europe is in same order of magnitude as typical North-American basins Three major European shale gas basins: Poland, Northern Germany, and Southern North Sea No production of unconventional gas established yet Shale gas Tight gas Coalbed methane Source: Schlumberger, 2009, E.ON 2010. Geological potential of European region to be utilized in order to improve energy supply! Energy security: How to ensure supply for the EU and its neighbours? 29th April, 2011.

Unconventional projects in Europe - challenges Shell • Three-year exploratory term in the Cambrian Alum in southern Sweden • Acquiring seismic data, drilling pilot in 2010 ExxonMobil • 750,000 acres in Lower Saxony Basin • Drilled 3 exploration wells and another 10 wells planned Geology and cost structure not well developed Research phase Mainly state owned mineral rights difficulties with licenses and land acces (densily populated) Environmental issues Well costs Eurenergy Resource • Holds 123,000 acres in southern England’s Weald Basin • Five-year license for exploration drilling 3Legs Resources • Five licenses to explore 1 million acres in the Baltic Basin region • 3D-seismic and drilling with ConocoPhillips ExxonMobil • Holds 400,000 acres in Mako Trough in southeast Hungary • Joint exploration program with MOL • $ 300 mn investment Eurenergy Resource • Awarded 1.3 million acres in East Paris Basin • Starting drilling program in 2010 OMV • Three-year project in Vienna Basin; very deep • Estimated shale gas potential at ~ 430 bcm Source: Wood Mackenzie (2009), E.ON (2010) Energy security: How to ensure supply for the EU and its neighbours? 29th April, 2011.

Conclusions Unconventional gas resources are smaller than in the USA Unconventional geology not well understood in Europe More difficult acces to resources than in the USA Environmental issues Costs BUT: Unconventional gas will reduce expected import needs and diversify EU supply in a long run Energy security: How to ensure supply for the EU and its neighbours? 29th April, 2011.

Thank you for your attention! Istvan Gyerman University of Pécs, Faculty of Business and Economics Doctoral School in Regional Policy and Economics H-7633 Pécs, Rákóczi út 80 Tel: +36 20 228 3235 istvan.gyerman@externet.hu