MSLGROUP EMEA Energy Report June 2013: Snail Shale


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Our latest energy report captures the progress of the shale industry across EMEA.
In our previous reports, we talked about how Fukushima has shaken up the European energy landscape and shared our insights into the challenges facing EMEA including climate change, growing fuel poverty and security of supply.
MSLGROUP has a growing footprint across Europe and beyond, and a fantastic team in place to help our clients rise to the challenge of communicating effectively with stakeholders around the world on these and other critical issues. Connect with us:

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MSLGROUP EMEA Energy Report June 2013: Snail Shale

  1. 1. ENERGYREPORTSnail ShaleViews and insightson the progress ofEurope’s shalerevolutionJune2013
  3. 3. Welcome to MSLGROUP’s Snail Shale Report in which my colleagues fromaround Europe reflect on the progress of the shale industry across thecontinent.The contrast between Europe and the United States of America is notable. Inthe US, the industry has taken off like a rocket, leaving even seasoned marketparticipants surprised at the speed and scale of development. However, inEurope, shale is still stuck in the slow lane, despite our growing energy needsand the economic morass we find ourselves in.In the teeth of one of the longest and deepest recessions in living memory,one which is testing the European Union to its core, the lack of any policyconsistency in this area in Europe is, perhaps, doubly surprising. While thereare undoubtedly questions to be asked about the environmental impact ofshale, the economic benefit is tangible.Instead, we have a divided picture, from countries like France, which iscontinuing to resist the allure of shale, to Poland and the UK, which havebecome increasingly keen to exploit its potential. The UK Government, inparticular, has been almost indecent in its haste to speed up the regulatoryprocess so it can tap this new source of revenue and enhance its energysecurity.From a communications perspective, it is really about thinking locally;working on the ground with local communities and listening to their questionsand concerns. It is not just the drilling and fracking, but also the logistics ofmoving heavy plant through country lanes that were not designed for suchloads and the associated disruption. So a sympathetic ear and responsivecommunications are essential.There is also a serious issue over the financial benefit of such potentialriches. In the US, where the landowner holds the mineral rights, you havelandholders welcoming exploration and production. Unsurprisingly, inmarkets where there is no direct benefit – such as the UK – landholders aremuch less solicitous. A direct form of profit share for communities wouldunquestionably help smooth the passage of such developments.In addition, the industry could do a better job in communicating the broaderbenefits that shale can bring – not just the hydrocarbons themselves, but allthe associated jobs and services too. With Europe in an economic funk, thewealth that shale can create should be most welcome.Nick BastinManaging Director, Capital MSL,Head of MSLGROUP EMEA Energy PracticeIntroduction3
  4. 4. AyearoftruthforEUpolicyonShalegas?Leonardo Sforzaleonardo.sforza@mslgroup.com4The specific interest of the European Union institutionsin shale gas is relatively recent, but the debate aroundthe nature and scope of EU action in this area is gainingmomentum rather quickly in the Brussels policy arena.The European Commission, theEU executive body, will resume itsplanning for future activity by the endof 2013.The impetus for this activity wasgiven by Heads of State andGovernment at the EU Summit inFebruary 2011. EU environmentallegislation, which is also applicableto hydrocarbon projects, dates backto 19851, although, since 20082,several members of the EuropeanParliament have raised the issueof shale gas exploitation. The EUSummit resolution recognizedthe intrinsic value of shale gas forthe European economy and calledon the European Commission toproceed with a full assessment ofEurope’s potential for the sustainableextraction and use of unconventionalfossil fuel resources, including shalegas3.Following this mandate, theCommission has been focusingon gathering fact based evidence
  5. 5. 5At the domestic level, eachMember State is free tochoose its own energy mixfrom the sources available.Nevertheless, the EuropeanCommission is entitled topropose measures aimedat ensuring the correctfunctioning of the EU energymarket while preserving andimproving the environment.EU environmental legislationapplies to shale gas explorationfrom planning until thecessation of the activityand stakeholder views, to create aframework for an informed decisionon the way forward. The results ofthree research studies, carried outon behalf of the Commission, on theclimate and environmental impactsof shale gas extraction, and on theimpact on the energy market of thedevelopment of unconventional gasextraction, aims to contribute to suchgoal. Meanwhile, the record numberof 23,000 responses submitted tothe European Commission in thecontext of an open stakeholderconsultation, offer a tangibleindication of the interest and views ofconcerned parties throughout Europeabout shale gas.Today, there are no less thanfour European Commissionersand four European ParliamentCommittees, with about 200 MEPs,that are already directly involved inaddressing and designing the futuredirection for policy on shale gas.Earlier this year, at a round tablediscussion on EU industrial policyin Brussels, French CommissionerMichel Barnier shared his views onthe pre-conditions for relaunchingthe European industry and articulateda true pan-European industrial policy.He considered the high cost ofenergy as one of the key factors thatundermine the competitivenessof the European industry, whileacknowledging the need toconsider carefully the impact on theenvironment. For Connie Hedegaard,the Commissioner responsiblefor climate change, shale gas willnot be the “game-changer” thatit has been in the US. She agreeswith her colleague Janez Potocnik,Commissioner for Environment, whoinsists on the risks to the environmentand the need for its adequateprotection.The Commissioner for EnergyGünther Oettinger is in a ratherdifferent position: he seems to bein favour of shale gas production,particularly for its abilty to reducegas prices and enhance security ofsupply. The same wide range of viewsresonate in the European Parliamentand in the Council of Ministersmeetings.Last year, MEPs adopted tworeports on shale gas, one fromthe Environment Committeeemphasizing the dangers thatfracking might pose to watersupplies, and one from the IndustryCommittee, emphasizing thepotential for shale gas to reduceEurope’s dependency on imports ofenergy. At an Informal Energy Councilon 24 April 2013 in Dublin, nationalMinisters for the first time debatedtogether about unconventionalfossil fuels such as shale gas. Morenotable, the shift of tone and focusat the EU Summit of Heads of Stateor Government last May where theemphasis was on the diversificationof supply and price reduction, withshale gas being a potential solutionworth deeper investigations. This willencourage the Commission to comeout with pan-European guidelines bythe end of the year, which are likelyto be further examined at the 2104EU Summit in March. Meanwhile,discussions will continue to to betough, as Member States remaindeeply divided on their approach toshale gas. While some of them havealready gone ahead with exploitingshale gas resources, others arebanning the practice, and in themiddle other countries that are nowaccelerating the assessment ofthe related pro and cons. MemberStates favourably disposed towardsshale gas include the UK, Romaniaand in particular Poland, whichhas announced that it would investaround €12 million to developexploration by 2020. Bulgaria andFrance, on the other hand, areopposed to fracking and have alreadyimposed moratoria on hydraulicfracturing in 2012, with France goingeven further to demand a total banon fracking at EU level.A year of truth forEU policy on Shale gas?
  6. 6. 6Can the EU help to overcome theeconomic versus environment dividethat we have already seen in otherareas? How can an EU frameworkadd value? How can we makeprogress towards at least ensuringgreater certainty and transparencyof the national and pan-Europeanregulatory frameworks? If EU policymakers can start considering theenvironmental and industrial aspectsof shale gas as two sides of the samecoin; as a common challenge that weneed to face and reconcile in everysphere of our daily life, because itinvolves all of us, as business people,as employees, as consumers andas citizens, we will certainly makeprogress.The first test that will measure theEU’s ability to reconcile its views onshale gas is later this year, when theEuropean Commission will proposean “assessment framework” settingregulatory options for the productionof unconventional gas. It is notclear yet whether the Commissionwill propose soft laws in the formof industry guidance, or will seekto amend existing legislation,or propose a new standaloneinstrument in the form of hard law.For the time being, the applicableEU environmental legal frameworkincludes about eight differentdirectives, implemented with varyingnuances in the 27 EU membercountries.According to a recent Pan-Europeanpublic opinion poll carried out onbehalf of the European Commissionby an independent research institute,six out of ten Europeans support anEU-wide harmonised and consistentapproach to the management ofunconventional fossil fuels, althougha large majority of Europeans (74%)would be concerned by a shale gasproject located in their neighborhood.The development of this importantenergy resource in Europe will onlygo ahead if it proves to policy makers,industry and local communitiesto be both economically andenvironmentally viable.It is time for European industry, forresearchers and other interestedparties to step up with bolder andricher research analysis into thePan-European debate to contributeto well informed decisions withoutideological bias.A year of truth forEU policy on Shale gas?The development of thisimportant energy resourcein Europe will only go aheadif it proves to policy makers,industry and local communitiesto be both economically andenvironmentally viable.
  7. 7. Leavingthedoorfirmlyajar:WhyGermany’slacklustreapproachtofrackingcouldstillholdpotentialforshale.Florian Wastlflorian.wastl@mslgroup.com7A coalition compromise to regulate fracking mayhave come too late. Ultimately, this could be to theadvantage of shale gas exploration in Germany.While Germany’s estimated shalegas resources are not as big asthat of other European countries,they are considerable and farsurpass its conventional reserves.According to Germany’s FederalInstitute for Geosciences andNatural Resources, the countryhas technically recoverable shalegas resource deposits of between0.7 and 2.3 trillion cubic metres.Conventional reserves and resourcesstand at a meagre 0.25 trillion eachin comparison. This, combined withGermany’s increasing hunger for gasin the wake of the country’s nuclearphase-out and its already heavydependence on gas imports, shouldhave been enough to trigger an eagerdebate about shale gas in the country.
  8. 8. 8Instead, the picture has been one ofscepticism and hesitation. On theback of wide-spread public concerns,action groups and opposition partieshave been leading the chargeagainst fracking pointing to extensiveenvironmental risks. Crucially, theyhave not been alone: Germany’sFederal Environment Minister PeterAltmaier (CDU) has repeatedly voicedenvironmental as well as publichealth concerns about the large-scale use of an allegedly “unsafetechnology” in such a densely-populated country as Germany. Atthe beginning of this year, however,things began to gather speed. InFebruary, a deal emerged betweenMr Altmaier and his counterpart inthe Federal Economics Ministry,Philipp Rösler (FDP), designed to seta legal frame for hydraulic frackingin Germany for the first time. Whilethe deal prohibited drilling in wellprotection zones, it allowed fornew exploration concessions to begranted outside such zones, providedthe proposed drilling sites receivedthe go-ahead in local environmentalimpact assessments.The deal was an uneasy compromisebetween two ministers pursuingstrongly divergent agendas.According to Mr Altmaier, theGovernment’s plans ensured thatfracking would be “severely curtailed”while the technology was unsafe,dirty and full of environmental risks.Meanwhile, Mr Rösler hailed the“considerable economic potential”,predicting a promising future forshale gas in Germany. The delicatebalance struck by two Governmentministers is indicative of howcontentious the issue of frackinghas become in Germany’s publicdebate. It now risks becoming anissue in the forthcoming electionin September. The closeness ofthe election date has already led tosome disquiet among members ofthe CDU’s parliamentary party whohave been worried about a backlashin their constituencies. To appeasebackbenchers, the Government hasbeen forced to revise the proposedlaw. Under a new deal struck in earlyMay, German federal states will nowbe given the right to further limit theuse of fracking in their territories.The Government is intent on pushingthe revised fracking bill throughparliament before the summerrecess begins in July in order tokeep the highly contentious issueout of the election agenda. However,given an opposition majority in theGerman parliament’s upper chamber(Bundesrat) and the opposition’sinterest in keeping the issue alive, itis far from certain if the Governmentwill be successful.For those pursuing an interest inshale gas in Germany, this couldwell turn out to be for the best.While the current deal would openthe door for fracking in principle,it is far from perfect. It could bemuch more promising to wait for thenew Government to draw up a lawregulating fracking during the courseof the next parliament. This is partlybecause of the impending electionbut also partly because, today,reservations about the technology’ssafety record persist right acrossthe board. As cleaner and saferfracking develops over the comingyears, it is more likely Germany willopen up to its potential, especiallyif gas prices in other parts of theworld continue to decline makingGerman business less competitive.In the meantime, it is crucial for gascompanies to demonstrate to thepublic and political decision-makersalike how risks can be minimised tobuild trust and allay fears. However,much depends on the outcome ofthe German election in September.If the SPD and Greens emerge asvictors from the election, the currentGovernment’s proposal on frackingwill be the most liberal we are likelyto see for years.Leavingthedoorfirmlyajar:WhyGermany’slacklustreapproachtofrackingcouldstillholdpotentialforshale.For those pursuing an interestin shale gas in Germany, thiscould well turn out to be forthe best. While the currentdeal would open the door forfracking in principle, it is farfrom perfect. It could be muchmore promising to wait forthe new Government to drawup a law regulating frackingduring the course of the nextparliament.
  9. 9. FrackingintheUK–thebeginningoftheend,ortheendofthebeginning?Nick Bastinnick.bastin@capitalmsl.com9Ever since Cuadrilla sent shockwaves through the UKonshore E&P industry in 2011, when its drilling nearBlackpool caused two earth tremors, the UK shaleindustry has been on a go slow, with little positivemomentum.That changed recently, when theUK Chancellor George Osborneindicated his support for shale andmade it clear that it was an areawhere the Government was goingto try and push for progress. Withalmost embarrassing celerity, a merefew weeks later, Michael Fallon, theEnergy Minister, announced a newonshore licensing round and thecreation of robust regulations tospeed the development of shale.There is no doubt that the UKhas been enviously eyeing theextraordinary events in the US, whereshale has rapidly transformed theenergy landscape, turning the USinto a potential net energy exporterby 2020.The UK, which has been bemoaningdeclining North Sea oil productionfor years, has suddenly beenpresented with an opportunity to
  10. 10. 10rapidly enhance its energy securityand benefit from its domestic naturalresources.While there are obvious contrastswith the US, not least the typicallymuch higher population density,which makes drilling morechallenging, the biggest issue liesaround public acceptance. Thereare fundamental differences in thisregard between the US and theUK, which have yet to be resolvedsatisfactorily. The principal point isthat in the US the landowner ownsthe mineral rights below the ground,whereas in the UK they are ownedby the Crown (ie the State). Withoutthat direct financial benefit, many arereluctant to support drilling, whichcan be hugely disruptive, potentiallydamaging to property values(another English obsession), and hasdisputed long term environmentalimplications.The Government has tried to addressthis by flying the kite of lower energybills past local residents, to see ifthat would turn perceptions around.It is too early to say if that will movethe needle, but I suspect it won’tbe enough on its own. A moremeaningful profit share has to bethe way forward. This is the approachwhich has seen local opposition towind farms turned into enthusiasticsupport. If local communitiesfeel that they are directly, andtransparently, benefiting from theexploitation of the resources beneaththem, then, unsurprisingly, they aremore likely to be supportive.It is on the local level that heartsand minds need to be won and it isperhaps unfortunate that the supermajors are so far resisting the urgeto get involved, perhaps chary ofthe potential PR fall out. Typically,companies like BP and Shell oftenhave a great understanding andsensitivity to the communities inwhich they operate, built up overyears in challenging political andcultural environments. However,Shell’s CFO has recently declaredthat they don’t have any intentionof putting themselves in the mediafiring line by pursuing shale inthe UK, despite the size of theopportunity. While they may justbe waiting for a pure play upstreamexplorer to do the heavy liftingbefore swooping in and acquiringthe production phase, it does little tocalm local market concerns.Nonetheless, it is to the smallerupstream operators that we will haveto look to if this industry is to get offthe ground in the UK. They are takingthe debate to local communities,spending time explaining thebenefits, highlighting the sciencebehind the drilling and seeking toallay concerns over contamination ofthe environment and in particular thewater table.The UK, with its narrow, windingcountry lanes, is unquestionablymore challenging to deploy majorplant in than the wide open spacesof the US, and it is these practicalissues that will also cause much localopposition. It is to be hoped that themajor advances in horizontal drillingthat we have seen in recent years willmean that far fewer holes will needto be drilled on the surface and thatthe disruption of moving rigs aroundacreage can be minimised in the UK’scrowded countryside.No one seems to have been ableto quantify the opportunity andpotential benefit to the UK consumeror residents. If local communitiescould benefit financially in ameaningful way, and if consumerscould see their bills fall materiallydue to an abundance of gas, thenopposition would likely melt away.The perception that the only oneswho will benefit are companyshareholders and the Chancellorof the Exchequer is an obstacle tomore widespread support, and thatis something the industry needs tochange.It remains to be seen whetherrational debate can win the day orwhether the emotional responsethat shale triggers will win out. Whatis clear is that the geology of theUK is seductive to operators andthe Government hungers after therevenues and economic benefits, soexpect to see the pace of the shalesnail speed up dramatically in thenear future.The principal point is that inthe US the landowner ownsthe mineral rights belowthe ground, whereas in theUK they are owned by theCrown (ie the State). Withoutthat direct financial benefit,many are reluctant to supportdrilling, which can be hugelydisruptive, potentiallydamaging to property values(another English obsession),and has disputed long termenvironmental implications.Fracking in theUK – the beginning of the end,or the end of the beginning?
  11. 11. Sweden:Shalewhat?Per Ola Bossonper.ola.bosson@jklgroup.com11Shale gas and shale oil have transformed the energymarket throughout basically the entire world, but thisis not spoken about much in the Nordic countries. InSweden, the largest Nordic energy consumer, shalegas is a non-issue. One reason for this is that votersand consumers do not have a relationship to naturalgas. Nine in ten Swedish towns and cities are locatedoutside the natural gas grid. Households and kitchenranges that use gas can be found, but are viewed assomething exotic.Only three per cent of Sweden’senergy supply is based on naturalgas.The term ”fracking” remainsunfamiliar to most people, includingpoliticians and journalists. When theword is occasionally used by a foreigncorrespondent in the media, it has tobe explained and put into context.You have to search far and wide for aneconomic expert who believes thatwe should pay attention to Americanindustry’s access to cheap shale gasenergy, since this may have an impacton Sweden and Europe. Someeconomists do talk about this, butthey are few and far between.
  12. 12. 12But the investments inmining exploration have alsogenerated public opinionagainst commodity extraction.A large demonstration washeld in Stockholm last winterto protest against mining, andall proposals for mineral andgas exploration in southernSweden have faced angryopposition.Officially, Sweden has a deregulatedenergy market. But at the same time,parliament has decided that there’sno question of developing a nationalgas grid. Any proposal to connectSweden to the Russian-German gaspipeline that runs along Sweden inthe Baltic would be political suicide.And hardly anyone is willing to investin a gas grid, since the combinedheat and power market is claimedby waste fuels and biofuels. When itcomes to electricity production, thedoctrine on nuclear power is that itcan only be replaced by renewableenergy. So, few people count on aninvestment in natural gas in Sweden,although energy supply expertsdon’t rule it out in the long term if oldnuclear reactors are not replaced withnew ones.Swedish legislation on metal andmineral exploration was liberalisedin the early 1990s, in the midst of theeconomic crisis. This has had a clearimpact for the past several years, witha multitude of Swedish and foreigncompanies applying for permits toexplore for underground treasure.Some promising new mining projectshave been started and several moreare in the pipeline. Coupled withhigh global commodity prices, thishas generated optimism in someof northern Sweden’s sparselypopulated areas.But the investments in miningexploration have also generatedpublic opinion against commodityextraction. A large demonstrationwas held in Stockholm last winterto protest against mining, and allproposals for mineral and gasexploration in southern Sweden havefaced angry opposition.Due to the active public opinionagainst mineral exploration,combined with the market’s lackof interest in natural gas as a fueland the energy policy barriersto natural gas, fracking is a non-existent topic in the energy debate.There probably are some shale gasdeposits in Sweden, but it wouldbe nearly politically impossible toextract them. It is thus more likelythat Swedish energy consumers willask themselves in the future whetherimported natural gas is extractedthrough conventional means orthrough fracking. The Swedishconscience might not accommodatefracking.Although fracking is not an issue onany government political agenda,Minister of Energy Anna-KarinHatt recently confirmed Sweden’snegative view of shale gas on herblog, summarising a meeting with EUEnergy Ministers:”My French colleague, DelphineBatho, and I remarked on thenegative aspects of shale gas.Although shale gas may have asmaller carbon footprint than coal,it is far from a long-term sustainablesolution. Among other things, Ihighlighted that if Europe decides toinvest more in inexpensive short-term fossil gas, it risks saddling itselfwith an infrastructure and cementingitself into heavy dependence onfossil fuels for a long time to come.”For most of Europe, this gasinfrastructure is already developed –though not in Sweden. Yet.Sweden:Shale what?
  13. 13. DoestheVoxpopstilldominatetheshaledebateintheNetherlands?Erik Martenserik.martens@msl.nl13Last month, I had the pleasure of touring the USMidwest. If I’m being honest, it is not an area that youwould particularly want to visit as a tourist, but sinceour daughter studies there, I had to!While there, I learned that in thedepths of America’s heartland, shalegas potential has not only beenidentified but is being exploited,in marked contrast with the southof The Netherlands, where I live.At home, the potential for shalewas identified some years ago afterCuadrilla, a British company, filed fora test drilling permit , and was poisedto get it until it was blocked followinga populist intervention, fuelled byenvironmentalists.I regret to say that in the Netherlands,a balanced discussion on shaleappears close to impossible. You areeither for it or against it; no reflectionon the impact, no balanced opinions,nothing of the sort – as yet. Theopposition voices are the loudest.Municipalities and communitiesdeclare themselves ‘shale free’, as ifwe are reliving the days of the fiercedebates around the neutron bombor nuclear power, back in the 1980s.I have to admit, environmentalists
  14. 14. 14Only recently, one SocialDemocrat MP, an expertspokesman on energy,expressed a rather balancedopinion stating that ‘drillingafter shale would be feasible,but only after a thoroughimpact analysis and under strictcircumstances’.manage to cleverly manipulatepublic opinion, using the Gaslanddocumentary as a pseudo threat ofArmageddon.Having said that, media reports aregetting more and more balanced.After the initial horror stories about‘burning water’, feature articles arenow starting to appear in leadingnational media outlets, highlightingboth sides of the story and callingfor a more unbiased, balancedassessment.Many would argue that this attitudetowards shale gas is long overdue,as the big corporates get morenervous by the day, having graspedthe full impact of the American shalerevolution on their operations inEurope and The Netherlands. Theyhave tried to set up a lobby but, upuntil now, they have forgotten toattempt to influence the averageDutchman, whose welfare dependsvery much on the availability of gas.Let us not forget that this largelyself-sufficient country has becomeextremely wealthy thanks to theavailability of gas in the northernareas.So, what has the Dutch Governmentdone so far? They appear to be takinga very cautious position, seeminglyignoring the international energyrevolution that is taking place aroundus. To take a slightly more cynical(and personal) stance: what elsecould you expect of a Governmentformed by liberals and socialdemocrats – a group that can bebelligerent in nature having foundthemselves forced into this unusualpolitical marriage?The extent of the Government’sintervention so far has followed thetraditional Dutch tactic of installinga committee of stakeholders to‘investigate and assess the situation’.Every stakeholder involved gets theirsay, which is the way the Dutch tryto create ‘consensus’. Clearly thisprocess could take years and years.After a long tendering process,the Ministry of Economic Affairschose Dutch engineering companyWitteveen+Bos to conduct the study.On the very day the announcementwas made, opposition groupslabelled this respected engineeringcompany as ‘biased on shale’. Bydoing this, they applied proven tacticsof naming, blaming and, cunningly,framing.What especially worries me is thatparties at the centre of the politicalspectrum seem to shy away frombeing outspoken on the topic. Oneof the ruling parties for example,the social democrats, is a good casein point. Only recently, one SocialDemocrat MP, an expert spokesmanon energy, expressed a ratherbalanced opinion stating that ‘drillingafter shale would be feasible, butonly after a thorough impact analysisand under strict circumstances’. Aperfectly sensible opinion, you wouldthink. However, the voxpop grewlouder as a consequence, the resultbeing that, less than a week later, theMP had to backtrack and distancehimself from his earlier, inoffensivecomments.I am not particularly for or againstshale gas, but I do expect to decidefor myself without being rebukedfor doing so. Before making up mymind, I would like to know what theimpact will be, both economic andenvironmental, whether on a local,national or an international level.Both factors will weigh equallybut what is important is that thesituation is analysed and assessedin a balanced and objective fashion,taking all factors into account. Thepolitical decisions ought to be takenafter such a study and analysishas taken place, enabling firstlythe Government and ultimatelyParliament to make the rightdecisions. In my view, that is how itworks and that is how it should work.Of course everybody is free to lobbythe process, but the final politicaldecision, whatever it may be, shouldbe respected. That’s democracy.Does the Voxpop stilldominate the shale debatein the Netherlands?
  15. 15. 15To finish my American story; in a hotelbar in Wichita, Kansas, I asked a manwhat he thought of the explorationof shale in his neighbourhood. Helooked at me, somewhat puzzled anduttered the word: ‘PUMBY: Please,Under My BackYard’. Perhaps wecould learn from his enthusiasm.Erik Martens is director Public Affairsat MSL Netherlands and member ofthe Energy practice group of the MSLGroupShale in Dutch Parliament: thepositionsVVD (Liberals)The VVD, the Government coalitionpartner and largest political party,fully supports the test drilling forshale in The Netherlands, in order toverify whether this can be done safelyand in a sustainable way. The VVDwants to diversify Europe’s energysources, believing that high energyprices are pushing back economicrecovery and growth.PvdA (Labour)The other Government coalitionpartner, PvdA, has an ambiguousposition on this issue. It has changedsides during the debate, saying thatit wants to wait for the report aboutthe consequences of test drillingbeing put together by the Ministryof Environment. If this report ispositive, the PvdA would be willingto support test drills. However, thePvdA member congress recentlyput forward and passed resolutionscountering this point of view. ThePvdA leader Diederik Samsom hasnow declared his party will voteagainst initiatives for test drills untiltechnical developments can enableresponsible drilling.D66 (Progressive Liberals), SP(Socialists) and CDA (ChristianDemocrats)These parties have yet to take adefinitive stance on this matter.They want to wait for the report bythe ministry of Economic Affairs,Agriculture and Innovation on thesafety and risks of shale drilling.PVV (Nationalists)The PVV views shale as potentially aviable alternative energy source buthas not spoken out definitively on theissue. It does consider supporting testdrilling in order to analyse whether ornot shale could be an option for TheNetherlands.GroenLinks (Greens) and Christenunie(Christian)Firmly against test drilling andshale overall, due to environmentalconcerns.Does the Voxpop stilldominate the shale debatein the Netherlands?
  16. 16. ThebenefitsforItalyoftheshalegasrevolutionAlessandro Chiarmassoalessandro.chiarmasso@mslgroup.com16How to seize the opportunities provided by the EnergyStrategy of Italy’s Ministry for Economic DevelopmentWhile many world economies arepoised to enjoy the benefits of shalegas development, Italy is planning totap the shale gas potential withoutextracting it from its soil. For acountry that is dependent fromother countries to satisfy over 90%of its demand for gas, this may seemunthinkable. Yet, Italy’s NationalEnergy Strategy launched on March14, 2013 under the auspices of theMinistry for Economy Developmentleaves no doubt: Italy intends toboost its competitiveness startingfrom its energy system, but with noshale gas extraction.How can this be possible? Ourcountry is aware of the globalacceleration in the use of thisunconventional fuel, and itintends to tap its potential not byextracting it, but in an indirect way.i.e. by strengthening its nationalinfrastructure for gas storage andgasification in view of the largequantities of gas that are going tobe imported into the Continent ofEurope in the future, and becomethe South European hub for gasimported into Europe from theSouth.
  17. 17. 17The Government’s decision appearscautious in some respects. This iscertainly due to the strong pressuresfrom environmentalists – fromGreenpeace Italy to the Greenswho on several occasions haveopposed shale gas developmentin our country. Opponents claimfracking – the technology used toextract the gas from the soil – causesuncontrolled release of methaneinto the atmosphere, contaminationof groundwater aquifers due to thechemicals used, and also micro-seismicity. Criticism was particularlyharsh when last year Emilia Romagnawas hit by two strong earthquakesand there were allegations – laterproven wrong - that unauthoriseddrilling for shale gas in the area hadcontributed to them.This time, however, its seems thatItaly does not want to miss theopportunity to have its share in whatFareed Zakaria former editor ofNewsweek called “the game-changerin the geopolitics of energy”. And itintends to do so, not by joining theclub of countries that extract it and,churning away the near-monopoly ofcurrent producers, will become thenew gas exporters, but by reinforcingthe infrastructure for gas import andstorage. Italy’s plan seems to provideequal benefits.As to infrastructure for gas imports,in Italy at present there are only twogasifiers (one in Panigaglia in theprovince of La Spezia, and one inPorto Viro in the province of Rovigo),yet numerous others could beinstalled in coastal areas. The plan toincrease gasifying capacity includesthe entry into operation of a thirdplant off the coast of Tuscany as wellas a further increase in capacity by atleast 8-16 billion cubic meters (bcm)from the current 12 bcm to 24-32bcm.Increasing spot and short-termcapacity would enable the countrynot only to structurally align priceson the Italian market with Europeanones, but also be less dependentfrom current non-European gassuppliers. Italy would import theliquefied gas by ship, gasify it andexport any surplus to other Europeancountries. Considering that this wouldrequire an initial investment of about€1 billion and reduce the country’sgas bill by up to €1.5 billion p.a., thecost-effectiveness of the project isself-evident. Last but not least, thiswould lead to the creation of newjobs, a key benefit in a country wheretoday unemployment is at 11.5%.In a nutshell, Italy has a long-termstrategic plan to tackle its energyneeds and solve situations thatappear contradictory, like the oneresulting from its agreement withRussia for a constant supply of gas,which, as demand fell, has generateda gas surplus that is hard to sell toothers given its above-market price.This plan, too, may encounter someopposition owed to the potentialhazard posed by gasifying facilities.In fact, recently the Ministry for theEnvironment rejected a projectsubmitted by the Spanish energycompany Endesa for the installationof a gasifier in the Gulf of Triesteand another one offshore (19 kmwest of the city of Trieste), due to theopposition of local authorities andenvironmentalists; and the companyBrindisi Lng, a British Gas subsidiary,renounced to install one in Brindisi.Given the influence exercised at locallevel by environmental lobbies andthe circulation of distorted news thatoften accompanies these protests,only providing true facts and broadinformation to the population andall stakeholders using novel, open,two-way communication modelsincluding via social media can ensurethe survival and the developmentof those projects that bring benefitsto the local communities and to theentire Country as indicated in theNational Energy Strategy.Isn’t it about time for our Country-System to have its fair share ofsuccess in the complex Europeanarena? Is it possible to overcome theNIMBY (not in my backyard) approachand embrace the more long-sightedPIMBY (please in my backyard)approach, through a strategy thatpursues dialogue, consensus buildingand identification of tangible benefitsfor the populations involved?The Government’s decisionappears cautious in somerespects. This is certainly dueto the strong pressures fromenvironmentalists – fromGreenpeace Italy to the Greenswho on several occasions haveopposed shale gas developmentin our country. Opponents claimfracking – the technology usedto extract the gas from the soil –causes uncontrolled release ofmethane into the atmosphere,contamination of groundwateraquifers due to the chemicalsused, and also micro-seismicity.The benefits for Italy of theshale gas revolution17
  18. 18. ShalegasscenarioinFrance18For the past three years, France has been entangledin a legal, political, and social imbroglio over theprospective exploration and production of its shaleresources.At stake are thousands of jobs, apotentially drastic cut in France’strade deficit, and much-neededsupport to an increasing number ofindustries suffering from the shalegas boom in the United States, fromthe petro-chemical side to watertreatment companies. As someEuropean countries move aheadwith their research projects in thisfield, French politicians faced strongopposition in the winter and springof 2011, which resulted in a lawbanning hydraulic fracturing over thatsummer.Environmentalist and European MPJosé Bové, famous for his mediaattention-grabbing stunts with alocal French McDonalds in the late1990’s, took up the cause againstshale gas in December of 2010 whenhe learned that French oil companyTotal could soon be fracking near hisbeloved farm, in the Larzac region.Ensued six months of bitter andintense lobbying by his legions offollowers, who marched thousand-strong to small towns all overFrance, began Twitter and Facebookcampaigns against big oil and gasGéraldine
  19. 19. 19companies, stormed offices withcameras ready, and popularized theUS-made documentary, Gasland.Environmental militants used thenow infamous scene with a lighterand a faucet on fire from the movie torally populations around their cause.With no factual information on hand,the militants launched a campaignbased on outrageous lies andconspiracy-spurned theories, leadingthe national media to write aboutbirds falling from the sky because ofhydraulic fracturing. Local MP’s weresoon faced with a growing numberof constituents who clamoredfor information and a stop to thispotentially disastrous technique,during a tense senatorial campaign.In the early spring of 2011, all eyeswere on the National Assembly, thenled by the majority party UMP. Afterseveral law proposals, bickeringamongst MP’s, growing concernsfrom the population and no efficientcommunication on the part of oiland gas companies concerned, the“Jacob Law” was promulgated inJuly of 2011, effectively banning thetechnique of hydraulic fracturing. Acaveat was however written in thelaw, which allowed for a nationalcommission to be created andpotentially experiment techniquesand alternatives.Two years later, the industry isstill facing a tremendous amountof skepticism and oppositionby local populations to severalexploration projects granted bythe government. The result is thateven conventional permits arenow being blocked.Despite anincreased communications flowfrom such companies, and attemptsat transparency and dialogue, thelack of factual information initiallyprovided has resulted in growingfears and a complete distrust. Goneare the days when one could exploreand produce in complete anonymity,and with no interest from mayorsand residents. Social acceptabilityhas become the key to a successfulexploration and productioncampaign, whether it is conventionalor not. The “NIMBY” effect hasspread throughout France, and localpopulations demand information,demand to meet the people behindsuch projects, and demand thatsuch companies be trustworthy andhonest.The lessons learned are proving hardto put in place. While the industryhas understood the importance ofsocial acceptability, going back onfifty years of total independence andminimal communication towardsthe populations concerned is notan easy transition to make. Effortshave been made to open doors,create a dialogue and inform moreeffectively, but the right argumentsand key messages are not alwaysproving to be as impactful as onecould have hoped. The job creationand added revenues for localcommunities, despite the positiveimpact it could have created, hasnot been received all that wellby some, and was discredited byothers. Environmentalists claimthat no energy independency willcome despite a potential massiveproduction, but that environmentaldamage is a certainty. And whilesome efforts were praised, for themost part, local populations havenot budged on their position, partlyleading the government to remainstand-still on the issue, while at thesame time being pressured by theGreen party, ahead of municipalelections next year.As gas prices soar, unemploymenthit an all-time high in France andcompanies invest abroad, the banon hydraulic fracturing remains inplace. With a national debate onenergy transition currently occurringin France, and a new mining codebeing drafted, everyone looks to thefuture and its neighboring countriesto envision what tomorrow may looklike. While it appears that the industryis not nationally or internationallycoordinated, the opposition is cross-border and well-organised. Thedebate has been influenced by whatwe hear from other countries, as wemove towards a new French energymix. Will it include shale gas? Willit be comprised of coal, nuclear, orsolar panels and windmills? Willthere be a consultation processfor the attribution of explorationpermits? Will the nationalcommission for the experimentationof hydraulic fracturing be named? Acertainty is that social acceptabilitywill now weigh heavily when the timecomes for the government to takeanother closer look at the shale gasquestion. The only way forward is togain the trust, and approval, of thosedirectly concerned by such projects.Despite an increasedcommunications flow fromsuch companies, and attemptsat transparency and dialogue,the lack of factual informationinitially provided has resulted ingrowing fears and a completedistrust.
  20. 20. Polandbreaksthe“shalelock”The Polish experience has not beenany different. Until now that is.Develop your own shaleIt’s already been five years sinceshale fever started to take hold inPoland. So far, there have been 109exploration concessions grantedand 44 wells drilled. Poland’s shalegas reserves may well be amongthe largest in Europe (dependingon the methodology, their volumeis estimated to be between 0.34and 5.3 billion cubic metres)1.Nevertheless, until at least 100Marcin Obersztynmarcin.obersztyn@publicrelations.pl20While the US shale gas revolution is in the makingand has already transformed the American energysector, such a reality in Europe has been constantlyconstrained by expanding European Union law,bureaucracy, domestic regulatory environments,public consultations and competition among differentenergy sectors such as the nuclear and renewableindustries.1Polish Geological Institute estimated Poland’s shale gas reserves between 0,34 and 0,76 billion cubic meters. EIA Energy Information Agencyestimated Poland’s shale gas reserves at 5,3 billion cubic meters.
  21. 21. 21wells are drilled these estimates areexactly that, estimates; it remainshard to predict when the industrywill finally take off. On top of that, arecent study shows that the Americantechnology behind extracting shalegas cannot be directly replicated inPoland. Shale deposits are non-homogeneous in Poland and theirparameters differ from the Americandeposits in terms of permeability.Poland has to learn how to developand extract its own shale gas.Obstacles pile upWhen domestic law was shown to beincapable of effectively regulatingthis new industry, it seemed thatyet another problem was standingin the way of realising the Polishshale dream. Currently, accordingto the calculation of the Ministry ofFinance the total tax or royalty onthe extraction of hydrocarbons inPoland is 21%, unacceptably lowin comparison to Norway (72%) orthe UK (62%). The expectation thatthis will rise and the consequentuncertainty for internationalcorporates looking to invest in Polishshale is another issue.Unsettled taxation issues and anunclear regulatory environment hasled to the withdrawal of several majorshale gas operators from Polandand is considered to be among thereasons why international companiesare not eager to start work in Poland,despite having been granted thelargest number of concessions. Thissituation seriously jeopardises thePolish shale revolution because ofthe huge costs associated with thedrilling of shale gas wells, which is farbeyond the financial means of Polishcompanies.Communications issues undercontrolIn a series of public consultationsconducted by the EuropeanCommission from March 2012onwards, with the aim of discoveringmore about attitudes towards thedevelopment of unconventionalfossil fuels such as shale gas, almost50% of the 23,600 surveys weresubmitted by Polish citizens2. Thisfact alone shows how high Polishhopes for shale gas are.Furthermore, the EuropeanCommission’s report entitled“European Attitudes towards AirQuality” (published in January 2013),indicates that out of all EU membercountries Poland is the most infavour of shale gas. According to theresearch, less than 46% of Poleswould feel anxious if shale gas wasextracted in their vicinity (comparedto 74% of EU citizens in general).Moreover, half of Polish citizens(49%) do not believe that any threatsare posed by the exploitation ofhydrocarbons.These figures correspond nicelywith the results of another publicopinion research poll conductedby the institute for public opinionPolandbreaksthe“shalelock”Breaking the “shalelock”Reflecting the political will,combined with the efforts tomitigate the environmentalimpact and comprehensivecommunications - factorsconsidered to be crucial indefining the success of anyshale project in Poland - therehave been recent signs of thedeadlock breaking.2European Commission will publish the official results at the turn of July and August 2013 –
  22. 22. 22research, CBOS. According to CBOS,the support for shale gas in Polishsociety has increased along withthe decreasing levels of supportfor nuclear energy. In March 2013,47% of Poles were in favour ofthe development of the shale gasindustry, compared to 43% in August2011 . Furthermore, over half of therespondents (52%) were againstbuilding nuclear power plants inPoland.As for the attitudes of localgovernment towards investing inshale gas, a poll conducted by theresearch company KB Pretendent inNovember 2012 indicated that 44%of members are in favour of shaledevelopment in their communities.Only 6% are against and 26% do nothave a preference.It also seems that NIMBY (Not inmy back yard) syndrome does notapply to Poland. Evidence of thiscan be found in research conductedin January 2013 by PBS Sopotfor PGNiG (a Polish state ownedcompany holding a license to drillfor shale gas in Poland), whichrevealed that 75% of citizens inPomerania, where most of wellshave been drilled, are in support ofsearching and extracting shale gas.Moreover, 97% of local governmentrepresentatives are also in favorof hydrocarbons. However, 40%of citizens fear the effects on theenvironment, with 21% of localgovernment representatives feelingthe same way.Breaking the “shalelock”Reflecting the political will,combined with the efforts to mitigatethe environmental impact andcomprehensive communications -factors considered to be crucial indefining the success of any shaleproject in Poland - there havebeen recent signs of the deadlockbreaking.The Prime Minister’s interventionThe topic of shale gas has recentlybeen brought back to the public’sattention as numerous shale gasproducers decided to withdraw fromPoland and move to more promisingand investment friendly markets. ThePrime Minister (PM), Donald Tuskpublically intervened, setting shaledevelopment as a high priority. TheMinister of the Environment, MarcinKorolec, was reprimanded by thePM, who demanded the acceleratedintroduction of hydrocarbonextraction legislation.Mr. Tusk also stated that the requiredlegislation would be passed by theend of the current year and stressedthat there was an urgent need for acompromise between ecology andbusiness in order to create a solutionwhich might potentially attract shalegas investors.Consequently, the Minister of Finance– Jacek Rostowski announced thatshale gas extraction taxation wouldbe effective from 2020.Subsequently, Polish scientists atthe Military University of Technologyhave been working on a new methodof fracking, which uses carbondioxide instead of water to pushgas up from shale reservoirs. Thenew technology may reduce theenvironmental consequences ofwater based hydraulic fracturing byeliminating the use of water but alsoprovide a storage solution for CO2thus mitigating the effects of climatechange.Polandbreaksthe“shalelock”3The report can be viewed here - report by CBOS “Extract? Poles on shale gas” from September 2012 can be found here -
  23. 23. 23Poles’ attitudes towards shale arenot to be taken for grantedAlthough public opinion in the pasthas shown that Polish citizens andthe local government representativesare rather positive about shale gas,this is not to be taken for granted.There is still a lot of work to be donein terms of managing environmentalissues brought on by hydraulicfracturing. In addition to this, thelack of clear priorities set by thegovernment regarding supportingenergy sources (e.g. nuclear energy,shale gas, renewables), inadequatedomestic tax regulations and thenew EU environmental regulationsregarding the future exploitationof hydrocarbons all present realchallenges for the future.A lot of work needs to be done inorder to educate the general publicand to win their acceptance. There isa need for all issues to be effectivelycommunicated and questions mustbe adequately answered.The government and shale gasoperators should look to utilisethe experience and best practiceof others in the energy sector thathave been affected by similar issues,such as the nuclear or wind energycompanies in Poland. Whether it’sa question of dealing with the socialfears of hydraulic fracturing, heavytrucking and water contamination, orthe influence of wind turbines on thelandscape and the bat population;the solutions are similar. Operatorsshould act with patience and realisethat objectors, even if sometimeslacking the technical informationabout shale gas operations, may beacting out of a genuine concern.There are as many argumentsdefending for shale gas as thereare for defending renewableenergy investments (additionalincome for local communities, newjobs, percentage increase GDP,CO2 reduction, increased energysecurity, decrease in gas price andstrengthening a negotiating positionwith the current suppliers). There arenegative cases that set a precedent,such as public consultations aroundnuclear energy. But similarly thereare positive experiences to learnfrom, such as past experiences withwind energy. These present greatcase studies of what cooperation withlocal governments and communitiesought to look like.Finally, there are plenty of facts andfigures at hand to deconstruct all themyths about shale gas, which need tobe examined in a balanced fashion bythe media.It seems that the Polish shalerevolution may be turning a corner.However, the technical, regulatoryand communications issues ofprospective shale projects will notsolve themselves. They need to beurgently addressed in order to putthe Polish shale dream firmly backon track.
  24. 24. MSLGROUP is one of the world’s top four PR and events networks,employing more than 3,400 people in 22 countries around the world.MSLGROUP is now Europe’s largest PR network and was the mostawarded agency at the 2012 EMEA SABRE Awards and won EMEACorporate Consultancy of the Year at the 2013 SABRES.We are Publicis Groupe’s speciality communications and engagementgroup, advisors in all aspects of communication strategy: fromcorporate PR to employee communications, from public affairs toreputation management and from crisis communications to eventmanagement.We work for a quarter of the top-100 most valuable brands globally.Specialist expertiseMSLGROUP’s EMEA Energy Practice is a leader in advising companiesfrom Europe and around the world on communications issues in theenergy sector. Across 15 countries and offices, our European networksupports clients that range from large publicly listed Fortune 500organisations, to small, privately held companies. We currently advise athird of the energy companies in the Eurotop 100.We offer in-depth sector understandingMSLGROUPCanmaketheDifference24Anders KempeRegional president MSLGROUP EMEAChairman JKL Groupanders.kempe@jklgroup.comNick BastinHead of MSLGROUP EMEA Energy Practice, UKnick.bastin@capitalmsl.comPer Ola BossonSwedenper.ola.bosson@jklgroup.comAlessandro ChiarmassoItalyalessandro.chiarmasso@mslgroup.comLiam ClarkUKliam.clark@capitalmsl.comSeth GoldschlagerFranceseth.goldschlager@consultants.publicis.frOurTeamFrom well head To wall socketFrom nuclear To renewableFrom crisis To talent
  25. 25. 25OurTeamHolistic communications solutionsWith both breadth and depth of energy communications expertise inEurope’s key markets, we share the belief that effective, best practicecommunications can deliver value to stakeholders across the energyvalue chain.We also understand the key communications issues that keep energycompanies awake at night:If you want to find out more about the work we do, or enquire as to howwe might be able to help, don’t hesitate to contact a team member inyour market – or contact Nick Bastin at nick.bastin@capitalmsl.comCreativity CorporateBrandDigital/Social mediaTalentPublic affairsand regulatoryrelationsInvestorrelationsM&A, IPO,restructuringCrisisWe look at the biggerpicture in the context ofenergy market issues• We help energyorganisations to findbetter ways ofcommunicatingcomplex messages tomultiple stakeholdersoften across multiplemarkets• We deliver creativesolutions that drivegreater engagementwith key audiencesFlorian WastlGermanyflorian.wastl@mslgroup.comPeter SteereBrussels/ Swedenpeter.steere@jklgroup.sePawel TomczukPolandptomczuk@publicrelations.plErik MartensNetherlandserik.martens@msl.nlLeonardo SforzaBrusselsleonardo.sforza@mslgroup.comHelmut
  27. 27. To find out more aboutMSLGROUP’s services,please contactNick Bastin +44 (0) 20 7255 5117