ExxomMobil has already set the pace for this exciting trend in shale gas

Implications: David Jolly in Paris reported in the August 23-24 issue of the International Herald Tribune that Europe, seeing American exploitation of shale gas, has now begun a similar search. The first chore is to determine how much gas could be available. Many of the same type of North American shale formations exist across Europe. Scientists of the GFZ Research Center are undertaking a six year study to map these resources. Possible commercial production will be based on data for the Barnett shale in Texas. First on the list are deposits in Sweden, the Netherlands and Germany. However known shale deposits exist in Poland, France and elsewhere. European Union officials, nervous about increasing dependency on Gazprom, welcome the effort. Private companies, fearing land speculation, are reticent about discussing their exploration activity. But OMV (Austria) has already announced tests in the Vienna basin, an oil production area since the 1930s. Royal Dutch Shell has licenses in Sweden.

Analysis:  Last April ExxonMobil announced agreements with Falcon Oil and Gas and MOL Hungarian Oil and Gas for exploration in the Mako Trough in southeast Hungary. The projects are aimed at production of unconventional oil and gas. Later, the company announced it was setting up a geological section to look for opportunity across Europe. ExxonMobil is the largest natural gas producer in Europe. It can review exploration records for all of its lease holdings across the continent. Another important producer in the region is Ascent Resources of London which announced this month that it was increasing natural gas production from the Penezlek region in eastern Hungary. The potential is huge. All of the European majors including Shell, BP and Total have large concessions held by production. Other important companies include E.ON, the Wintershall unit of chemical giant BASF. This activity will not be invisible to Gazprom. It is likely that they too, will begin similar regional mapping studies because Russia no doubt has ten times the shale gas resources of Europe. Significant developments in the unconventional oil and gas sector of the business has the potential to completely change the economic landscape for hydrocarbon production and consumption not only in Europe but in the major liquefied natural gas producing nations such as Algeria, Qatar and soon, Iran. In the U.S., production from the Barnett, the Woodford and more recently the Haynesville shales, has already retarded LNG imports. The promise of the Marcellus in Appalachia threatens LNG even further. The international oil and gas industry has an amazing capability of going after natural resources quickly and efficiently. This is a trend to watch carefully. Worldwide natural gas prices could be affected more quickly than anyone thinks possible.