Europe Shale Can Ease Need for Russia Gas, Minister Says

Technology could unlock shale resources in Europe and help wean the continent off Russian natural gas, U.K. Energy Minister Michael Fallon said after Group of Seven nations recommitted to energy diversification.

“There is a lot more underneath us than we thought,” Fallon said today during an interview at Bloomberg’s Houston bureau. “We do believe technology will come to our rescue.”

The G-7 agreed in Rome to find new sources of energy to prevent Russia from using its oil and gas reserves as “a political weapon,” German Economy and Energy Minister Sigmar Gabriel said. The countries plan to expand their natural gas infrastructure, improve efficiency and use more renewable power.

Fallon, who was in Houston for the annual Offshore Technology Conference, said the G7’s statement today in Rome isn’t new policy but a restatement of long-term commitments that remain unfulfilled. If the U.K. doesn’t change energy sources, he said, it will import 70 percent of its gas by 2030 because of declining production in the southern North Sea.

The European Union’s reliance on Russian oil and gas has hampered the global response to escalating violence in Ukraine and the worst standoff with Russia since the Cold War. Russia under President Vladimir Putin provides about a third of the EU’s oil and gas needs, mainly via state-controlled OAO Gazprom and OAO Rosneft through pipelines that cross Ukraine.

“Security of supply is obviously important,” Fallon said. “Ukraine really is a wake-up call for Europe.”

Extracting Gas

Fallon said in Houston that while engineers in the U.K. don’t know yet whether shale gas there can be extracted as easily as it has been in the U.S., it would be “irresponsible” not to try.

Europe faces big challenges in the short term in breaking its dependence on Russian gas, said Sarah Emerson, managing principal of ESAI Energy Inc. in Wakefield, Massachusetts. Among the hurdles are a shortage of liquefied natural gas and a weakness of infrastructure.

“The G-7 is really grasping at straws,” Emerson said in a telephone interview. “This is a form of saber rattling.”

Russia would take the G-7 stance more seriously if the U.S. issued a more assertive statement promising greater exports of LNG and the swift approval of the Keystone XL pipeline, said Edward P. Djerejian, a former U.S. ambassador to Israel and Syria who is founding director of Rice University’s Baker Institute for Public Policy in Houston. The pipeline would move crude to the U.S. Gulf Coast refineries from Canada’s oil sands.

“That would be an extremely important strategic message to Moscow,” Djerejian said in a telephone interview. “It would not have an immediate impact on the supply to Western Europe. But in the longer term, Moscow would have to consider its long-term national security and energy interests.”

To contact the reporter on this story: Harry R. Weber in Houston at hweber14@bloomberg.net

To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net Richard Stubbe, Margot Habiby

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