Serious about European competitiveness? Go for shale gas

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Across the Atlantic, a shale gas revolution is sweeping the United States, helping re-vitalise the economy, while Europeans are held back by environmental concerns. Such concerns are not to be taken lightly but each can be addressed, writes Hubert Mandery.

Hubert Mandery is Director General at CEFIC, the European Chemical Industry Council.

Competitiveness now attracts as much attention here in Brussels as climate and environment policy. For the first time, the European Council will hold a summit devoted exclusively to industrial competitiveness, and rightly so.

The debate over shale gas will be a part of that. The European Commission is poised to release a framework for the extraction of unconventional gas locked in the region’s sub-strata. Getting the right answers on these issues is crucial to re-energizing a continent paralysed by feeble growth.

Across the Atlantic, a shale gas revolution is sweeping the United States, helping re-vitalise an economy where gross domestic product (GDP) expanded at an annualised rate of 2.8% in the third quarter and unemployment has eased to 7.3%. Pioneering exploitation of unconventional gas reserves has put the New World back on course for energy self-sufficiency, lowered the cost of energy and industrial feedstock, and unleashed $100 billion of investment in new chemical industry capacity, not to mention the billions worth of investment in other sectors.

Meantime the European economy is only now slowly emerging from recession. Eurostat predicts no growth in 2013 and an uptick of only 1.4% in 2014, whilst unemployment hovers at 11%. Chemicals are the start-point for a swathe of industrial value chains, from automotive to construction and cleaning products. Hampered by high energy and feedstock costs, there is a growing risk that to stay competitive, European producers will be obliged to invest where inputs are cheaper, or watch others gobble their markets, destroying European jobs.

Europe needs to give itself a chance to compete. Exploration of Europe’s undoubted shale gas potential has been hesitant, held back by environmental concerns, the reluctance of citizens to have drilling rigs for neighbours, and legal regimes that fail to reward landowners and communities for aiding the development of reserves.

Yet a newly-completed study by independent consultants for the International Association of Oil & Gas Producers suggests that extracting shale gas could add 1.1 million new jobs in Europe by 2050 and bolster GDP by up to €3.8 trillion. Shale gas could replace declining output from Europe’s conventional fields, reducing dependence on imports, improving security of supply and putting downward pressure on prices.

Sceptics argue that pumping chemical-laced water into bedrock to fracture it and release gas can pollute ground-water, trigger minor seismic shocks, and blight the lives of those who live near wells. Such concerns are not to be taken lightly.

But each can be addressed. At EU and national level, we have sound regulations already in place and best industry practices that build on decades of US experience. In reality, though much water is used, fracking 100 wells, as being talked about in the United Kingdom, would require a volume of water equal to just 0.03% of that used there annually. Seismic shocks can be contained by prudent operation. The volumes of chemicals used are tightly-controlled. And consents can require protection of aquifers and the wellbeing of neighbours.

The economic health of Europe and its citizens should not, as so often in the past, be sacrificed to fear. The commission’s shale gas framework must require high standards, but it must also be enabling.  

José Manuel Barroso, president of the commission, has promised recommendations on competitiveness to the European Council in February. For jobs and growth to be delivered, industrial competitiveness must be integrated within every policy initiative whether it concerns the environment, climate, energy or any other field. Renewing Europe’s industrial competitiveness, like everything in the political and business world, will take resolution and courage.

It is up to European leaders to take the lead and show they are serious about competitiveness. What they do with shale gas will show whether they are willing to walk – or merely talk.

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