FLORENCE (Italy): Former U.S. Assistant Secretary of Energy James Slutz said European shale gas may alter the geostrategic balance between Russia and Europe. Speaking in Florence, Italy, at a Technical Forum on Environmentally Friendly Drilling Systems, Slutz noted that shale gas presents Europe with new opportunities to develop significant gas reserves. Shale gas has been exploited successfully in the United States for several years, Slutz noted, and Europe may soon follow suit.

Mr. Slutz is the Director of International Oil and Gas Ventures for CAPPA Fund III, a Washington, DC-based group that purchased the rights to 34% of the shares of Transpetrol, the Slovak operating company for the Druzhba pipeline. Slutz is the Principal of Global Energy Strategies, an international energy consulting group.

Shale gas deposits exist throughout Western and Central Europe, with large potentially recoverable reserves in Poland, Germany, Hungary, Romania, and neighboring countries. Initial exploration is already under way in Poland, Sweden and Germany, but additional exploration is needed to determine the extent of the reserves. Conservative estimates place the potential at around 500 trillion cubic feet, or roughly 5% of existing global supply.

Poland is the most promising country because of its large reserves, with several oil majors and super-majors already initiating exploratory drilling, but government regulation and licensing is a key factor in any decision to make a direct investment in a foreign country. "The fact is, almost every country in that region has shale gas deposits, and those who develop it will be those that provide a transparent and predictable environment for investors in a long term, high risk, capital-intensive industry," said Slutz.

Slutz highlighted the geopolitical implications of developing a new source of natural gas in Europe. "Recent years have witnessed Russian dominance of natural gas pipelines, and the associated energy security concerns in Europe. What is the European commitment to energy security? How quickly will shale gas resources be developed? Shale gas has dramatically changed North America from an expected large gas importer to potentially a gas exporter – in under a decade. Many Russian experts see shale gas as a threat to their market share and their resulting political influence in Europe."