• Natural Gas News

    The Geopolitics of Shale Gas in Europe: Interview with Dr. Aviezer Tucker



Dr. Aviezer Tucker, Assistant Director of the Energy Institute at the University of Texas at Austin, believes Russia is inflaming environmental fears of shale gas development in Europe Russia in order to maintain its virtual monopoly over the supply of gas to Eastern and Central Europe.


Posted in:

Natural Gas & LNG News, News By Country, Shale Gas , Top Stories

The Geopolitics of Shale Gas in Europe: Interview with Dr. Aviezer Tucker

Dr. Aviezer Tucker is Assistant Director of the Energy Institute at the University of Texas at Austin.  Dr. Tucker, who studies energy issues in Eastern and Central Europe, recently wrote an article in the Washingtom Times indicating that Russia was inflaming environmental fears of shale gas development in Europe in order to dominate energy markets.

Natural Gas Europe correspondent Yasmina Sahraoui recently had the opportunity to discuss  "New cold war over shale gas" with Dr. Tucker.

1. You recently wrote an article in the Washington Times (13/07/12) presenting shale gas as the "New Cold War". Why do you see unconventional gas developments in Europe that way?

The wording of the first paragraph also raises a question: does the «we» designate the US ? And if yes, what is their role in this “New Cold War” ?

Quote from the abovementioned article: “We lost Bulgaria. We are likely soon to lose the Czech Republic. We gained Ukraine. Poland has always stood with us. Germany hedges its bets. France definitely is not with us. The United Kingdom probably will side with us. The Baltic States would love to join us if they have the resources. A fierce battle rages over Romania.»

I see several parallels between the Cold War and the current struggle over shale gas in Europe:  There is obviously a conflict between the United States and Russia.  The United States is interested in promoting energy security and independence for the nations of Europe.  Russia wishes to maintain its virtual monopoly over the supply of gas to Eastern and Central Europe and the economic dependence it implies.  It also has an interest in maintaining a high price for gas in Europe in general since it is the largest single supplier.  This is not a hot war, there are no shootings and nobody dies.  Russia does not seem to attempt to stop shale gas explorations in the United States, and even if it did try, it would be hopeless.  The United States does not try to influence Russia’s energy policy, and even if it did try, it would be hopeless.  So this new Cold War, as the old one, is over countries in the middle, countries like Germany, the Czech Republic, and Bulgaria.  The conflict is not over which type of regime these countries have, but over how dependent they are on Russian energy supply.  The more dependent they are, the less able they will be to defy or challenge Russian interests.

Energy independence requires diversification of sources.  The most obviously safe and by definition independent energy source is domestic.  Here is where shale gas comes into play.  Almost all the countries in Europe have some shale gas that may be commercially exploitable, some more and some less.  We will know the quantities more precisely only once they start drilling.  The other issues are the pipelines and LNG.  Each side to this new Cold War wants its pipes to be independent of the control of the other.  LNG terminals may allow Europe to buy its gas from outside the old continent, from Qatar, the U.S., Israel, and so on.  But the politically best and probably cheapest source will be shale gas.

As during the old Cold War, the struggle is taking place country by country.  I pointed out that the new map of the two blocks is not identical to that of the old Cold War.  At nominally NATO country like Bulgaria sided with Russia and the Czech Republic may follow suit.  A Western country like France is also in that camp, at least for now.  By contrast, Poland is firmly in the energy independence camp as is Ukraine, which is neither a member of NATO, nor of the European Union. 

Another similarity is in methodology: The Russian/Gazprom methods for stirring and financing local environmentalist opposition to shale gas exploitation resemble their method for encouraging and supporting the anti-nuclear movements during the 1980ies.  They build broad coalitions that include members that are not directed from Moscow and finance the movements indirectly.

2. US energy giant Exxon halted its search for shale gas in Poland last June, with the spokesperson saying that there had been “no demonstrated sustained commercial hydrocarbon flow rates” and that the company had completed its exploration work in Poland. Thus, it seems that having shale gas deposit does not automatically equate with commercial profitability. If we add to this the genuine public concerns over the impact of hydraulic fracturing, the sensitivity of the European electorate to the “green argument”, and the fact that in the EU the mineral rights regime differs from that in the US, what future do you see for unconventional gas in Europe?

We need to distinguish what happens under the ground with what happens above it.  Under the ground the commercial viability of shale gas exploration in Europe will depend on the kind of crazy drillers like the Mitchell brothers in Texas, who are ready to take on themselves extreme risks for huge gains and adapt the technologies they work with as they go along.  Historically, large companies like industry majors and state companied like the Polish PGNiG, are better at exploiting known resources using established technologies than at exploring and inventing new technologies.  Smaller companies would also be able to avoid the kind of complicated geopolitical computations and pressures that large companies like Exxon have to engage in if they want to operate globally, including in Russia. So, in the long term, I am fairly optimistic that the combination of entrepreneurship and innovation will work its magic just like it did in the U.S.

Problems above ground, as usual, are more difficult to resolve.  But we need to note, and much of my own research is on this topic, that each European country, and sometimes each region, have different issues and different approaches to shale gas exploration.  The only all-European adverse factor, as you point out, is the regime of mineral rights, which reduces substantially the incentives for locals to participate in developing their mineral resources.  Otherwise, there are good regulations available that can guarantee that hydraulic fracturing is used safely and is not more risky than the exploration of conventional natural gas.

Other factors differ from country to country.  France, Poland, and Ukraine may potentially become energy exporters, a particularly strong incentive to develop the industry.  The countries of the former Soviet bloc are more dependent on Russian supplies than Western European countries like France.  This gives them greater interest in developing the industry to reduce that dependency.  Green movements are not equally developed if we compare for example Germany with Poland.

I would also not give up on getting out the message, explaining that shale gas is certainly more environmentally friendly than coal, safer than nuclear, and politically safer than oil.

Realistically, countries tend to act, when free, on their interests. Beyond the energy security and political independence aspects, there is simple economics. In the current economic mess that Europe is in, it could use anything that would reduce its need to import anything, reduce the cost of energy that is factored into the price of anything that is manufactured, and creates jobs, most of them well-paying.  It is a no-brainer.  I think that the French civil service bureaucracy in particular is very aware of this raison d’etat.  Its only problem is how to pass it past the public by stealth or by convincing it.  It is usually better at doing the first…

The most significant factor in my opinion will be local success. Once one country, say Poland, is successful at exploiting commercially shale gas, another, say France, will follow, and then everybody else will get in on the act.  Europeans are aware of course of the huge success of shale gas exploitation in the United States.  But the U.S. is too far and they do not quite compare themselves to it.  They need a closer to home model to imitate. 

3. If unconventional gas in the EU was to enjoy the same success as it does in the US, what would be the consequences from a geopolitical point of view, in particular for Russia?

 It would give Russia the greatest opportunity it has had in over a decade to become a modern democracy with the rule of law and a sustainably prosperous economy. 

A quarter of a century ago, low commodity prices participated in forcing Gorbachev to initiate the reforms that eventually brought about the disintegration of the Soviet Union.  Under Yeltsin, after an initial rush to reform, in the absence of the rule of law, the economic and social transition of the country stalled.  Then, when commodity prices touched bottom, the country defaulted on its loans, Yeltsin’s regime collapsed and Putin’s group came into power.  Then, the worst possible thing happened, partly because of the rise of China, commodity prices started climbing, thereby eliminating the incentive for Russian economic and social restructuring.  So, while other countries in the former Soviet bloc, like Poland and Estonia had to go through painful economic restructuring, but came out of it stronger and more democratic, Russia’s income from selling commodities isolated its elites from such pressures.  It provided Putin’s security services backed elite with unprecedented wealth, and left enough to provide the majority of the population with a social and economic minimum it grew to expect since Soviet times.  Russia never went through J-curved economic restructuring, shock therapy, and so on.  Much of the progress in terms of the growth of civil society, the independence of the media, and privatization that was made under Yeltsin has been reversed in what I called elsewhere, the “Putin Restoration.”

If the well spring that has been providing for this restoration dries up, Russia will be forced into some kinds of reforms.  Russian history proves that such reforms, as modernization under Peter the Great and industrialization under Stalin, do not have to take the Western course. Today, there is also an alternative model of a path to prosperity in China.  But I believe that the Russian people are tired of totalitarian experimentation and would much rather follow the path of Western Germany after the Second World War than the path of China.  Russia is already an industrialized country and is more modern than China in terms of urbanization.  I do not think they will be able to advance themselves economically, in the absence of high commodity prices, without democratization and most importantly the rule of law, and I think at least some people within the Russian elite understand this as well.  But as long as the cash keeps flowing effortlessly from selling energy, there is insufficient urgency to their pleas, and reason for political and economic reactionaries to change their ways.

Politically, without the power that it gains from its status as an energy superpower, Russia will be less able to project its power abroad.  This may well be good news to the subjects of regimes that depend on Russia, like the Syrian people, and to countries on the Russian rims that must contend day to day with its attempts to become involved in their internal affairs, like Georgia and the Baltic countries.

Before Stalin killed much of the Russian intelligencia, it made decisive contributions to world culture and science.  I look forward to the day when Russia returns to the forefront of European literature, music, art, mathematics, and science. It should project its cultural power, rather than its military and energy based power.

4. Over the past months, bans of hydraulic fracturing for exploratory drillings for shale gas were enacted in Europe (France, Bulgaria, potentially Czech Republic and Romania): when and why has the industry failed toearn its social license (Fatih Birol, IEA Chief Economist) for shale gas operation?

If unconventional gas is that promising for the people, why does it seem so difficult to gain public support? Will the recent IEA report “Golden Rules for a Golden Age of Gas” help?

I perceive here many of the problems that I see in corporate America and the universities that prepare the employees for the corporations in general (even though not all the companies that are involved in shale gas exploration are American).  We are facing terrible provincialism that holds that since everybody knows English and watches Hollywood movies these days, corporations do not need to know anything about the countries they wish to operate, not the languages nor the histories nor the society. Corporations send then executives without much European experience into a country they basically do not understand.  They then conduct business through intermediaries, fixers, shady people who know somebody in the power structure.  Then money changes hands much like it would be in authoritarian countries in the Middle East, and the corporations expect to start drilling and concentrate on technical problems under the ground.

Then, suddenly, out of the blue, the corporations make this startling discovery: They are operating in Europe and not the Middle East. Some of the politicians may be corrupt, but they still need to win largely fair democratic elections.  There is civil society and there is free media that does its job exposing corruption and criticizing government decisions.  All this time, working through the trusted intermediaries they ignored civil society, the media, and local politics.  In the meanwhile, Gazprom through its intermediaries, PR companies and so on, has been working on exactly these neglectedsectors. 

Had the corporations spent half a minute realizing where they were, they could have hired area experts who know the languages and the histories and some credible locals with patriotic credentials, not the shady intermediary types and try to explain to society and the media what and why they are doing what they are doing and what are the potential advantages to society and the politicians for whom people vote.

Compare these bungles with Gazprom’s efficiency in dealing with Germany for example.  Everybody from Putin down knows the German language, history, culture, politics and so on.  They hired Chancellor Schroeder to represent them.  Russia, as a former imperial power, is more experienced than corporate America in using local vassals to project its power.  When it comes to Eastern and Central Europe, it also had the former personal that used to rule these countries from Moscow or locally and it can use their skills to train others.  Still, corporate America could have found some area experts, historians, social scientists and so on, and could have hired some local former anti-Soviet dissidents for example to make their case for energy independence.

There is this false universalist mentality that the world can be run by MBAs and engineers who have universal models that can apply everywhere and so they do not need to know anything about local conditions and can ignore civil society.  This is nonsense that costs money. 

This anti-global semi-suicidal approach of the corporations is then projected back on the universities.  Since the corporation do not hire area specialists and the administrators measure the success of a program by how many students it attracts and how many of them graduate, they have been eliminating exactly the kind of language andarea studies programs that are most crucial for producing the kind of expertise that Gazprom uses to advance its interests.  It is possible in the United States to have a first degree in European history without knowing foreign languages.  This is just dumb.  Corporations and university administrators need to understand that languages and cultures are systems for keeping secrets and generating confidence.  If everybody else knows English and American culture and we do not know their languages and cultures, it means that they know our secrets, but we do not know theirs and we cannot win their trust; and please spare me the fixers, they are not going to make anybody trust anybody..

Unless and until the corporations change this provincial culture, the cause of energy independence will need to be advanced by local political and social movements and by diplomats who do know languages and study foreign cultures.  Academics like me cantry to help.  Here at the Energy Institute of the University of Texas in Austin, we try to communicate and instruct the latest results of scientific research about shale gas and hydraulic fracturing (and other forms of energy of course), advise about sound policy on the basis of good science.  I have been presenting some of this research in Bulgaria, Ukraine, the Czech Republic and Poland.  I can say that my audience (composed of politicians, civil servants, NGOs and academics) has been very receptive.  But then Europeans tend to be very polite in general….

5. Would you agree that Europe is better equiped than the US to ensure that shale gas is exctracted safely (quote from Polish MEP Boguslav Sonik (Euractive, 24/07/12)?

Yes, but not because it is Europe.  Any late adaptor of any technology can learn from the experience of the early adaptors and do things better.  In the case of hydraulic fracturing, they can demand that the companies post on the internet the chemical contents of the cocktails they send down, demand to measure the chemical composition of water tables before and after hydraulic fracturing, demand that the flow back water be stored in closed containers rather than in open pools on the surface, demand that the water is treated to a certain standard or otherwise disposed of underground in a certain safe way and so on.  Europeans can learn from the extensive American experience and introduce safe regulatory regime that would avoid much of the risk associated with this technique.

Read: New cold war over shale gas