Fracking in Europe Is only Profitable when Gas Prices Rise Clearly

Exploiting shale gas using the controversial "fracking" method has led to a strong decrease of gas prices in the United States. In the European Union (EU), however, fracking, i.e. the extraction of gas resources in rocks by injecting water and chemicals under high pressure, would not pay off given the current gas prices. Fracking would only pay off within the EU if gas prices increased significantly. This is a result of the ZEW Energiemarktbarometer (Energy Market Barometer), a semi-annual survey conducted by the Centre for European Economic Research (ZEW) among some 200 experts from the energy sector.

The current price for one megawatt hour (MWh) of conventionally extracted natural gas is about 27 euros at wholesale markets (in January 2013). About 30 per cent of the energy market experts surveyed by ZEW expect a break-even price for the extraction of unconventional gas resources in the EU of 40-50 euros per megawatt hour. 34 per cent of the survey participants even believe that the wholesale price for unconventional gases has to reach 50-60 euros or even more before shale gas, coal bed methane, and tight gas can be extracted on a large scale. Currently, conventional gas fields in Eastern Europe and in the Middle East are being exploited, where extraction costs are clearly smaller and the availability of freight transport facilities is improving. "Under these circumstances, the extraction of unconventional natural gas in the EU will not pay off in the foreseeable future", says Florens Flues, environmental economist at ZEW. "Moreover, it is difficult to estimate the costs for the environment and health resulting from unconventional gas extraction", adds Flues. "Experts who expect further regulations such as environmental impact assessments, expect on average higher costs for the extraction of unconventional gases. If and how these regulations will help to avoid environmental and health damages, however, remains an open question."

For further information please contact

Dr. Florens Flues, Phone +49 621/1235-218, E-mail flues@zew.de

ZEW Energy Market Barometer

The ZEW Energy Market Barometer (ZEW Energiemarktbarometer) is a semi-annual survey among some 200 experts from the areas of science and business (energy supply companies, energy trade companies, and energy service providers, as well as regional and green electricity providers). They are asked to give an assessment on the short- and medium-term trend on national and international energy markets. The complete results of the current survey (survey period November 2012) will be published in the ZEWnews 01/02 2013 (in German only).