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Published: Friday March 14, 2014 MYT 11:35:02 PM
Updated: Friday March 14, 2014 MYT 11:36:08 PM

Ukraine crisis sharpens focus on European shale gas

LONDON (Reuters) - Ukraine's crisis underscores the importance of Europe's drive for greater energy security and could buoy development of shale gas as the continent looks to cut back on Russian supplies.

As tensions between Moscow and Kiev spark concerns over a possible cut in Russian gas to Europe via Ukraine, European Union officials this week identified shale gas drilling as one of the "indigenous sources of energy" that can help reduce such imports.

Significantly, EU politicians left shale out of tougher rules on exposing the environmental impact of oil and conventional gas.

Poland also introduced an investor-friendly shale gas bill aimed at cutting red tape and regulatory hurdles.

"I expect that as a result of the Ukraine crisis, the EU is going to look much more seriously at ways of diversifying away from Russian energy sources," said John Lough, associate fellow at London think-tank Chatham House.

"Shale gas will be one of the options to be explored."

Britain and Poland have for years pressed for shale gas development to help lessen their dependence on imported fossil fuels.

Development there, and in countries such as France and Bulgaria, has faced opposition, however, from citizens and groups concerned about the potential environmental impact.

Supporters include energy-intensive industries who fear that cheaper energy available to U.S. companies from the shale gas boom there will render Europe's manufacturers uncompetitive.

"Given the absolute necessity for Europe to diversify its sources of supply of gas and to find solutions to the huge energy price differential with its main competitors, we see no alternative but to proceed as rapidly as possible with shale gas exploitation as part of the energy mix in Europe," said Gordon Moffat, director general of steel industry group Eurofer.

Such pleas could gain support as the argument shifts to one over energy security, as Brussels grapples with the fact the EU opposes Russia's seizure of Ukrainian territory yet remains dependent on Russian gas.

Should Russia's seizure of Crimea include a takeover offshore gasfields, Ukraine's best remaining sources of new energy will be its two large, untapped shale finds.

Ukraine has Europe's third-largest shale gas reserves at 42 trillion cubic feet (1.2 trillion cubic metres), according to the U.S. Energy Information Administration.

Kiev has signed a deal with Chevron to develop the Olesska block in western Ukraine and one with Royal Dutch Shell to develop its Yuzivska field in the east.

"Unrest in any part of the world related to oil and gas production and transport argues in favour of long-term diversity of supply," said the International Association of Oil and Gas Producers.

Thus far, Europe's hoped-for shale boom has struggled, with estimates of Poland's reserves slashed, public unease holding up British plans, and outright bans in France and Bulgaria.

(Reporting by Oleg Vukmanovic and Nina Chestney in London and Barbara Lewis in Brussels; editing by Jason Neely)

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