Spain has silently joined the UK, Poland and Lithuania in its hopes of exploring its shale gas reserves. And those hopes seem not only well-founded but are also based on a real need for national energy sources. Spain is near the top of the list of largest energy consumers and yet its production of hydrocarbons is so low, it’s almost irrelevant to the needs.
According to the U.S. Energy Information Administration website up until the 2008 recession, Spain was phasing out its coal production subsidies. In 2011 coal production and consumption increased after the Spanish government introduced domestic coal production subsidies trying to reduce the country’s dependence on imported coal.
Roberto Martínez, Deputy Director of Research on Geological Resources at the Geological and Mining Institute of Spain’s view of the extremely low production of liquid fuels and natural gas is that: Conventional hydrocarbon exploration carried out during the second half of the 20th Century had a very low degree of success, discovering only small oil and gas fields on shore and a few medium size fields in the near offshore which have already been almost depleted. Hydrocarbon reserves are now almost negligible.
According to EIA the domestic coal production subsidies caused electricity producers to substitute away from renewables to coal. In 2012, fossil fuels accounted for 49 per cent of Spain’s electricity generation. It’s no surprise that the government has voiced its support for shale gas development, while, in the past few years, the number of permits has gone up by 80 per cent. According to Roberto Martínez there are currently 70 exploration permits active, 75 are expecting administrative acceptance and 23 exploitation permits are active.
He commented: Several international and national companies have expressed interest in developing exploration in Spain. In some cases, exploration objectives are related to very deep potential resources, deep offshore resources or unknown geological settings. In other cases, permit requests are linked to potential unconventional resources. There is still a high level of uncertainty regarding how these projects will carry on and if new exploration could be really successful. At this point, it can only be assured that there are a few companies willing to invest in oil and gas exploration in Spain and that is already a change regarding the last decades.
The hopeful attitude of the government and the operators seems supported by the Gessal study. This was a 2013 preliminary evaluation of prospective conventional and unconventional hydrocarbons, which found the potential of natural gas to be 2.5bn cubic metres, almost all of it (80 per cent) from shale rock.
There have been no new evaluations since then, but according to Mr Martínez the Gessal study is well funded and can be acceptable assuming a high level of uncertainty. However, he also commented on the ACIEP report (Asociación Española de Compañías de Investigación, Exploración, Producción de Hidrocarburos y Almacenamiento Subterráneo) based on the estimates outlined by Gessal, which claimed that the exploitation of natural gas could allow Spain to become completely independent of gas imports by 2030 and an exporter of natural gas until 2050. Mr Martínez said that the ACIEP report assumes Gessal numbers as reserves, not as prospective resources, being, in my point of view quite optimistic.
The new addition to the energy mix
Apart from coal usage and gas imports, there are also eight operating nuclear reactors in Spain and, until recently, the government was investing in renewables. In 2014 27.4 per cent of Spain’s electricity was generated from wind and solar power.
However, the government has made some cuts in subsidies. According to Mr Martínez there are several complex reasons for that fact. (…) but probably the main issue was that tax incentives were so attractive that the learning curve for these technologies had so many actors and was very costly.
When asked if the government simply chose shale over renewables he said: Now it is not possible to sustain the same incentives for mature technologies and available resources for new technological developments are lower than expected. In my opinion, it is not a matter of shale gas vs renewables.
There have been protest in Ibiza with regards to exploration. The island is considered too beautiful to allow operators access to it. At the moment, according to Mr Martínez, everyone is awaiting an administrative decision regarding seismic exploration in the area but there is strong local opposition.
In addition, Paulino Rivero, former president of the Canary Islands regional government, planned to hold a referendum on the issue. The referendum question was going to be: “Do you think the Canary Islands should modify their touristic and environmental model in exchange of oil and gas exploration?”
However, The Central Government asked the Constitutional Court to evaluate if this referendum would be out of the regional government competences and Mr. Rivero decided to retire his proposal. Moreover, as Repsol decided to abandon the exploration, this referendum will likely never take place.
According to Mr Martínez With the available knowledge, the Basque – Cantabrian Chain is the area with higher prospective resources, although there are other areas that may have unknown resources. However, more research is needed especially drilling, to solve main uncertainties and have a much more defined opinion on the existence of resources and in the viability of their exploitation. But we cannot expect actual production of shale gas in Spain before 2019.
It is also worth mentioning that the Hydrocarbon Law has been amended in the Parliament in order to establish economic revenues for owners and local authorities in order to promote activity but all aspects of the energy situation in Spain will be discussed by Mr Martínez during the European-focus conference at the THIRD EUROPEAN SHALE GAS AND OIL SUMMIT in Manchester in October.
This is a guest post prepared by Charles Maxwell Events.
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