RCEM: Views on Energy News

Thanks to ESCP Europe's Research Centre for Energy Management's  wide network in the academic and business communities, our views on energy news give you comprehensive insight into energy issues. 

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Acceptance of shale development in Europe is increasing, but not at a pace to suggest that shale oil and gas will be part of Europe's near-term energy or economic solutions.

Over the past year there have been significant changes in the European shale development landscape. A 2012 study by ESCP Europe researchers identified social risks as those risks of greatest consequence for investors and companies seeking to explore or produce shale gas or oil in Europe.  That has not changed, but the level of uncertainty surrounding social risks in Europe is declining.  This is likely because of better public understanding of the issues; concerns over carbon emissions; frustration with rising energy costs; continued concerns over Europe's economic conditions, particularly when contrasted with what shale is doing for the US economy;  and fear of losing economic competitiveness.

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Shale development is a European economic imperative. Yet, only a handful of countries are seriously contemplating shale development at this time. The failure to act now in preparation for a post-2020 economy displays strategic short-sightedness and does not bode well for mid-and long-term EU economic well-being and competitiveness.    

In contrast, North America has embraced shale development. As a result, the price of natural gas in the US has declined to less than one-third the price of natural gas in Europe. This has been a boon to the US economy and helped US manufacturers achieve significant competitive advantages over Europe in some industry sectors - with the prospects of even greater advantages ahead. 

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Europe's shale gas landscape presents risks and opportunities over the next 10 years. As interest in developing a European shale industry expands, it is imperative that investment and partnering decisions are guided by an appreciation of risks that are of greatest consequence to the business strategy. Across industry sectors, to include the energy sector, these risks - strategic risks - are too frequently ignored and minimized. Closely related is the all too common practice of focusing risk management actions on near-term hazard, financial and operational risks to the detriment of enduring, broader discussions on longer-term risks and opportunities. Below we offer nine considerations for companies and the shale gas industry as a whole as they contemplate future investments in shale development in Europe.

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