An energy-cost squeeze might coax Europe back toward the supplier of natural gas from which it has been trying to turn away.
If Europeans want industry, investment, and employment, argues Paolo Scaroni, chief executive officer of Eni, they must choose between two options.
They can embrace hydraulic fracturing and allow assessment and development of shale resources, he told an audience at the Johns Hopkins University School of Advanced International Studies on Nov. 4. But densely populated Europe, he pointed out, understandably resists the "invasive activity."
The alternative? "Embrace Russia," Scaroni said.
That's difficult, too. European governments have craved non-Russian gas since a series of interruptions to wintertime deliveries began in 2009. Related to money owed Russia by transit-country Ukraine, the disruptions shattered European confidence in Russia as a supplier.
Absent whatever new supply might come from shale development, though, Russia might be Europe's best port in the proverbial storm.
Rising energy costs are making European industries uncompetitive with businesses in the US, where shale and other unconventional-resource plays are yielding cheap gas in growing abundance.
"European industry—already battered by low demand and rigid labor markets—now has to contend with natural gas which costs three times as much as in the US and electricity which is twice as much," Scaroni said.
Gas imports by members of the European Union are set to jump from 10.6 tcf/year now to 13.4 tcf/year by 2020, he said. To compete with their American counterparts, European industries need the supply to cost $3.50/Mcf.
"Importing more LNG, in particular from the US, isn't going to work," Scaroni said. The LNG price in Europe is at least twice that of gas in the US.
Russia, however, has "almost unlimited gas reserves" and can produce gas at less than $1/Mcf. "There is room to find an agreement," Scaroni said.
"Could Russia become Europe's Oklahoma?" he asked. "Not anytime soon. But with a hypercompetitive USA, the forces of gravity do seem to be pushing us together."
