More U.S. coal going to Europe for power generation

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Latest Oil and Gas News: 
December 10, 2012

(Dow Jones Newswires; Dec. 5) - Low U.S. natural gas prices and weak prices for carbon permits in Europe are pushing more polluting coal into Europe where it is being burned to make electricity, Shell's Upstream International Director Andy Brown said Dec. 5. The shift in energy flows comes as Europe is trying to reduce its greenhouse gas emissions to meet targets and highlights how North America's shale gas boom has rewritten the global energy map, sometimes to the detriment of regional energy policy.

Before the shale gas boom, the U.S. power sector predominantly burned coal, which produces roughly twice as much emission as gas, to generate electricity. But a surge in unconventional oil and gas production has forced down U.S. gas prices, stimulating demand for gas across many sectors. Ironically, as natural gas demand in the U.S. power sector has increased due to the low prices, demand for coal has strengthened in Europe, where it is cheaper than gas, which is mostly priced against oil.

Since the start of this decade, U.S. coal exports to Europe have increased five-fold. This has resulted in a reduction of about 800 billion cubic feet of gas burned in the European power sector this year, Brown said at Shell's natural gas strategy briefing. Weak prices for European carbon permits is another factor making coal a more attractive fuel to burn than the higher priced, but less polluting, gas in Europe, Brown said.

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