Germany's fracking moratorium could damage energy industry
The chairman of company Wintershall spoke at a conference to warn of the actions
Germany's hydraulic fracturing (fracking) moratorium could damage the country’s industrial base – and place its energy security in jeopardy, Rainer Seele, the chairman of oil and gas company Wintershall claimed.
At the company’s annual conference, held in Kassel, Seele that Germany’s reluctance to embrace shale gas because of environmental fears over fracking was causing domestic gas production to plummet. “Why are we so naive to have these (shale gas) riches and not even look at them? Conventional production will continue to decline. Look at England for example,” Seele said. “It (shale) could make a potential contribution to security of supply in our country (Germany). We must look at it. But we need certainty about whether to spend money on it and to be sure Germany and Europe want to have this.”
While Germany has not technically banned fracking, the granting of permits has been put on hold since a 2012 Federal Environment Agency study was released assessing the environmental impact of shale gas development. The study recommended shale gas exploration shouldn’t be allowed in drinking water protection areas. It didn’t call for an outright ban, but said the process should only be allowed with strict regulation in place and should be accompanied by intensive administrative and scientific supervision.
Although companies are allowed to file requests to carrying out fracking, the bureaucratic stalemate has created a de facto moratorium.
A recent study by IHS consultancy said Germany should use its shale gas resources to both boost its economy and cut carbon emissions. The US Energy Information Administration estimates Germany's Lower Saxony basin could hold 2.26 trillion cubic metres (cm) of shale gas-in-place, with around 480 billion cm of that believed to be recoverable.
Germany’s Federal Institute for Geosciences and Natural Resources is even more bullish, estimating that the basin hosts between 700bn and 2.3 trillion cm of recoverable shale gas. This dwarfs the country’s conventional gas reserves of 100bn cm. In 2002 Germany’s gas reserves stood at 200bn cm, Cedigaz data show.
Germany’s domestic gas production currently covers around 12 % of its demand but its conventional resources and production are falling. Domestic gas production in Germany has plummeted in the past decade. In 2012, Germany produced 9bn cm of gas, down from almost 18bn cm in 2003.
IHS added that the country's shale gas resource could support domestic natural gas production through the 2030s, providing more than 35% of current German gas consumption. The consultancy estimates Germany could produce more than 20bn cm of shale gas per year by 2030, with production reaching more than 25bn cm/y by the middle of the next decade.
Wintershall is carrying out shale-gas exploration in North Rhine Westphalia. The firm is actively working across a 3,900 square km area which stretches from the German-Dutch border in the west to the Sauerland region in the east. Over the next three years, the company wants to determine how much gas lies in the acreage. However, without being able to frack, the available data Wintershall can gather is limited.
Seele said that Germany’s fracking ban, which was designed to protect against shale gas exploration, has also been damaging the country’s tight-gas industry. “What preys on my mind is the blanket rejection of a technology which has been used for many years. Tight gas is not the same as shale gas and not all fracking is the same,” he said.
Germany has been using fracking techniques to produce tight gas since the 1950s. Indeed, Wintershall has fracked across its tight gas fields in Lower Saxony for more than 30 years.
The company is also exploring for tight gas near Barnstorf in Diepholz, northern Germany. Wintershall applied to the State Authority for Mining, Energy and Geology (LBEG) in Meppen for a permit to carry out fracking and flow testing in July 2012. It is still awaiting approval.
Seele said the fracking ban has caused Germany’s tight gas production, in places such as Lower Saxony, to tumble and applications for new exploration have fallen for the past three years because of the political uncertainty. He added that the industry must have clarity from the government on the regulatory climate or risk “wasting our home advantage”.
Dr Joachim Pfeiffer, an economic and energy policy spokesperson for the German parliament, said that it was fierce public opposition to fracking which was to blame for the lack of progress, rather than government bureaucracy. “For me it’s a chance to use this potential but we have a very large movement in Germany against it. Our present law allows fracking but it’s not used,” Pfeiffer said. “There are many people who want to change the law to make it impossible. I personally think it’s a chance (to boost energy security) but nobody knows how much (shale gas) we’ve got in Germany.”
Germany has been pursuing an ambitious energy strategy to shift the country’s mix away from fossil fuels and nuclear power towards renewable energy. Chancellor Angela Merkel wants renewable energy to make up 35% of Germany’s energy mix by 2020, up from 23% in 2012. The government plans for this to rise to 80% by 2050.
The result has been that German electricity prices have risen by 60% since 2007 as the country has sought to boost its renewable energy capacity. German consumers support renewable energy by paying a surcharge as part of their electricity bills, of €0.053 ($0.073) per kilowatt hour (kWh). The government expects that will rise by 20% this year to around €0.064/ kWh. Germany's environment minister Peter Altmaier said the scheme could cost €1 trillion by 2039.
When asked by Petroleum Economist if the government thought this was economically sustainable for German taxpayers, Pfeiffer said the government was giving the people what they wanted. “People wanted to have it (renewables) and now they’ve got it. Higher (electricity) prices were foreseeable,” Pfeiffer said. “Everybody is talking about even higher (renewable) goals. The public think (the renewable energy transition) is not fast enough, that we should do it quicker but economically that’s not possible.”
Pfeiffer added that the bigger problem was high electricity prices for German industry because it was damaging competitiveness and might force businesses based in Germany to relocate abroad.
Wintershall is hoping to develop Argentina’s shale and tight gas potential. The company has interests in in the San Roque, Aguada Pichana, Bandurria and Aguada Federal blocks in the Neuquén basin. It is also exploring for tight gas, shale gas and shale oil across two blocks in Mendoza.
The Argentine government has eased domestic gas price controls to make shale investments more attractive. It has also said that companies that invest more than $1bn over a five-year period would be exempt from some of the country's strict foreign-exchange rules and would be allowed to sell 20% of their production abroad at international prices. “Conditions in Argentina have improved and we will make the most of it. Financially it's becoming more attractive,” Seele said. “There's nowhere else in the world (outside North America) which even comes close to this.”