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CEOs criticise European laws on hydraulic fracking

The controversial technology was slammed in Paris at the World Gas Conference

The controversial drilling technology, that boosted US oil and gas production and transformed global energy markets in the process, is making waves again.

Chief executives from two of the world’s largest oil companies slammed European laws restricting hydraulic fracking as the global gas industry gathered in Paris for the World Gas Conference.

European energy companies have encountered fierce opposition to their plans to produce gas from shale – even in countries which might have welcomed some alternatives to Russian gas, such as Ukraine. There have been reports that some of this is sponsored by producers outside Europe, worried that their market share will fall if the US experience is repeated. Gazprom has already shelved one major LNG project, Shtokman, which was pointed at the US until the rise in shale output there led the spot price to fall so far that it priced Shtokman out of the market.

Rex Tillerson, chief executive of US supermajor ExxonMobil, and Eldar Saetre, chief executive of Norwegian state-backed energy company Statoil, both called on EU policy makers to allow the drilling process, where a mixture of water, sand and chemicals is pumped down wells at high pressure to break underground rock so that oil and gas can flow to the surface.

Fracking has existed since the late 1940s, but technological advancements in recent years, such as horizontal and directional drilling to extend the reach of wells and bring more reserves to the surface, have sparked an energy and economic boom in US energy-rich states like Texas, Oklahoma, Louisiana and North Dakota.

Saetre told The Financial Times that fracking was a “lost opportunity” for Europe. He added: “I am confident that it is possible to operate fracking operations in Europe in a responsible manner as it is in the US. It is accessible, it is close to the markets, it can be done, it is not rocket science.”

France, Bulgaria and the Netherlands have all banned fracking. Denmark, Poland and the UK are some of the few European countries to allow fracking, although so far with no actual commercially useful results. Concerns about the safety of fracking were not raised in the controversial decision to disallow Cuadrilla’s applications to drill two sites in Lancashire, however.

In May, Denmark ordered French major Total to stop fracking work, alleging it was using unauthorised chemicals.

However, it resumed work in Nordjylland a few days later after talks with Danish authorities. Total has the only Danish shale gas exploration permits. Its other, in Zealand, has been abandoned owing to the poor geology, but there is local opposition to its Nordjylland operations.

Tillerson made the case for fracking in Europe during his speech to the conference.

“We can do the same in Europe [as in the US]. By opening up access and by applying such proven technologies, European and global markets would capture the benefits of increased energy diversity, flexibility and security,” he said.

“Unfortunately some nations such as Germany and right here in France have put in place policies that have effectively banned hydraulic fracking.”

Tillerson said that 2 million wells in the US and Canada have been safely hydraulically fractured in total. “I think we have enough data.”

In the same week the US Environmental Protection Agency released the results of a four-year government study that concluded the contentious drilling practice does not cause widespread damage to drinking water, one of the public’s biggest fears.

Never the less, some US states have banned it, including New York.

Europe could see a natural gas renaissance similar to that witnessed in the US if governments such as France and Germany, which face public backlash against the drilling, allowed it to proceed, added Tillerson.

New technology

Elsewhere, companies in Estonia, which for decades has relied on kerogen oil, also known as kerogen shale or oil shale – and not to be confused with tight oil occurring naturally in shales – for the bulk of its energy needs, are seeking to export the technology they have been refining for years to unlock the energy source.

Eesti Energia, Estonia’s largest power company, plans to start building an oil shale-fuelled power plant in Jordan later this year.

Oil shale is the solid organic matter held in shales that is the source of oil and gas. The rock needs to be mined and then heated at a controlled rate to separate the oil from the shale. It is produced in small quantities in Estonia, China and Brazil. But the cost of mining and processing oil shale is still generally too high to make the process worthwhile.

In Estonia, the most advanced producer of oil shale, an investment in a new processing plant requires oil prices of around $65 per barrel to enjoy 15% returns. In the US, oil prices of $80-85/b would make oil shale viable.

But significant environmental concerns, related to water and land use, are associated with oil shale production, not to mention it is energy-intensive and carbon dioxide-intensive. 

North America, Brazil, Israel, Jordan, Indonesia, Australia, China, France, South Africa, Spain, Sweden and Scotland all have notable oil shale deposits.

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