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Shale-gas revolution comes to Bulgaria

Chevron has applied for a permit to explore for shale gas in the northeast of Bulgaria

Bulgaria could be the next country swept up in the shale-gas revolution. Chevron has applied for a permit to explore for shale gas in the northeast of the country near the Romanian border. Traicho Traikov, the Bulgarian economy minister, and Chevron executive Ian MacDonald discussed opportunities for the US major in mid-July.

Bulgaria's shale gas deposits could be 25bn cubic meters (cm), according to James Warlick, the US ambassador in Sofia.

The country consumes 2.5bn cm/y of natural gas, all of which it imports from Russia. Bulgaria's existing contracts to import Russian gas will expire between 2011 and 2012. Domestic gas production would help to offset some of these imports and increase the country's energy security.

Russia is the second-largest gas producer in the world and the largest supplier to Europe. In 2006 and 2009, spats between Russia and Ukraine saw the supply of gas to Bulgaria and other east European countries interrupted, prompting a strategy of gas-supply diversification in the region. A proposed pipeline, Nabucco, would break Russia's domination over supplies in the region, delivering Central Asian, and possibly Middle Eastern gas, to eastern Europe. Domestic shale-gas production could have a similar effect.

However, analysts are urging caution when assessing the prospects for shale-gas in Bulgaria. Andrew Neff, senior analyst at IHS Energy, says the Chevron project, only in its exploration phase, offered "hope rather than concrete potential" for shale-gas exploration in eastern Europe. There is no evidence, yet, that drilling in the region will replicate the success of the US shale-gas industry.

If Chevron decides to develop shale gas in Bulgaria it could face an array of political and logistical obstacles. The major previously claimed "the price tag was too high" to explore for shale gas without conclusive data regarding how much there may be available. Chief executive John Watson told reporters in April that Chevron would not rush to join other shale-gas developers. If the US company committed to developing shale-gas projects in Bulgaria, substantial infrastructure investment would be needed to support operations.

Meanwhile, Bulgaria has also invited Canadian energy companies to apply for drilling licences following Chevron's interest in shale gas. Traikov also recently met the Canadian minister of international trade, Peter Van Loan, to discuss new deep-water exploration and extraction technologies.

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