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More setbacks for European shale

Shale-gas exploration is facing further setbacks across Europe after governments in the Czech Republic and Romania moved to ban hydraulic fracturing (fracking) and reports emerged of opposition to the technique mounting within the German government

France and Bulgaria have already banned fracking, while in Austria, OMV has been forced to put its shale exploration plans on hold because of local opposition to its drilling plans.

Opposition to fracking has been driven primarily by fears – mostly fuelled by reports from the US – of potential environmental damage such as the poisoning of groundwater, a claim that the industry and many analysts say has been overblown.

Nevertheless, opposition continues to mount. The Czech Republic plans to impose a moratorium on shale-gas exploration in place for the next one-and-a-half to two years as the government examines the environmental risks and implements legislation specific to shale gas, environment minister Tomáš Chalupa said in a statement on the ministry’s website.

The announcement came after Chalupa revoked shale exploration licences previously issued to a local subsidiary of UK-based firms Cuadrilla Resources and Hutton Energy, in the face of stiff local opposition to drilling plans.

The Czech Republic has a history of disappointing oil and gas exploration results, and no comprehensive study has been carried out to evaluate potential shale resources, but explorers hoped that the Prague basin could have similar potential to that in neighbouring Poland.

The country aims to increase the use of natural gas in its energy mix from less than 20% as it reduces its reliance on coal. Currently, though, the Czech Republic is almost wholly reliant on imported gas, and about three-quarters of those imports come from Russia, a lingering sore spot for Czechs worried about their energy security and the rising costs of imports.

In Romania, one of the new centre-left Social Democratic Union government’s first moves was to ban shale-gas exploration. The move was a response to growing public unease over the pace of shale-gas activity proposed by the previous government after US supermajor Chevron was awarded acreage.

Fracking has had a unique ability to mobilise protests in the country. “In Romania people don’t go to the streets easily. There was little protest over an IMF programme that led to a 25% wage cut for public workers in 2010, but out of nowhere there were protests over shale,” Dragos Talvescu, a partner at consultancy Sund Energy told PE Unconventional.

It is a blow to Chevron, which also lost exploration rights when Bulgaria banned fracking. The company had been awarded exploration licences for three shale-gas blocks in the country’s southeast along the Bulgarian border by the previous government in 2010 and acquired another block in the northeast of the country in 2011.

Chevron has said that it will continue shooting a seismic survey across the Romanian acreage and plans to drill a conventional exploration well in the second half of the year. 

The US Energy Information Administration estimated last year that Romania, Bulgaria and Hungary held combined recoverable shale resources of 19 trillion cubic feet (cf), but said that there were additional areas in Romania that may be prospective but had not yet been explored.

As the Czech and Romanian government announced that they were halting shale-gas exploration, Der Spiegel reported that members of the German government were “very sceptical” about fracking. The report said that the environment and economic ministers, Norbert Röttgen and Philipp Rösler, had decided to oppose fracking “for the time being”.

Exploration has already been put on hold in North Rhine-Westphalia, Germany’s most prospective shale gas area, while the environmental risks there are being studied.

ExxonMobil is leading the exploration effort in Germany. Earlier this year, the company’s country manager Gernot Kalkoffen said the firm planned to spend hundreds of millions of dollars on early-phase exploration. He also sounded hopeful that the company would be able to get around the fracking ban, saying that there was a 50% chance that gas could be produced from Germany’s shale formations without having to frack its wells.

This widespread opposition has dampened the hopes of companies eyeing Europe’s shale-gas potential, but the moratoria may be just a temporary reaction to slow development. After all, fracking is a process many do not understand, and have only heard negative reports about. 

“In the end they will all go for shale exploration,” Talvescu said. But each country will want to carry out its own assessments of the local conditions for shale gas, he added, pointing to the UK’s recent experience as an example of how things may play out.

The UK imposed a de-facto moratorium on shale exploration in May last year after tremors were detected near Cuadrilla Resources’ drilling site in the Lancashire sector of the Bowland basin. After nearly a year studying the issue, though, the UK government has now decided to approve exploration and may licence further shale acreage in a bidding round later this year.

There are signs that something similar may already be happening elsewhere. Just five months after voting to outlaw shale-gas drilling, the Bulgarian parliament has decided to create a committee to review that decision. Economy minister Delyan Dobrev said the committee would provide an opportunity for a full debate on the issue, after there was criticism that the earlier decision had been made too hastily.

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