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Public slows Exxon's German shale gas bid

By STEFAN NICOLA, UPI Europe Correspondent   |   April 13, 2011 at 11:39 AM
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BERLIN, April 13 (UPI) -- Public opposition is derailing ExxonMobil's hunt for shale gas in Germany.

The U.S. oil and gas giant plans to drill for unconventional gas in northwestern Germany and has snapped up several exploration permits for promising lots.

Eager to assess their resource potential, the major has drilled at least three test wells into shale gas rocks in Lower Saxony. The company recently said it would also invest at least $100 million into unconventional gas exploration in neighboring North Rhine-Westphalia.

The U.S major isn't the only company hoping to extract shale gas in Germany. Other companies that have secured exploration permits include BASF's oil and gas arm Wintershall, Gaz de France, BNK Petroleum from the United States, BEB, a Royal Dutch Shell daughter, and Canada's Realm Energy, a company specializing purely in shale gas exploration.

An unconventional gas boom in Germany could change the energy market in Europe's largest economy.

Germany imports some 90 percent of the natural gas it uses, with around 40 percent of those imports coming from Russia. A recent study by the U.S. Energy Information Administration estimates that Germany sits atop 8 trillion cubic feet of technically recoverable shale gas resources -- roughly three times Germany's yearly consumption.

If the German shale gas reserves prove economically recoverable, Russia's state-controlled gas giant Gazprom would have to make more efforts to offer competitive contracts, especially as spot prices remain low.

Public opposition to the drilling has slowed activities, however.

Advocacy groups such as "Schoenes Luenne" ("Beautiful Luenne") have drafted petitions and staged demonstrations to protest drilling activities near their home towns.

The locals are concerned that the new technology that makes shale gas exploration possible, the so-called "fracking," will damage the environment.

Fracking involves drilling into the rocks horizontally and then cracking them with a high-pressure missile of water mixed with sand and chemicals, to unlock the gas from the impermeable shale rock.

Critics of fracking have warned that the technology could cause earthquakes and contaminate groundwater. In neighboring North Rhine-Westphalia, the state government, under pressure from local politicians, late last month imposed a moratorium on new shale gas drilling.

"The political and public discussion is putting the brake on activities," Klaus Soentgerath, an expert with the Lower Saxony State Mining Authority, or LBEG, said in a telephone interview. "Companies are engaging the public right now, and they're carefully observing the negative publicity."

ExxonMobil and the other companies fracking for shale gas vow that the technology is safe and tested. The industry admits, however, that it will have to win over the public to be able to drill in Europe, where opposition from locals has delayed or even destroyed several energy infrastructure projects in the past.

"We can't say there is no risk from drilling for unconventional gas," Simon Blakey, an expert with Eurogas, the European gas industry association, said at the recent Gastech conference in Amsterdam. "But we can say there is no more risk from unconventional drilling than from conventional drilling."

In a bid to defuse fears over fracking, ExxonMobil has tried to engage local advocacy groups via open roundtable discussions that started last week in the western German city of Osnabrueck. It's not expected to silence the opposition anytime soon.

If the German market proves to hostile for shale gas exploration, companies will likely move elsewhere. Some of the biggest shale gas reserves are believed to be located in Australia and China.

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