Government Permit Not The End Of Fight For Fracking


BMI View : With this latest permit from Vaslui, Chevron has now obtained the necessary environment approval needed to begin fracking in its shale gas concessio ns in Romania, the first of the Eastern European countries outside of Poland where the US major has received government endorsement of Chevron's pending shale-related activities. However, we warn that above-ground risks to Chevron's efforts in Romania remain. Strong grassroots opposition against fracking could see petty disruptions to its operations. Together with below-ground risks, these could prevent a rapid take-off of shale gas production in the country.

Chevron has been given approval to proceed with its shale gas activities in northeast Romania. According to local news agency Mediafax, this green light was given by the environment protection agency of Vaslui, the northeast town where Chevron's 6,350 square kilometres (sq km) Barlad Shale concession lies . With this permit, the US supermajor can start drilling an exploration well in the area in by H213 as planned.

Chevron continues to be one of the few major international oil companies (IOCs) to invest in Eastern Europe's shale resource potential despite fa ding enthusiasm by its peers. The supermajor remains in Poland even as ExxonMobil and Talisman made high-profile exits , and has taken shale gas permits in Bulgaria, Lithuania and Ukraine. However, its shale exploration activities in this sub-region have constantly encountered regulatory roadblocks owing to concerns over the safety of hydraulic fracturing (fracking) - the controversial technology deployed for shale oil and gas extraction:

  • Romania : Drilling on its Barlad shale concession had to be postponed due to a moratorium on fracking in May 2012 following the election of a centre-left party to power;

  • Bulgaria : A ban on fracking in January 2012 saw Chevron's shale gas permit cancelled;

  • Ukraine : Kiev awarded Chevron rights to the Olesska shale block in 2012, but the oil majo r continues to await approval from local authorities , who are concerned about the environmental impact of the firm's shale exploration activities;

  • Lithuania : The government is delaying a shale gas deal with the major - the only company to have submitted an offer at the country's shale gas auction in January 2013 - until it finalises a law on fracking as domestic concerns about the practice increase .

Of the following countries, Chevron has seen the biggest breakthrough in Romania, in terms of overcoming regulatory barriers. The government decided to let the ban expire in December 2012 and officially cancelled the moratorium in March 2013, in a sign of increasing acceptance of tapping the country's shale resources.

In a conference on European Unconventional Gas Development held in March, Dr. Iulian Fota, a presidential advisor, stated the importance of studying Romania's shale resource potential as it concerns the 'prosperity of the country'. This was reiterated by Prime Minister Victor Ponta, who expressed that if shale gas potential exists in Romania, 'it must be developed' pending the implementation of necessary environmental safeguards. This echoes a growing sentiment across Europe, where the need to find cheaper energy sources even as the region seeks to pursue ambitious green energy targets have led countries such as the UK, France and Germany to relax their positions on fracking, albeit in varying degrees ( see 'Batho Dismissal Sparks Fracking Suspicions', July 9; 'Major Consumer Sees Upside From Fracking As Supplies Dwindle', May 22; 'Government Reveals Shale Wish With Communal Incentives', May 1).

Romania's unconventional potential could indeed be large. In the US Energy Information Administration (EIA)'s latest shale gas report, it stated that Romania could hold 1.43trn cubic metres (tcm) of technically recoverable shale gas resources - more than 13 times that of its proven gas reserves as of January 2013. These could be concentrated in the Carpathian Foreland Basin in northern Romania and the Moesian platform in southern Romania. If developed, it could help the country reduce its dependence on Russian gas imports in particular, which high prices have increasingly been contended by its Eastern European customers.

Dormant Potential To Be Tapped
Comparison Of Proven Gas Reserves And Technically Recoverable Shale Gas Resources For Selected Countries In Eastern Europe (tcm)

Locals Chew Out Chevron's Plans

In May 2013, the environment protection agency of Constanta had given Chevron the green light to frack in its three licences in south-eastern Romania, albeit limited to 'controlled explosions' of depths between 10-15 metres and within a 1,800sq km area. With the latest permit granted by the county of Vaslui, the regulatory barriers to fracking have now been cleared for the US major in Romania.

However, progress could continue to be blocked by grassroots opposition against the environmental risks that fracking could pose. The mayor of Barlad had tried to stop a local demonstration against deployment of this extraction method in April, but a church opened up its doors for people to protest against the movement inside instead. The priest leading the movement, Vasile Laiu, pointed out that the area's water scarcity could be further exacerbated by fracking, which requires large volumes of liquids for its operations. Locals had taken part in street protests against Chevron's Barlad project that 'threatens man, nature and future generation' as recently as June 2013, according to APF.

In the short-term, even with government permits Chevron's shale gas exploration in Romania could still face obstacles posed by local resistance forces - a problem that some firms involved in Poland's nascent shale gas exploration also encountered despite a government supportive of shale gas activities ( see 'CEE Shale Potential: Promise Awaiting Fulfilment', February 14). Besides the unknown geological risks associated with early exploration, petty civil movements could also prevent a rapid take-off of shale gas exploration and production in Romania.

This article is tagged to:
Sector: Oil & Gas
Geography: Romania