PRAGUE – Chevron is betting it can win over Eastern Europeans with the idea of energy independence even after dry wells and government delays led Exxon Mobil and Talisman Energy to scrap efforts to tap natural gas deposits in Polish shale.
Bringing shale drilling to Europe from North America promises to help the region ease years of dependence on Russian fuel and hurts the Kremlin’s ambition to secure the country’s future as an energy superpower. Use of hydraulic fracturing, or fracking, upended the U.S. gas industry, which overtook Russia as the biggest producer, driving prices to a decade-low.
This resource could certainly enhance energy security within Europe and also bring enormous economic benefits, said Ian MacDonald, Chevron vice president for Europe, Eurasia and the Middle East. Chevron believes that upon learning how these hydrocarbon resources can be explored for and developed safely, the governments and citizens of central Europe will be supportive.
President Vladimir Putin is pushing investment in Russia’s gas industry, with new fields and a pipeline to Asia planned.
Chevron has leased or licensed for exploration 5.6 million acres in Poland, Ukraine, Romania and Bulgaria, an area the size of New Jersey. Its joint venture in Lithuania has a license for about 600,000 acres, and Chevron is applying for an additional 450,000. In Ukraine alone it agreed to spend $400 million on exploration.
Royal Dutch Shell won rights to explore for shale gas in the Yuzivska field in Ukraine’s Kharkiv region in May 2012, and signed a production sharing agreement in January.
Yet the prospect of a European shale revolution is in doubt before it has begun. Exxon said in June 2012 it was pulling out of Poland after its first wells produced disappointing results, which was followed by Talisman.
On May 7, Marathon Oil Corp. said it was quitting after failing to find commercially viable resources and it would seek to dispose of its 11 licenses.
In the U.S. in contrast, Exxon plans a $10 billion Texas export terminal to ship abroad excess domestic gas.
Deposits in Poland have turned out to be deeper and harder to exploit than those in the U.S. due to geology and poor roads to remote eastern regions. Estimated reserves in the European country were cut to 9 trillion cubic feet last year by the U.S. Energy Information Administration, from 44 trillion in 2011.
Big companies like Shell and Chevron could become afraid to invest, said Volodymyr Omelchenko, head of energy analysis at the Razumkov research group in Kiev and former director of shipments at Ukraine’s NAK Naftogaz Ukrainy. Ukraine has an enormous potential but realization will be difficult because the legal system is governed by old Soviet traditions.