Shale Drilling Must Improve to Protect Environment, GDF Says

The technology used to extract oil and gas from shale rocks, a process that has revolutionized the U.S. energy industry, should be improved to protect the environment, the head of Europe’s largest gas company said.

“There are concerns about the environmental impact,” Gerard Mestrallet, chief executive officer of GDF Suez (GSZ) SA, said in an interview at Bloomberg’s headquarters in New York. “Probably it can be improved and probably it has to be improved.”

Hydraulic fracturing, a technique that uses water, sand and chemicals to break apart rocks and release trapped fuel, has made the U.S. the world’s largest natural gas producer. That success hasn’t quelled concern that fracking, as the process is known, risks polluting drinking water.

GDF Suez is the former gas monopoly in France, which in July became the first country in the world to pass a law making fracking illegal. The Paris-based company held talks with Schuepbach Energy LLC, holder of permits for shale exploration in southern France, to buy stakes in the licenses. These have been dropped, and the utility isn’t currently developing shale gas projects elsewhere, although it holds licenses in Germany.

“In Europe, the geological situation has given serious hopes in Poland and France,” Mestrallet said. In France, “there will be no development of shale gas without the maximum of measures to protect the environment.”

The U.S. Environmental Protection Agency is studying the effects of fracking on drinking water. A committee advising the U.S. Energy Secretary Steven Chu said Aug. 11 that gas companies risk causing serious environmental damage unless they commit to best practices in engineering.

Convince Public

Opposition in Pennsylvania, New York and other U.S. states shows the industry needs to convince the public shale drilling in safe, Mestrallet said.

“When we see resistance in Pennsylvania, it’s clear that there is progress to be made and explanations to be given to populations everywhere,” he said.

GDF Suez, which has natural gas exploration and production projects from Australia to the North Sea, isn’t planning to invest in U.S. shale to gain expertise in the drilling technology, Mestrallet said in the interview.

In fracturing, millions of gallons of chemically treated water and sand are forced underground to break up rock and allow gas to flow. Advances in the technology have, in a few years, pushed gas from shale to almost 30 percent of U.S. production and may account for 47 percent of the total in 2035, according to a report given to Chu last month and the Energy Information Agency.

Texas Shale

Total SA (FP), Europe’s third-largest oil company and also based in Paris, is producing natural gas from U.S. shale. The French company entered the business last year when it agreed to pay $800 million for 25 percent of Chesapeake Energy Corp.’s assets in the Barnett Shale field in Texas.

“We have associated ourselves with a good teacher in the U.S. They are drilling so many wells,” Armand Khayat, a gas analyst at Total, told a conference in Paris last week. “We are learning very quickly.”

In addition to the U.S., Total plans to develop unconventional gas in Algeria, Argentina, Australia, Canada, China, Denmark and Poland, company executives have said. Total is now readying to start drilling in Argentina, Khayat said.

In France, the company applied to the government earlier this month to keep its exploration permit in Montelimar, pledging to use conventional technology and not hydraulic fracturing. The oil company won the permit last year to probe the area for shale gas and has had to revise its strategy because of the ban.

‘Respect Environment’

“There are no other techniques” than fracking to extract hydrocarbons from shale, French Industry Minister Eric Besson said in an interview on RTL radio last week. “Many experts think that in two, three or four years, we will have techniques that scrupulously respect the environment and allow us to exploit what is underground.”

Hydraulic fracturing of one well requires between 10,000 and 15,000 cubic meters of water compared with the 550,000 cubic meters consumed daily by a city like Paris, according to France’s IFP Energies Nouvelles, an energy research organization, adding that between 20 percent and 70 percent of the water can be recovered and treated when production begins.

“The environmental impact is not neutral,” according to the institute.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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