France Urged to Pursue Oil-Fracking Research to Reduce Imports

France, which last year banned oil and natural-gas extraction from shale rock, should keep experimenting with the technology if it wants to curb reliance on imports, the nation’s oil industry lobby said.

The country should use “all means” to cut purchases of energy supplies from abroad, the Paris-based Union Francaise des Industries Petrolieres said today in a statement. UFIP also urged France to revise its mining code so that the public and local government are more “closely associated” with projects.

Total SA (FP), based in Paris, and international peers have been hurt by France’s ban on hydraulic fracturing, or fracking, which the government says may harm the environment. The process, which has made the U.S. the world’s largest gas producer, involves pumping water and chemicals into rock to release hydrocarbons.

The ban, the first of the technology by any country, has suspended shale exploration at permits around Paris and in southern France. Oil companies including Total, the nation’s largest, and Toreador Resources Corp. held licenses for shale exploration.

The decision to outlaw fracking curtailed operations for energy companies already contending with dwindling refining margins. French oil-product demand fell 1.3 percent last year to 77.8 million metric tons, contributing to refiner losses of about 800 million euros ($1.04 billion), UFIP said.

Plant Shutdowns

Lower profits from processing crude have forced refiners to cut costs and shut plants across Europe. In the past two years, LyondellBasell Industries NV, Petroplus Holdings AG and Total have decided to stop refining at sites in Berre, Petit-Couronne, Reichstett and Dunkirk, leaving France with eight working plants, compared with 24 in 1977.

Refining margins slumped to an average of 14 euros a ton in 2011 from 21 euros a year earlier, according to UFIP. French refiners lost 1 billion euros in 2009 when margins averaged 15 euros, and “hundreds of millions of euros” more in 2010, the group said previously, estimating that margins of about 25 euros are needed for profitable operations.

The French oil companies also called today for “minimum service” laws for ports to avoid strike disruptions. The crippling of operations at crude-import hubs in 2010, combined with strikes at refineries, led to shortages at the pumps.

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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