Veolia May Raise Revenue From Oil Sector Five-Fold: CEO

Veolia Environnement SA, Europe’s biggest water company, may boost revenue from oil and gas operations five-fold to as much as 5 billion euros ($6.4 billion) in four years, aided by shale drilling and the dismantling of aging offshore platforms.

The hydrocarbon business is “rapidly growing and rich,” Chief Executive Officer Antoine Frerot said today at a news conference where he detailed plans to take the utility into areas more closely linked to industry. “Profit margins are attractive.”

Frerot, more than halfway through a two-year plan to curtail debt and scale back Veolia’s geographic reach, has announced initiatives this year that move the Paris-based company from its historic municipal water and waste contracts. The utility will focus more heavily on emerging markets and tackle the “most complex” industrial waste problems, he said.

Veolia already earns about 1 billion euros a year in revenue from the oil and gas industry, including through water supply and treatment for offshore production installations and high-pressure cleaning of storage tanks, according to Frerot.

One business expected to grow in the coming years is dismantling of old installations in the Gulf of Mexico and the North Sea, he said. The utility helps decommission projects at Lerwick in the Shetland Islands.

Shale oil and gas drilling may also provide the utility with water-treatment contracts, the chief executive said.

Water Treatment

The French utility announced a water-treatment contract in April worth as much as A$800 million ($734 million) for BG Group Plc’s Queensland Curtis liquefied natural gas project in Australia, which will develop unconventional coal seam gas.

U.S. orders for water treatment related to shale drilling are small for now because of a lack of federal regulations to force energy companies to treat water, according to Frerot. Until this occurs, orders are more likely from Europe where Germany, Poland and the U.K. may develop the sector.

Frerot announced in December 2011 a plan to sell assets, lower debt and cut costs to turn around the utility. In January Frerot said Veolia would earn half its revenue within five years from industrial clients compared with 35 percent now.

He has since detailed plans to focus on nuclear plant dismantling, hazardous waste and now the oil and gas business. The utility is contending with economic stagnation at home combined with a move by French municipalities to take over water contracts and curb margins.

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