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Shale gas exploration on the rise in France – Environmental risks, land rights and tourism pose challenges for investors – Maplecroft report

25/08/2010

Despite a reliance on nuclear energy for domestic consumption needs, shale gas exploration in France has risen in the wake of new extractive technologies coming out of the US and rising demand for energy, according to a new in-depth country report from Maplecroft.

Historically, gas production in France has been low. Nuclear power accounts for around 80% of electricity generation in France, and the country imports almost all of the natural gas it consumes. In 2009, France produced 31bcm of natural gas, with net imports of 1,551bcm.

The IEA commends France on the diversity of its natural gas suppliers which include: Norway (34% of imports), Algeria (17%), the Netherlands (17%) and Russia (15.4%) - Nevertheless, France was one of the Western European countries to experience a reduction in gas supplies at the height of the December 2008 dispute between Russia and the Ukraine.

Shale gas production therefore provides a viable option for the country to increase energy security. "The potential of shale gas to enhance energy security in Europe can be seen by examining the case of the case of the US, where advances in shale gas extraction technology have led to a revival of the gas industry," said Maplecroft Analyst, Mandy Kirby. "In June 2009, the US Potential Gas Committee reported a 39% jump in potential US gas resources from its 2006 to its 2008 survey, a massive increase, helping to overturn fears of dwindling reserves and escalating import dependency."

An annual government report on the oil and gas sector released on 30 June 2010 has revealed an increasing interest in non-conventional gas resources in France. The report finds that new extractive "hydro-fracking" technology utilised in the US has drawn attention to a basin in south eastern France that had previously been explored for conventional resources.

However, there are specific geological challenges to shale gas development in France compared to the US, and extraction techniques must be developed for different geological environments. With the average population density in Europe greater than in the US, exploration activities in France also face particular challenges over land access rights and exploration areas found in tourist destinations.

Although some energy analysts have said that shale gas development is not necessarily incompatible with the local tourism industry, it is likely to increase sensitivity to drilling activities, especially as the extraction of shale gas utilises more wells than traditional natural gas operations.

France is involved in the Gas Shales in Europe project (GASH), which includes corporate partners, such as Gaz de France Suez and Total, and research institutions such as the Institut Francais du Petrole. (Both Germany and Poland are high profile members of GASH and Maplecroft reports profiling shale gas activities in these countries are also available - see our previous press release.)

The granting of exploration licenses has also raised environmental concerns relating to toxic spills, pollution and waste-water disposal. Some local communities in the US have claimed that drilling is polluting groundwater supplies. French exploration licences for shale gas have been awarded in most cases for a period of five years, to companies including Total, Egdon and the Devon Energy Group.

The Country Report - France provides in-depth analysis, innovative sub-national maps, stakeholder viewpoints and key recent events. Comprehensive risk analysis is broken down into individual chapters focusing on: governance framework, the regulatory and business environment, political violence, human rights and society, and an economic overview.

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