Energy transition

Why French big business is obsessed with shale gas

by Ivan du Roy, Olivier Petitjean

Intense lobbying in Brussels, recurrent calls to French political leaders, charm offensive in the media: several French groups are making considerable efforts to advocate for shale gas. Why this insistence? Who are the players in this war of influence? They include Total, but also several other firms. Shale gas mobilises powerful interests, often opposed to any kind of energy transition.

This article was originally published in French. Translation: Jocelyn Timperley.

A steamroller has been set in motion in the pursuit of shale gas development on the old continent. The Franco-German working group of CEOs for ‘competitiveness’ and ‘growth’ in Europe, set up with the backing of the Mouvement des Enterprises de France (MEDEF, the largest union of employers in France) and the German Federation of Industries (BDI) [1], has made it a flagship proposal. ‘Europe must work towards the development of industrial skills and a framework for the unconventional gas sector (including shale gas, Editor’s note),’ they suggest in their list of thirty-two demands, presented to François Hollande and Angela Merkel on May 30th. Last autumn, an appeal for ‘the continuation of research into the technical exploitation of shale gas’ already featured among the 22 proposals of an important official report on French competitiveness (‘rapport Gallois sur la compétitivité française’).

The proposal echoes the ‘call of the 98 CEOs’ published at the end of October 2012 by French weekly newspaper Le Journal du Dimanche (part of French multinational mass media company Lagardère Group), which likewise insisted on ‘being provided with the means to explore and exploit our national resources like shale gas.’ Not to mention the succession of ambiguous government statements and the burst of editorials and articles (Le Monde, Le Point, Challenges…) which, between July and September 2012, called for the debate on shale gas – theoretically closed by the official ban, signed into law in 2011 - to be reopened. ‘We must take advantage of the wealth of shale gas in French soil!’, argued Claude Perdriel, head of weekly magazine Le Nouvel Observateur in a column published by Challenges. ‘The debate is not yet settled,’ said Prime Minister Jean-Marc Ayrault a month later. Shale gas exploitation, they claim, would lower the price of energy, create employment, make France less dependent on expensive oil imports, contribute to growth and reinforce our ‘competitiveness’ as well as ‘lowering labour costs’. Renewable energies, on the other hand, don’t seem to be raising much interest.

Brussels besieged by fossil fuel lobbyists

The ‘debate’ on shale gas has also reached Brussels. The European Commission and Parliament are ‘besieged by the big players from the oil and gas industry’, says the Corporate Europe Observatory (CEO), an organisation that monitors corporate lobbying at the European level. ‘Thirteen formal meetings between the Commission and representatives from ExxonMobil, Talisman Energy, Shell, Statoil, Halliburton, Chevron and GDF Suez relating to shale gas were held between January and August 2012,’ the CEO noted in a report published in November 2012. Total is also one of the firms lobbying aggressively to try to ‘downplay the devastating environmental and social effects of shale gas development,’ and ‘brand gas as a climate-friendly energy option for a low-carbon future’. One example: a press trip paid for by the oil company, which resulted in a series of articles and editorials supporting shale gas development in Le Monde.[See here (in French).]]

In France, this industry and media offensive is confronted with one major obstacle: hydraulic fracturing, the only technique currently available to extract shale gas trapped in rock, is prohibited by French law. Hydraulic fracturing is extremely water intensive, uses chemicals and can cause uncontrolled rises of gas to the surface, all of which risk the contamination of groundwater, rivers and soils. It’s this hurdle that conservative senator Jean-Claude Lenoir and Socialist MP Christian Bataille have been trying to overcome. The two representatives are preparing a parliamentary report on ‘alternative techniques to hydraulic fracturing for the exploration and exploitation of shale gas.

CAC 40 companies largely in favour of shale gas

Lenoir and Bataille regard hydraulic fracturing as ‘an old technique now rapidly evolving due to growing environmental concerns.’ They propose studying alternative techniques: ‘An alternative operational technique exists that deserves a closer look: propane fracturing. Other technologies are being researched and may lead to applications in the coming decade.’ A progress report on their initial investigations was released on the 5th June 2013. As soon as hydraulic fracturing is no longer the only possible technique, the ban can be bypassed.

Indeed, this ban on hydraulic fracturing is interfering with major economic interests. Shale gas extraction isn’t only a business of Texan explorers and ‘major’ oil and gas companies like Total and GDF Suez, who want to frack the French subsoil as they did in the US and Poland. Indeed, it is not widely known that no less than ten French companies listed on the CAC 40, including Air Liquide, Veolia and several other French transnational corporations, are involved in shale gas development all around the world, from the supply of equipment and chemicals to the treatment of wastewater.

Total piles up concessions

Total, GDF Suez and the Anglo-French oil and gas company Perenco have licenses for several deposits of shale gas outside France. The French giants pile up concessions abroad. In the Unites Stated, Total has acquired 25% of the concessions of Chesapeake Energy, world leader in shale gas production and largest driller in North America, with 11,000 wells in twenty years. In fact, Total has invested more than 2.2 billion dollars in the USA! In Poland, it has picked up part of the ExxonMobil’s exploration rights. It also holds shale exploration rights in Denmark, Canada, China, Algeria, Argentina and even Libya…

GDF-Suez, the other big French gas player, was in the running for the famous ‘Nant license’ in Southern France. However, following the moratorium, Gérard Mestrallet, CEO of GDF-Suez, publicly announced that his company would await the development of more secure technologies before restarting operations in France. The company still keeps its German operational licenses near at hand though. Meanwhile, it intensifies its purchases of cheap American gas, partially sourced from hydraulic fracturing, cashing in along the way on the difference between the actual purchase cost and the theoretical cost which the regulatory gas tariff is based on in France. This practice puts customers at a disadvantage, and has been denounced by the Regulatory Commission of Energy (CRE) [2]. As for Perenco, they have conducted drilling by hydraulic fracturing in Tunisia.

Schlumberger and ‘smart fracking’

Not to displease the two representatives claiming there are ‘alternative techniques to hydraulic fracturing,’ but neither Total nor GDF-Suez yet seem able to offer any. ‘R&D into gas and shale oil is increasing, with particular focus on water management throughout the production cycle and on alternatives to hydraulic fracturing,’ claims Total in its annual report. GDF-Suez doesn’t mention the subject.

After the two ‘major companies’ come firms specialising in servicing the oil and gas industry: Vallourec, Technip and Schlumberger. These firms do not directly own deposits, but instead assist the oil companies in their operations by selling their services and technological solutions for extracting fossil fuels. Schlumberger, which has headquarters both in Paris and Houston, is a leading supplier of pumping materials and chemical liquids used for hydraulic fracturing. These are the very products that raise concerns among local communities, and which the firms involved obstinately refuse to reveal the composition of under the pretext of commercial confidentiality. Schlumberger is now trying to position itself in ‘high-end’ fracturing operations, which, according to its CEO, Paal Kibsgaard, would use a little less water and chemicals: welcome to ‘smart-fracking’, or ‘intelligent fracturing.’

Vallourec: ‘zero nuisance’ drilling

Vallourec has also invested heavily in the United States. The company is now one of the leading suppliers of deep drilling tubes for shale gas extraction. CEO Philippe Crouzet hopes for ‘massive shale gas production,’ in Europe by 2017. ‘We must first make shale gas extraction acceptable by public opinion from an environmental point of view,’ he advises. Listening to him, you would think there is no safer source of energy: ‘There hasn’t been a single accident due to horizontal drilling in decades in the United States (…). All drilling crosses groundwater tables, with zero nuisance, to reach gas or oil much further below. The idea that there may be leaks from the pipes is an aberration,’ he stated in August 2012. In his view, the arrival of shale gas in Europe is synonymous with ‘significant benefits for the economy.’ Though it’s not certain that these benefits will reach everyone: between 2003 and 2009, Vallourec was the company who most largely favoured its shareholders over its employees among its CAC 40 peers. Dividends per share increased 1,007% over the period! [3]

The construction sector is another key shale gas stakeholder: Lafarge, the world leader in building materials, manufactures special cements for North American drilling wells, both for conventional reserves and hydraulic fracturing. Saint-Gobain supplies fracturing materials, notably ceramic balls the size of a grain of sand which, when injected into the rock faults, act as a retaining structure to increase hydrocarbon recovery. Technip, an oil and gas infrastructure specialist also working in refining and petrochemicals, has redirected a large part of its strategic investments – 225 million euros – towards the United States to enjoy the benefits of the shale gas boom. And let’s not forget the chemistry industry, such as Solvay and its French subsidiary Rhodia, which depends on the purchase of oil and gas for part of its production. They are among the main proponents of shale gas development in Europe, which they see as a promising way to reduce costs.

Hydraulic fracturing, a source of profit for Veolia and Suez?

There can be no fracturing without an abundant supply of water. This is one of the ways Veolia and Suez environnement have found to make up for their decline in market shares and profitability in drinking water supply, where private management is increasingly challenged. The two water giants consider hydraulic fracturing as a promising source of profit. They have made significant investments in the shale gas extraction regions in the United States (Pennsylvania, Texas and Ohio), and have funded shale gas lobbying. With shale gas, they win on two counts: the sale of water wholesale to the drilling companies –15, 000 m3 water are needed on average for a fracturing operation – and the treatment of contaminated water arising from the fracturing. This massive use of water resources provokes tensions and conflicts with farmers, particularly in the United States. So what. Jean-Michel Herrewyn, CEO of Veolia Water, hails his company’s ‘great projects’ in ‘mines, petrol and the extraction of shale oil, all enormous consumers of water.’

Most of these French corporations, or their subsidiaries, are members of powerful lobby groups in the United States. These are very active in promoting shale gas and minimizing any restrictive regulation, and include the ‘American Petroleum Institute,’ the ‘American Gas Association,’ and the ‘Marcellus Shale Coalition,’ the last of which brings together firms with interests in the Pennsylvania shale gas deposits. This coalition, which counts Veolia, Vallourec, Lafarge and Schlumberger as members, campaigns to stifle all criticism and combat any attempt at regulating the environmental impact of shale gas extraction in the region, as well as to push for reduced tax contributions in their operating areas[Source: Center for Media and Democracy.].

A coalition against energy transition?

This pattern of influence is found in all countries, from Poland to Argentina, whose subsoil contains potential shale gas reserves. And now this influence seems to be spreading across all of Europe, including France. Does this enthusiasm and these investments make sense when shale gas could meet its production peak – after which production begins to decline due to lack of resources – as soon as 2017 in the US? Shale gas allows for the artificial preservation of obsolete industrial systems, based as they are on the intensive use of relatively cheap fossil fuels. But what happens after?

Faced with this broad offensive, ‘a handful of civil society organisations are raising environmental concerns, lobbying for a ban on fracking or at least a strict regulatory framework,’ says CEO. Will proponents of a transition towards a much lower use of fossil fuels have enough weight against this substantial cartel of multinationals? The battle looks tough.

Ivan du Roy and Olivier Petitjean

Photo : CC SkyTruth