North America: Transferring Knowledge, Avoiding Mistakes
While a hydraulic fracturing ban in France was not that surprising in retrospect, few anticipated a moratorium on the technology in Bulgaria.
Those kinds of East-West parallels were what delegates talked about in a panel discussion at the CEE Unconventional & Shale Gas Development Forum in Budapest, Hungary.
“Prices in Europe are extremely attractive, something certain to attract interest in unconventionals,” noted conference chair Gabor Bada, Exploration Manager at Falcon/TMX Oil & Gas Hungary, who added that it was always crucial to pay attention to the political dimension of unconventional gas development in Europe.
“How do we transfer North American knowledge, avoiding North American mistakes?” asked Chris Faulkner, CEO at Breitling Oil & Gas. “It’s difficult to do, if we look at different parts of the world, and the autonomous nature of Europe, it’s not applicable to North America.”
He said that when a company like Exxon hit the road, the press weren’t positive. “We need to generate some kind of success in shale gas. Besides in Poland, and the halt in Austria, Spain may have real potential in the Basque region, while looking at Bulgaria or other parts of Europe, a lot of it’s negativity we’ve generated around the environmental impacts of shale gas. We need to overcome that and generate some environmentally friendlier and actually commercially productive wells in the near term in Europe.”
Mr. Boda mentioned Chevron’s activities in what he said was the least developed part of Romania. “One would think people would cheer. What you see is 5,000 protesters against this and Chevron hasn’t done anything. What can we do as an industry? Can we do anything?”
Rafael Graham, Senior Director BD & Marketing at Key Energy Services, Inc. said it was necessary to involve places that had a track record with the O&G industry.
“For Europe there’s a need to educate them on what the oil and gas industry is really doing. Here we can do things right, that we’re not making the mistakes that we did in other places.”
“Doing more with less, and reducing footprint – it is incumbent on us to emphasize these,” said Loyd Roberson, Vice President, Technical Sales & Marketing at Newpark Drilling Fluids. “Get in there, start the education process, so they get comfortable with what’s going to come into their area. Make them understand it’s a driver of the industry to protect what belongs to them, and to protect the environment that they use on a daily basis. That education can be very important to the success.
Chris Faulkner piped in that he believed Chevron had made a critical mistake in Romania. “They had a window of opportunity to go in and educate people on what would take place, what they were trying to accomplish. Instead, the showed up and people thought ‘okay, it’s going to be the same thing that happened in the US.’ I think they made those assumptions incorrectly, but I think Chevron could have done a lot more to get out ahead of the curve a bit.
“One thing not to translate from the United States,” he continued, “is our cavalier attitude that we’ve drilled 20,000 wells in the Barnett shale, had some success early on, and the latest wells we’ve drilled are the best ones – we’ve learned along the way, but at what cost? Billions of dollars were spent, and I think people will see that and think ‘That can’t happen in my piece of heaven.’”
According to him, everything in life involved an amount of risk. “People have to understand there’s risk, and I think just minimizing the impact goes a long way with people. As more of that happens in the industry, that will translate well to other parts of the world. Here in Europe, it’s not going to work any other way.”
But who would bear the responsibility for communicating this, asked Gabor Boda. “Does this come down to the operator, service companies, government?”
He noted that in South Africa, one could not say the contents of fraccing fluid were confidential information from the service provider.
Advisor to Hungary’s Ministry of National Development, Andras Jenei reported that Falcon Oil & Gas had conducted discussions with green organizations in Hungary like Greenpeace. He said, “This is a great experience in how to engage with them; if you involve government things get political.”
Big companies, small companies, and government in general were not trusted, according to Dr. Kenneth Mahrer, Chief Scientist at APEX HiPoint.
“You can come in and educate, but they show what’s on TV and say ‘you’re lying’,” he explained. “You’re going to have to give these people more than promises. You say ‘We’re not going to hurt the land.’ But the industry has a history of hurting the land.
“We’ve been talking about this remote area in Romania - I think what you’re going to have to do is go in and build schools, build hospitals. I think you’re going to have to go beyond and give the people more than promises and education. You’re going to have to bring them something tangible. That has to be thrown into your equation, otherwise you’re going to continue to fight the battle between big industry and the little guy and the environmentalists.”
Frank Umbach, Senior Associate and Head of the Programme “International Energy Security” at the Centre for European Security Strategies noted that infrastructure projects were all blocked by the same people.
“If the state owns the land, the situation different. I always wonder why the industry hasn’t been more proactive. The environmental movement has set the debate,” he said. “You need to have people on your side, with independent expertise and can’t stick to lobbying or traditional communication strategies.”
One delegate suggested getting people inside the economics of the projects, actually turning them into stakeholders.
Gabor Bada asked: “What are the key elements to make unconventional gas development a commercially successful story?”
“Big oil’s tolerance for marginal success is very small,” said Chris Faulkner. “Unconventional resources’ driver in the US was smaller companies. I think we need to find a way to open our doors for smaller companies in Europe, to make things easier for them to import technology and people to try come in and make something.”
He noted that ConocoPhillips may have been a great partner for 3Legs, but other supermajors had low tolerance levels for success and without smashing results would move on to focus on “low hanging fruit.”
“You see in America where all these independent companies drove all these shale gas finds and then they came in and bought those companies up once they proved these reserves and proved these plays. Maybe that’s the answer in Europe,” he offered, suggesting that regulation could be set at a broader level.
“The bar has been set very high by the supermajors,” concurred Loyd Roberson. “They have to get a return on investment – their business model is such that if they don’t have prolific results in short amount of time, they can’t afford to support the operation. Whereas the business model of the independents in the US – their core competency is based on fewer people with a lot of knowledge that can provide results to provide return on investment, but it doesn’t have to be such a massive volume, so it’s a lot more feasible for them to continue than for the multinationals.”