In Search of France's Shale Oil

A green and red nodding donkey pump sits in a rural landscape east of Paris, one of hundreds in France that produce smooth, dark brown crude oil.

It pumps 15 barrels per day, a tiny offering collected once every two weeks by a truck to supply a nearby refinery.

France is no Texas.

But Toreador Resources, which operates the Nangis nodding donkey, moved its headquarters from Dallas to Paris in 2009 to focus on French oil production.

The reason is shale oil -- crude locked tight in rock formations -- now accessible thanks to new drilling techniques, but which green groups say are damaging for the environment.

With oil prices rising above $100 per barrel France's bet on expensive shale oil output could pay back.

Analysts estimate the break-even price for shale at around $50 a barrel, attractive at current prices.

France is the only European country to be considering the production of shale oil, analysts say.

The Paris basin has similar traits to the Bakken formation in the United States, which has 4 billion barrels of recoverable shale oil, the International Energy Agency said.

Toreador is at the vanguard of shale oil exploration in France, after sealing a partnership with U.S. Hess Corp and snatching half the exploration permits in the Paris basin.

"The Paris basin has not been very prospected and there are still oilfields to be discovered," said Toreador Managing Director Emmanuel Mousset.

But increasing doubts over the impact of shale technology on the environment voiced by local pressure groups and green lobbies have pushed authorities to ask oil firms to delay first test drills until a commission has issued its final report in June. (Read More about the French Government's Action HERE)

This is a blow for Toreador, which was planning its first test drills in the next few weeks.

The technology used to unlock natural gas and oil from tight shale rock uses hydraulic fracturing to release hydrocarbons by injecting high-pressure water mixed with sands and chemical additives.

Roland Vially, geologist at France's institute for petroleum and renewable energies estimated there lies up to 200 billion barrels of oil under France, six years of world consumption.

"France has oilfields but the potential is certainly superior to what we believed," Vially said.

FOURFOLD RISE?

But shale oil, unlike shale gas, will not be a game changer for world supply because recovery rates are poor, the Paris-based IEA said.

Recoverable rates for conventional oil stand at 25 percent, but fall to around 2 percent for shale.

France produces a minute 10,000 barrels per day of conventional oil, only one percent of its consumption, an output steadily declining, like other reserves in the world.

Russia, currently the world's largest oil producer, pumped over 10 million barrels per day in 2010.

Half of France's output is in the Paris basin, a formation of sedimentary rocks which covers an area of 180,000 square km in northern France. The rest is produced in the southwest.

Mousset said French oil output could rise fourfold in the next 5-10 years as firms start producing shale oil.

"We are not going towards a Paris basin covered with derricks, but towards production zones," said Mousset, a 58-year old geologist. "Source rocks will not work everywhere."

"We could imagine a production level at around 40,000 bpd which is what France produced in 1986," he said, adding this would mean building an additional 100 oil wells to the 350 which already exist in the Paris basin.

All the additional oil produced will be delivered to the nearby Total SA Grandpuits refinery and sold at international oil prices, Mousset said.

Mousset believes that a production of up to 100,000 bpd could be achieved in a few decades.

"But of course there will never be an oil well in Paris," Mousset said. "The Eiffel tower is not a derrick

Source: FuturePros