January 2012

Bulgaria bans gas fracking

Bulgarian lawmakers banned hydraulic fracturing and established a $65 million (100 million-lev) fine for offenders, thwarting Chevron Corp.'s plans to explore for natural-gas deposits in the Balkan country.

Lawmakers voted 166-6 to prohibit the drilling technique known as fracking in January. That makes Bulgaria the second country in the European Union after France to ban the process, which uses a mixture of water, sand, and chemicals to open fissures in shale rocks and release gas and oil.

The prohibition will "seriously impair" Bulgaria's efforts to reduce its reliance on Russian gas, Ivan Kostov, the leader of the opposition Democrats for Strong Bulgaria, said in parliament. Bulgaria may hold 300 billion to 1 trillion cubic meters of shale gas, the Energy & Economy Ministry has estimated. The country consumes about 4 billion cubic meters of gas a year.

In the U.S., where fracking and new horizontal drilling practices enabled the nation to surpass Russia as the world's biggest gas producer in 2010, fracking has drawn criticism from regulators and landowners concerned about potential water contamination.

Shale formations that were impervious to drilling a decade ago are fueling a renaissance in U.S. gas output that surged a record 7.4% in 2011, the Energy Department in Washington said. Chevron did not reveal what the next step will be in Bulgaria.

Chevron's Bulgarian exploration license was withdrawn after hundreds of protesters marched in central Sofia last week to oppose fracking, fearing it will pollute the water and soil in Bulgaria's most fertile farm region of Dobrudja where Chevron was planning to drill.

Chevron, the world's fourth-largest energy company by market value, won a tender in May to explore for gas in shale deposits in northeastern Bulgaria, pledging to pay the government $38 million (€30 million). The company estimated it could extract as much as 25 billion cubic meters of gas in the region, six times Bulgaria's annual consumption.

"Chevron could provide millions in investments in Bulgaria and create jobs," U.S. Ambassador to Bulgaria James Warlick said. "Chevron has no other interests in Bulgaria besides shale gas and would be forced to leave the country if its opportunities are curbed."

While fracking has made the U.S the world's largest gas producer, it has also raised concerns that the technique pollutes drinking water and causes earthquakes. The ban halts the process of issuing permits to Texas-based Integrity Towers Inc. and Denver-based oil producer Direct Petroleum Exploration Inc., which were interested in shale-gas exploration in Bulgaria.

France was the first country in the world to outlaw hydraulic fracturing of shale rocks last July. Last year exploration was suspended in the German state of North Rhine- Westphalia as well as in northwest England, where fracturing gas wells caused two tremors.

In eastern Europe, particularly Poland and the Ukraine, fracking has been hailed as a means to reduce the countries' dependence on Russian gas imports.