Germany should thoroughly debate whether it can afford an outright ban on the production of shale gas, a form of unconventional natural gas found in shale rock formations that has helped turn the U.S. energy market upside down, the chief executive officer of the country’s largest oil and gas producer said Wednesday.
“The production of shale gas could be a great opportunity for Germany”, said Rainer Seele, CEO of Wintershall, a unit of chemical giant BASF SE (BAS.XE).
However, shale gas production is controversial in Germany as it requires the application of hydraulic fracturing, a technology also known as fracking that is used to extract unconventional natural gas deposits that cannot be released by simply drilling a well. Fracking involves pumping huge volumes of water and chemicals underground to fracture rock formations and release the trapped gas deposits.
Mr. Seele conceded that shale gas production in Germany is unlikely to turn the domestic energy market upside down, contrasting developments in the past few years in the U.S., where shale gas production triggered a massive slide in gas prices and is set to make the country the world’s largest gas producer.
However, shale gas production could help keep indigenous gas production at present levels for at least another 100 years, he said.
Germany is in the midst of phasing out all nuclear power generation through 2022 and intends to replace most of its fossil-fueled power plants with “green” energy such as wind and solar power. Gas, which emits less carbon dioxide than coal, is widely considered as an acceptable backup for intermittent renewable energies.
Germany’s state-owned Federal Institute for Geosciences and Natural Resources said last year the country has significant shale gas reserves that–if produced–could theoretically meet the country’s gas consumption for the next 10 years and help it to considerably reduce reliance on energy imports.
Mr. Seele also criticized the fierce rejection of the fracking technology by vast parts of the German population for fear of environmental harm.
“Many people don’t know that around one third of indigenous production of conventional gas can only be produced through application of hydraulic fracturing”, he said.
Mr. Seele added that a large portion of that is known as tight gas, a form of natural gas trapped in extremely dense rock formations. In contrast to shale gas, tight gas carrying rock formations are generally located much deeper underground and are therefore not in close proximity to ground water reservoirs.
Mr. Seele said that the controversy surrounding the issue of shale gas and fracking has effectively resulted in an outright ban of the technology for fear of public outcry on environmental grounds.
He added that authorities in Germany haven’t approved any fracking requests since the middle of 2011, which has accelerated the decline in indigenous gas production, which is already on the decline as wells are gradually depleting.
Last year, domestic gas production declined to 12% of overall consumption, in part due to the ban on fracking, Mr. Seele said.
Germany’s gas and oil industry association WEG last month said that indigenous gas production declined by a further 10% in the first half of 2013 compared with the same period a year earlier. The lobby group also attributed the fall to failure by authorities to approve fracking activities.