Chevron relinquishes fracking in Romania, as part of broader pull-out from Eastern European fracking operations

A year ago I made several posts about Chevron’s plans to begin fracking operations in Romania’s portion of Moldova. News surfaced on Friday that Chevron has relinquished interests in drilling frackable shale fields in Romania (and other countries), completely ending all of Chevron’s work on shale gas fracking in Eastern Europe. The news comes from no less than the Wall Street Journal, Bloomberg Business, and Chevron’s yearly 10K filing with the SEC.

The town of Pungesti, in the heart of Romania’s portion of Moldova, had learned enough about the side effects of fracking, after Chevron began work on a drilling pad just south of town, that they staged an intense months-long protest that eventually drew world-wide attention. Despite the protests, Chevron was able to start drilling an exploratory well in April 2014, finishing the exploratory work in July 2014.

In November 2014, in the final weeks of Romania’s national elections that saw Klaus Iohannis win over then-Prime Minister Victor Ponta, Ponta said during a national TV broadcast “It looks like we don’t have shale gas, we fought very hard for something that we do not have. I cannot tell you more than this but I don’t think we fought for something that existed.” (original: “Oricum s-a amânat, pentru că se pare că nu avem gaze de şist, ne-am bătut foarte tare pe ceva ce nu avem. Nu pot să vă spun mult mai mult decât atât, dar nu cred că ne-am bătut pe ceva care exista.”) Ponta was running for President of Romania, but lost to Iohannis, and was able to retain his position as Prime Minister and has since been pushed out of the Prime Minister job .

At the time Chevron responded saying that their engineers were still studying samples. But it was a clue that perhaps the results of the exploratory drilling were disappointing.

Indeed, a Chevron spokesperson told the Wall Street Journal on Friday, Feb 20, 2015, that they’re “are in the process of relinquishing our concession interests” without explaining why.

The company’s 10K yearly filing with the SEC, also filed on Friday, disclosed the following phase-outs of activity in Eastern Europe:

Lithuania: Chevron divested its 50 percent interest in an exploration and production company in mid-2014.
Poland: In first-half 2014, Chevron completed a 3-D seismic survey on the Grabowiec concession. The company also entered into a joint exploration agreement covering Chevron’s Grabowiec and Zwierzyniec licenses and two adjacent licenses in early 2014. In fourth quarter 2014, Chevron relinquished two shale concessions (Frampol and Krasnik) in southeastern Poland. In early 2015, Chevron announced the discontinuation of exploration activities in Poland.
Romania: In 2014, drilling of the first exploration well in the Barlad Shale concession in northeast Romania was completed, as was a 2-D seismic survey across two of the three concessions in southeast Romania. Chevron intends to pursue relinquishment of its interest in these concessions in 2015.
Ukraine: In 2013, Chevron signed a PSC with the government of Ukraine for a 50 percent interest and operatorship of the Oleska Shale block in western Ukraine. In fourth quarter 2014, Chevron terminated the agreement.

The 10K filing also says Chevron is facing rising expenses on “dry holes” (drilling operations that end up empty handed) with 2012 dry hole expenses of $555 million, $683 million in 2013 and $875 million in 2014. The Bloomberg news report says Chevron is shifting its focus to America, and that falling oil prices meant there wasn’t as much cash available for exploratory drilling and other capital expenses related to starting new fields.

$Pungesti, Romania, anti-fracking riots so severe the grandparents were involved$

Since Chevron was tight-lipped as to the real reason for pulling out of Romania and other Eastern European countries, the above data is meant to inform a bit of speculation. The possible reasons that come to mind are:

The protests in Pungesti was too severe, and Chevron decided to back off — this seems very unlikely
There’s a technical reason, that engineers weren’t able to discern a way to make Fracking work in these shale fields. If so, it would have to be something that affects all four of the countries named above.
Falling oil prices are apparently making fracking uneconomical, and that Chevron is cutting its losses.
Increasing tension in Ukraine, following the western-backed Coup of Ukraines government a year ago, makes business investment in that region very risky. If the fighting over Ukraine were to break out into a full scale war, it might not be contained just to Ukraine. Romania could become embroiled if Russia tries to take back Moldova and Romania tries to intercede, for example. NATO, the EU and the US could escalate the fighting into a broad-scale war over Eastern Europe.

The latter two points seem most likely.

I believe all this is part of a larger geopolitical tussle between Russia and Western Europe, and earlier posts on this blog have laid out the reasoning.

The U.S. State Department, starting under Hillary Clinton’s term as Secretary of State, launched an effort to export fracking technology to every country around the world with frackable shale deposits. We don’t know exactly why, but it’s clear that Clinton is very pro-fossil-fuels. Given that she’s a front-runner for the next U.S. Presidential Election we need to be very very concerned about her stance on fossil fuels.

There is a broad worry among America’s elite class about Europe’s energy security. The European Union, and the rest of Europe, doesn’t have much indigenous fossil fuel supplies. Europe has had to turn to other regions for those supplies, principle among them being Russia. But dealing with Russia is tricky business because Russians like to exploit every weakness they can. Having Europe under economic dominance of Russia would be bad for Europe.

As a result a Congressional Research Service report describes European energy security as in the U.S. National Interest. That’s a code phrase for “we are willing to go to war over this” because Europe’s security is that important to the U.S.

And, by golly, what has the US done but to launch a skirmish in Ukraine by toppling the Ukranian government and putting the US/EU/NATO on a collision course with Russia that may blow up into a major fight.

The CRS report outlines all the ways the U.S. could help Europe out of energy dependency on Russian natural gas. Part of the plan was fracking in the countries named above, because of the shale deposits shown on the map above.

What we’ve now learned from Chevron’s actions is there’s a high likelihood that the shale deposits on that map aren’t worth fracking. Chevron had to have spent a lot of money in those countries, and have pulled out of each.

The WSJ report linked above said

BP’s annual “energy outlook” says it’s unlikely to be any significant shale production in Europe over the next 20 years because conditions aren’t as good as they were in the U.S.
ExxonMobil, France’s Total SA and Marathon Oil, have all pulled out of projects in Poland.

These factoids make a technical reason for Chevron’s pull-out seem likely. If engineers weren’t able to develop a fracking chemical cocktail that would work in these shale deposits, they might as well not waste their time and money because fracking won’t release any natural gas.

Whatever the reason that Chevron and these other oil companies have pulled out of fracking Eastern Europe, this trend is dashing one of the big hopes to keep Europe safe from Russia’s economic dominance over Europe.

In my mind it simply raises the importance of steering Europe strongly towards renewable energy, instead of continued reliance on fossil fuels. One thing to take from this is that Europe is in a hard place, facing economic domination by Russia because of Europe’s continued dependence on fossil fuels. While Europe doesn’t have much indigenous fossil fuel supplies, they do have wind and sun resources and can deploy wind turbines and solar panels. The more investment Europe makes in renewable energy resources, the more resilient they will be to Russia’s attempts at domination.Update – For a good rundown of the sequence of events at Pungesti, see http://sarahinromania.canalblog.com/archives/2015/02/21/31574782.html

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About David Herron

David Herron is a writer and software engineer living in Silicon Valley. He primarily writes about electric vehicles, clean energy systems, climate change, peak oil and related issues. When not writing he indulges in software projects and is sometimes employed as a software engineer. David has written for sites like PlugInCars and TorqueNews, and worked for companies like Sun Microsystems and Yahoo.