Bloomberg News

Bulgaria Bans Gas Fracking, Thwarting Chevron Drilling Plan

January 19, 2012

(Updates with Chevron spokesman’s comment in fourth paragraph.)

Jan. 18 (Bloomberg) -- Bulgarian lawmakers banned hydraulic fracturing and established a 100 million-lev ($65 million) 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. 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.

“Chevron is confident that a considered review of the issues of concern in Bulgaria, using reputable scientific information, will do much to allay the concerns of the Bulgarian people and demonstrate that exploration and development can be done while protecting people and the environment,” Kurt Glaubitz, a spokesman for the San Ramon, California-based company, said today in an e-mailed statement.

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.

License Withdrawn

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 percent in 2011, the Energy Department in Washington said in a Jan. 10 report. Chevron’s Glaubitz didn’t say what the company’s next step will be in Bulgaria.

Chevron’s Bulgarian exploration license was withdrawn yesterday after hundreds of protesters marched in central Sofia last week to oppose fracking, fearing it will pollute the water and soil in Bulgaria’s most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 30 million euros ($38 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.

‘No Other Interests’

“Chevron could provide millions in investments in Bulgaria and create jobs,” U.S. Ambassador to Bulgaria James Warlick said in an interview with Nova television in Sofia today. “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.

“The ban is for an indefinite period of time and is valid for the whole territory of the country, including the Black Sea territorial waters,” Valentin Nikolov, a lawmaker in the ruling Gerb party, said in parliament today.

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.

--With assistance from Ladka Bauerova in Paris. Editors: Jessica Resnick-Ault, Charles Siler

To contact the reporters on this story: Elizabeth Konstantinova in Sofia at ekonstantino@bloomberg.net; Joe Carroll in Chicago at jcarroll8@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net; James M. Gomez at jagomez@bloomberg.net


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