Key statements by ANRM President Alexandru Patruti:
- All oil accords and exploration licenses in Romania are classified information
- As a general rule, any company holding an oil accord in Romania may operate exploration works for these unconventional resources
- Most companies holding oil accords, including Petrom, Romgaz have shown their intention. Mol has also shown intention, as well as Sterling, East-West.
- It is a resource which no state or company affords to neglect or leave unstudied for possible exploitation - by applying best practices and with a minimal impact on the environment, of course.
- The process of exploitation of any mineral resource has an impact on the environment, but this impact can be kept in check and at a minimal level by sticking to good practices.
- As a main effect on the environment, a possible - and I underline the term "possible" - contamination of subterranean waters. This contamination can be caused only by disregarding drilling and probe cementing technologies and not by the use of a certain method. Among the mentioned measures, a thorough control of probe cementation is recommended so that the liquid used in the hydraulic fracturing process not reach subterranean aquifers.
- Hydraulic fracturing is a standard method used in the oil industry for decades. The new issue rising from the unconventional gas exploitation is related tot he fact that this hydraulic fracturing method, which is initially applied to a vertical probe, has been combined with horizontal drilling. That means, in a vertical drilling one digs directionally several horizontal drillings in which hydraulic fracturing is applied.
- Because of the early phase of the research, hydraulic fracturing will not be used in Romania in the case of unconventional gas in the next several years.
- A working group was established at the European Commission level in January 2012 including Romanian experts from ANRM and the Environment Ministry
- Investments in the three perimeters in southern Dobrogea region (close to the settlements of Adamclisi, Vama Veche and Costinesti) in the next four years, involving prospects and the digging of eight classic probes with no hydraulic fracturing processes, amounts to over 80 million US dollars.
- Seismic studies have already been done in the town of Barlad and two vertical exploration drills to depths of 2,500-3,500 m will be built in the next two years. Depending on the results of the two drills, a supplementary one will then be done.
Rep.: The Government has just approved deals for the exploration and exploitation of shale gas by Chevron in three areas: Adamclisi, Costinesti and Vama Veche. What are the most important factors considered when such a deal is approved? That is, considering that the accord was approved several years after the tender...
A.P.: First of all, the deals are oil accords which means any company has the right to explore all forms of hydrocarbon deposits in the underground area for which the exploration and possibly exploitation rights were granted. The main criteria for the selection of offers were the technical and financial capacity of the bidder and the volume and value of investments they aim for in the exploration phase.
It is a standard procedure. I'd like to mention that the public offer started in 2009 when these perimeters were published in Romania's Official Gazette and in the EU Journal for international advertising and then, through 2009 and 2010, the biding and offer selection procedures, the announcement of the winner, the negotiation of oil accords procedures and starting last autumn the procedure of government approval took place. Many of these accords were signed by all relevant ministers but because of the changes in the government structure the signing procedure was restarted.
Rep.: Why are the annexes of the Government Decisions kept secret?
A.P.: In Romania, all oil accords and exploitation licenses are classified information. These oil accords are not exceptions to the rule.
Rep.: For what other perimeters might shale gas exploration and exploitation accords be approved and with which companies?
A.P.: I underline we are talking oil accords in which hydrocarbons in any form, underground deposits, are the subject of research. As a principle, any company holding an oil accord in Romania may run exploration works for these unconventional resources.
Rep.: What are the companies showing interest in mainly exploring and exploiting shale gas?
A.P.: Most companies holding oil accords expressed intentions recently. Mol also expressed intention. Sterling and East-West as well.
It is a resource which no state or company cannot afford to neglect or leave unstudied for possible exploitation - by applying best practices and with a minimal impact on the environment, of course.
Rep.: How many perimeters will be explored especially for shale gas?
A.P.: For the moment, we like any country in Europe are not in a position to say what are the possible areas and what are the resources of these unconventional rocks. Are are at the beginning of a period when we study rocks which may carry these unconventional rocks. Over the past year, at the initiative of the Agency as part of the national geological program, a group of experts from the Universities of Bucharest, Iasi and Cluj analyzed all available data from Romanian archives and conceived the first phase regarding the possibility that unconventional rocks containing gas and crude oil exist.
The first phase of the study was concluded and the study continues this year. We generally know the rocks, the geological formation which may contain unconventional hydrocarbons, but we don't know the direct data related to these formations in terms of porosity, permeability, organic substance content, depth. There is a lot of information and we're now in a preliminary phase of investigating these possibilities starting with existing data.
Rep.: What is your stand related to the impact shale gas exploration and exploitation operations might have on the environment? In the US, after many years of exploration, the negative effects on environment have started to appear. That is why there are American states which have started to reject these method of hydraulic fracturing or to push for supplementary conditions on companies exploiting shale gas.
A.P.: I will start by speaking specifically about the United States. I'd mention that in November 2011 a study ordered six months before was edited by the US Energy Department, where a working subcommittee for shale gas was formed. The results of this study show a lack of communication by companies, authorities and the population for correctly informing the people and simultaneously suggest 20 possible measures to reduce the impact on the environment. The process of exploitation of any mineral resources is a process which has an impact on the environment, but it can be kept in check and at a minimum level by both sticking to good practices and supplementary regulatory measures for developed operations.
Returning to the results of the study, a possible - and I underline the term "possible - contamination of subterranean waters would be a main effect. This contamination can be caused only by disregarding drilling and probe cementing technologies and not by the use of a certain method. Among the mentioned measures, a thorough control of probe cementation is recommended so that the liquid used in the hydraulic fracturing process not reach subterranean aquifers.
Other directions where action is needed is the reduction of methane emissions in the atmosphere when the extracted gas is treated - a treatment which is similar to the one in the case of conventional gas.
Rep.: In Romania, what effects may the use of this method have? I'm considering that the perimeters are in areas with a high density of the population.
A.P.: These perimeters are not limited to the towns for which they are named. The Barlad perimeter for example has a surface of 4,000 square kilometers, while the perimeters in Dobrogea each have a surface of 1,000 square kilometers. The name of the Vama Veche perimeter which expands from the area of the sea shore to the Danube comes is given by the fact that the largest settlement in the area is Vama Veche and is used only as a reference position.
Practically speaking, the density of the population in these areas is low. But the density of the population is not the important issue, because works are not made within towns or settlements. The issue is whether the technology, the legislation regarding mineral resources and the environmental legislation are complied with so that the impact on the environment be kept at a minimum level.
There are problems linked to the pollution of subterranean waters and in order to deal with these problems technological discipline has to be complied with fully. There are problems related to the necessary water quantity for the process of hydraulic fracturing - quantities amounting to tens of thousands of cubic meters, not millions. We are speaking millions of liters, which means tens of thousands of cubic meters of water which does not have to be drinkable. We're speaking of water in rivers and lakes. As a comparison, if we talk about the Barlad area, Siret river has an average flow of about 200 meters per second. In order to use hydraulic fracturing in a drill, one practically needs the water flow of Siret river for 100 seconds.
Rep.: Has this method been used in Romania for other resources?
A.P.: Hydraulic fracturing is a standard method used in the oil industry for decades. 30 years ago, at the drilling studies of the Geology and Geophysics University in Bucharest, I studied this method for the first time and it was presented as one of the few methods that may lead to an increase of crude and gas production. Beside the oil industry, this method is used in the exploitation of geothermal energy in dried, hot rocks.
Practically speaking, in this case two probes are dug to depths of thousands of meters, where temperatures are as high as several hundred degrees. And an inter-connection s made in these two probes through hydraulic fracturing. Afterwards, surface water is injected through one probe. Because of the hydraulic fracturing, it's spread within the rock, it gets hot, it's extracted through the other probe, thermal energy is recovered from this hot water or from resulting vapors and it is re-injected through the other probe.
Rep.: Provide some examples of areas where the method is used.
A.P.: The method has been used for all deposits of low porosity rocks. It has been used in all oil exploitation.
The new issue rising from the exploitation of unconventional gas is related tot he fact that this method of hydraulic fracturing, which was initially applied in a vertical probe, has been combined with horizontal drills. That means, from a vertical drill several horizontal drills are dug and hydraulic fracturing is applied there. This is the only difference.
Rep.: You said last year that a working group to analyze the shale gas issue may be established at the European Commission level. Has one been established?
A.P.: This working group was established in January 2012. Romania is represented there by ANRM and the Environment Ministry.
Rep.: From you information, what other countries beside France and Bulgaria are opposing this method?
A.P.: For the time being there is public talk in several European countries, but the method has not been suspended. The correct term is "suspended", not "banned". There are no such cases.
I'd like to mention that because of the early phase of research, the hydraulic fracturing will not be used in Romania in the case of unconventional gas in the next several years. We are talking about seismic studies, to learn the structure of the underground, and about classic drills to dig out samples of formations and to allow geophysical investigations.
Rep.: How costly are these studies?
A.P.: Investments in the three perimeters in southern Dobrogea region for the next four years, meaning prospects and digging eight classic probes without the use of hydraulic fracturing, amount to over 80 million US dollars.
Rep.: What is the estimated duration of prospects and exploration?
A.P.: I'd like to give you an example. For the classic deposits in Romania, we have about 40 exploration-development and exploitation accords signed and applied starting before 2000, in 1998. For these accords, were are still in the exploration phase and the Romanian Government decided last year, both for Petrom and Romgaz, to prolong the exploration period by three more years. So we're speaking about periods of up to or more than 10 years. For the oil sector, this time frame of ten years is a short one.
Rep.: What happens more precisely in Barlad? Are there prospects there, are they going on to exploration...?
A.P.: Seismic prospects were made in Barlad and over the next two years two vertical exploration drills will be executed at depths of 2,500-3,500 meters. Depending on the results of the two drills, a supplementary one will then be done.
Rep.: Is an impact study needed in the case of exploration operations?
A.P.: All activities taking place as part of an oil accord are regulated from an environmental perspective. The prospect phase is a phase mentioned explicitly in the European and Romanian legislation as one which does not need an impact study. The company executing these works submits documents to the environment agency and a decision is then issued saying an impact study is not needed.
For deep drilling, the Romanian and European environment laws say explicitly than according to the characteristics of the drilling the relevant authority decides whether an environmental impact study is needed before the environmental approval is issued. And at that moment, if the authority considers an impact study is needed, the procedure to evaluate the impact on the environement and the whole public consultation procedure that follows such a decision are launched.
For exploitation operations where an environmental approval is needed, an environmental authorization is needed. It is an extremely detailed document establishing all the terms that it has to comply with. (...)
Rep.: Romania does not have a specific legislation on shale gas. Will a draft bill in this regard be initiated, will the legislation be improved?
A.P.: The legislation will surely be improved and completed. I'll give you an example. Following the accident in the Gulf of Mexico, the US analyzed the problem. And a draft regulation on oil operation safety for the off-shore, marine sectors has been issued and is now debated. And it's not the content of the regulation over which states have generally agreed on that is discussed, but the form of application, whether it is a regulation or a directive.
If it's a regulation, it will be applied as such by each member state. If it's a directive, it will be adopted by each member state according to the legislative characteristics of each state.
As I have mentioned before, the heads of state and government from member states decided last year that these unconventional gases may be an alternative to the energy security of Europe and they have to be studied. The next phase was the discussion on reviewing the environment legislation in the EU, which is fully adopted in Romania. Following this analysis, the working group Romania is part of will see whether supplementary regulations are needed. And obviously these talks are held by experts from all Eu countries and consider the experience of the US, as exploitation there had remarkable results - 30% of the US national gas production comes from unconventional gas.
Rep.: Can the use of shale gas lead to a reduction of prices?
A.P.: It has done so in the US.
Rep.: Also in the US, in some areas, companies exploiting shale gas are forced to reveal the substances and quantities that they use...
A.P.: The European legislation and the Romanian legislation force companies to mention each chemical compound in the drilling mud explicitly.
Anyway, all the aspects are analyzed in the country as well. Experts discuss the ways to control the cementation of probes, studies that have to be made before the exploration process starts, determining the methane content in subterranean waters, possibilities to monitor rock fissures - a lot of discussions that will lead to precise rules.
Rep.: The royalty level will be the same for unconventional gases and conventional ones? Cat it change?
A.P.: According to the current Romanian legislation, the royalty level is the same. It is the right of each member state to change the royalty level considering that all mineral resources are the property of the state.