martes, 25 de octubre de 2016

The kings of fracking leave Spain by the back door

Foto: Fotografía de archivo de una instalación de gas mediante 'fracking'. (Reuters)The whole sector is in the doldrums, as can also be seen from the Ministry of Industry´s figures regarding the number of exploratory drilling licences which are currently either granted or under consideration.

Four years ago they arrived to great fanfare, and now they are tiptoeing away. That is how radical the change in Spain´s fracking sector has been. In this period, everything that could go wrong, has gone wrong for the shale gas industry. Prices have crashed, making it difficult to obtain a profit; the public administration has withheld operating licences; and on top of this, environmentalists have opposed all exploratory drilling activities, winning important political battles, particularly at regional level. As if that weren´t enough, the Castor effect has paralysed many of the technicians responsible for promoting fracking projects.  

Companies such as the Canadian oil company BNK, the US company Heyco and the North American San Leon, which arrived in Spain five years ago, are now in retreat according to all sources consulted within the sector. In four years, none of these groups nor any of the Spanish companies operating in the sector have been able to obtain an Environmental Impact Assesment – an essential requirement for any company wishing to undertake exploratory drilling. For this reason, the majority of multinationals are backing their bags and preparing to beat a discreet and gradual retreat.

Spokespersons for BNK have declined to comment on their plans and insist that they are maintaining their presence in Spain. However, BNK have given up on a fracking project located in Burgos, the so-called Sedano project. They are still waiting for the results of an environmental impact study relating to the Urraca region of Burgos. While Sedano was answerable to the Ministry of Agriculture, spanning as it did two autonomous regions (Castile and Leon and the Basque Country), Urraca falls entirely within Burgos, and is answerable only to the regional authorities. Nevertheless, the situation is not promising for BNK even in this case. (last minute piece of news: some days after this article was publiched, the company BNK recognized it is leaving its plans in Spain given that Urraca licence has expired before obtaining the EIA)

The sector has agreed to provide guarantees to the public administration worth hundreds of millions of euros, as in order to obtain an operating licence it is necessary to offer guarantees almost up to the value of each exploratory drilling operation - nearly five million euros each time. As is explained by Margarita Hernando, President of the Spanish Association for Research, Exploration and Production of Hydrocarbon and Underground Storage (ACIEP), “there are companies which are taking their guarantee money back, having had no response from the administration”. Hernando states that no group has formally admitted their intention to leave, but warns that “investments create their own schedules, and if these are not met, it is possible that some companies will look for other locations in which to operate”. Hernando also warns that all current projects are in fact behind schedule.    

There has been an overall reduction in the number of licences which are currently either granted or under consideration by different arms of the public administration, of between 30 and 50% in the last three years.
Heyco´s subidiary, Heyco Energy España SL, already appears in the Commercial Registry as a defunct company. And the sector 'lobby', Shale Gas España, which barely two years ago was extremely active in the media, no longer answers emails or phone calls. It has also been impossible to contact David Alameda, the director of this association, which all these international groups once belonged to.

Lottery numbers

Isaac Álvarez, a consultant specialising in geological prospecting, affiliated with the University of Oviedo, admits that “it has not been possible to make explorations because the environmental impact reports have been withheld. In theory, there was gas in Spain which could have been extracted using fracking, and which would have covered the country´s energy requirements for 70 years. We are talking about areas for exploration, rather than declared reserves, but it was as if Spain had a lottery number, but refused to let us know if we had the winning ticket”.

Álvarez accepts that fracking carries seismic risks, as well as a risk of aquifer contamination, as alleged by anti-fracking associations, but he explains that the risk is very low. “In the United States, we are talking about four cases in 70,000. It is a very low risk, much lower than driving a car, but thousands of people get into a car every day”, Álvarez argues.

Nevertheless, the environmnetalists have won all the battles, the real ones as well as the symbolic ones. Among the real victories: they persuaded Cantabria to prohibit fracking, and the Basque Country to reject this non-conventional extraction technique in the latest version of its energy plan. Among the symbolic victories: the Catalan parliament declared Catalonia to be ´fracking-free´, although this was somewhat meaningless given that Catalonia´s geological composition lacks the quantities of shale necessary to make exploratory drilling worthwhile. In any case, the Constitutional Court finally overturned this declaration.

The Basque exception

While international groups are withdrawing, sources in the sector explain that the Basque Hydrocarbon Society (Sociedad de Hidrocarburos de Euskadi), controlled by the Basque Government, has a different strategy. This is to continue renewing its licences and keep up its guarantees, all while keeping a low media profile, in the hope that the political climate changes in a few years. The Basque Country may have to prove itself once more a bastion of resistance of fracking hopes (the Basque Country was the first Spanish region with fracking plans).

In any case, the official figures offered by the Ministry for Industry appear devastating. In 2012, there were 57 national licences permitting general exploratory drilling, without discriminating between fracking and other types of extraction techniques. In 2015, the figure fell to 40. In 2012, a total of 48 government licences were applied for, while three years later this number was reduced to just 30. On the other hand, the number of valid regional licences on 31st December 2012 was 18, and this number is growing. In 2015 it reached 37, but these were not accompanied by the corresponding environmental impact assesments. This means that the licences have accumulated over time, without being dedicated to any specific projects. Finally, in 2012, 28 applications to carry out exploratory drilling were processed. Three years later, this figure had decreased to just 11. These are all signs that fracking is on the wane in Spain, with the reduction varying between 30% and 50%.

In the United States, a landowner is also the owner of everything that lies in the subsoil, but this legal principle has never been applied in Spain.

The failure of fracking is not due only to pressure from environmentalists. The legal framework also does not act in its favour. In Spain, an owner of real property has no rights to the subsoil, in contrast to the situation in the USA. Given this situation, fracking companies in Spain have tried to adopt the strategy of wind energy companies: channeling money to city councils. However, the mayors concerned have been more reluctant to play the game this time, having seen the problems caused by such dealings with renewable energy companies, the most famous being the scandal which led to the conviction for corruption of the mayoress of La Muela (Zaragoza).

 “Spain earns 50,000 million euros a year from tourism. However, almost 40,000 million euros are spent on buying gas and oil, now prices have come down. Fracking would have helped to bring down this energy bill. What has happened has been a real shame”, says Isaac Álvarez, who seems convinced that “it is a resource which future generations will end up turning to”.  

Translation of the article "Los reyes del fracking se retiran de España por la "puerta de atrás", published by Marcos Lamelas in, October 6th 2016. Translated by Laura Pitson