Why OMV is cautious on European shale gas

Austria’s OMV is among a glut of energy groups pursuing non-conventional gas opportunities in continental Europe.

But Wolfgang Ruttenstorfer, chief executive, is cautious about the potential of shale gas, given the challenges of extracting it.

OMV is examining  deposits in the Vienna Basin, where in the 1980s the company drilled to depths of up to 8000 metres.

“We had difficulties managing that 20-25 years ago. The pressure was too high. Then oil prices came down and the drills became uneconomic,” he told the Financial Times.

Today, new hydraulic fracturing techniques could make this gas viable, but OMV is not counting its chickens.

“We have to bear [in mind] that in Europe, in the Vienna Basin [the shale gas starts at a depth] of 5000-6000m instead of 3000-4000m. That means in terms of the economic and technical [viability] it’s still an open issue,” he said.

Helmut Langanger, head of exploration and production, put some figures on the cost-benefit equation.

“In America, where the shale gas is at 3-4km depth, you can make a drill hole for $5m. Here these drill holes will cost between $20m and $50m, so the matter starts to look a little different,” he said.

OMV has established a team concerned solely with studying non-conventional gas in the Vienna Basin, and is planning a similar study in Romania. But it will be a while before the company lays out concrete proposals.

“I don’t want to create these kind of hopes and fantasies that lack final results, so  I’m extremely cautious whether this will be an option at all,” concludes Ruttenstorfer.

Related links:

Europe the new frontier in shale gas rush (FT)