Chevron ditches last European fracking project in Romania

Reuters / Mike Blake
US energy giant Chevron is terminating its operations in Romania due to poor exploration results and prolonged protests by environmentalists.The withdrawal from this fracking project will mark the end of the company’s shale gas exploration in Europe.

Because of falling oil prices and underwhelming results in Europe, Chevron is now switching its focus to home soil. Last month, the company announced it was halting it projects in Poland, and terminated shale-gas agreements in Lithuania and Ukraine.

“That leaves Romania, where we are in the process of relinquishing our concession interests,” a Chevron spokesman told the Wall Street Journal, without specifying why it was relinquishing its interest in the country. The markets, meanwhile, are waiting for Chevron’s official announcement.

While the US Energy Information Administration had previously estimated that Romania could potentially recover enough gas to cover domestic demand for more than a century, the exploration failures resulted in the country’s prime minister, Victor Ponta, saying last year that it looks like Romania “does not have shale gas.”

Globally, Chevron’s 2014 failure rate stood at 30 percent, as compared to 18 percent in 2013, according to Bloomberg. Sixteen of the 53 wells the company drilled were found to have had no commercially viable quantities of oil or natural gas.

In other parts of Europe, such as Germany and France, fracking is under a moratorium, while the UK’s pursuit of the energy source is bound by strict regulations.

Chevron recently announced that it is cutting on capital and exploratory investments in 2015 by 13 percent to $35 billion.

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The oil giant’s decision to quit is seen as a major victory for activists, who have adamantly stood against the controversial practice over the years, often clashing with police.

Fracking, the process of hydraulic fracturing and horizontal drilling on land, is much more expensive than drilling from an average water-based oil rig. Over the past several years, however, it has become relatively cheap and efficient. Energy companies, eager to get in on the riches of the American oil boom, jumped on every opportunity to make a buck, despite potential environmental costs.

Analysts believe that shale needs to sell at $60-100 per barrel to break even on the billions of debt accrued by the energy companies, but plummeting oil prices are putting pressure on shale exploration. Chevron's quest for shale riches and its subsequent problems in Europe will also be shared by market players. Exxon Mobil and Total, for example, have also quit their shale projects in eastern Europe.