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INTERVIEW-German gas freeze menaces Wintershall's technology exports
March 14, 2014 / 2:46 PM / 4 years ago

INTERVIEW-German gas freeze menaces Wintershall's technology exports

* Germany halted exploration two years ago due to shale controversy

* Lack of new experience may undermine Wintershall’s technological edge

* Company eager for complex exploration ventures in Middle East

By Vera Eckert

FRANKFURT, March 14 (Reuters) - Germany’s two-year-old freeze on new exploration for gas means Wintershall is less able to develop expertise at home and therefore risks losing its competitive edge abroad, a board member of the energy company said.

Environmental and political opposition to U.S.-style shale gas fracking has led German authorities and policymakers to refuse new licences, even for conventional gas technology, while debate continues over a federal law on the future framework.

Martin Bachmann, who is in charge of exploration and production at the Kassel-based German oil and gas champion, a unit of BASF, said technology transfer is crucial for its progress in new international ventures.

“If the virtual ban on new domestic activity stays in place, we fear that we won’t remain competitive in developing valuable expertise on our doorstep that we need to succeed internationally,” he said in an interview with Reuters.

Hanover-based oil and gas association WEG estimates there is an investment jam of 1 billion euros ($1.4 billion) for unrealised projects in Germany.

Wintershall says that in the state of Lower Saxony with its complex geology, where the company has been extracting hard-to-exploit oil and gas for over 80 years, the standstill has halted 100 million euros of investment.

While Wintershall can hone its exploration skills abroad, the concentration in Germany of higher education and research institutions, and access to staff and funding, have made domestic activity particularly rewarding.

Germany’s small and fragmented fields meant special efforts had to be made to extract gas and such challenges have made Germany an innovation centre building on past investment.

INCREASING DEMAND

Bachmann said experience gained in Germany was now in increasing demand for big energy projects around the world.

“These efforts are only becoming relevant now in the bigger oil and gas regions of the world,” he said.

“You can avoid repeating mistakes and make enormous cost savings in future. This effect is transportable.”

For example, Wintershall is working with Austrian peer OMV and Abu Dhabi state oil firm ADNOC to exploit sour gas, a high sulphide hydrocarbon that is now mostly exhausted in Germany, where BASF gained the expertise to treat it so it is usable.

“They (Abu Dhabi) don’t need us for conventional gas but when it comes to more difficult sour gas, we can use our experience there,” Bachmann said.

The collaboration is meant to build a bridgehead for further activities in the Middle East, where mass production of sweet gas, that does not need cleansing, has been the norm so far.

“Now with rising standards of living and more power supply needed, more gas is used domestically, so there is more demand for gas in the producer countries themselves,” Bachmann said.

The BASF subsidiary, with operating profits (EBITDA) of 3.1 billion euros, is small in comparison with big oil companies but it is cost-efficient. It has had a successful partnership with Russia’s Gazprom in Siberia, where its technology helped open doors to exploit complex fields.

It has just agreed on co-operation with BP in North Africa.

Sources familiar with the matter said this week that Wintershall is in the final bidding race for RWE’s oil and gas unit DEA, which could help it add weight and size, but the company has declined to comment. ($1 = 0.7180 Euros) (Reporting by Vera Eckert; Editing by Anthony Barker)

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