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Sun Dec 21 06:02:33 SAST 2014

Cashing in on banned tech

Reuters | 06 December, 2012 00:46
France's President Francois Hollande delivers a speech at the Elysee Palace during a meeting with New Caledonia authorities on the Noumea Accords (agreements), December 5, 2012 in Paris. The Noumea Accord provides for the gradual transfer of powers from France to the government in New Caledonia, with a referendum after 2014 on whether control of matters like foreign affairs, police and justice should be handed over.
Image by: POOL / REUTERS

FRANCE has banned the controversial hydro-fracking extraction technology but the shale gas revolution in the US is proving a boon to small, specialised French players in oil-related services.

Large French oil services firms such as oil rigs builder Technip and surveyor CGG Veritas have benefited from the development of shale-oil and gas fields in the US in the past few years and little-known chemical firms have also carved out profitable niches.

SNF, a privately owned company founded in 1978, is one of them. It started out as a maker of polymers - complex, minuscule particles of plastics - for the water treatment industry, which uses them to make liquids more viscous and their transportation less expensive.

But the water-soluble polymer market, which had been on a slow but steady growth path for decades, was fired up by the sudden boom in the US in hydraulic fracking, the high-pressure pumping of liquids into rock fissures to split the rock and release gas.

"In the past three or four years there has been a massive deployment of this application in the US," the company's chief executive, Pascal Remy, said.

"It was very, very quick. Our sales were multiplied by five in maybe three years."

SNF, which had expanded to the US shortly after its creation, was one of the few companies fast enough to open a new production site in Louisiana two years ago to meet the rise in demand. Its polymers are used to facilitate oil extraction and extend the lifespan of oilfields.

The group, with total revenue of $2.5-billion this year, now controls a third of the water-soluble polymer market in North America, which is growing by more than 20% a year.

Beating its nearest rival, German chemicals giant BASF, the French group said the reason for its success was that it had always focused on polymers and never sought to diversify, and invested heavily in capacity on three continents.

"We are lucky not to have any big Chinese oil groups among our competitors," Remy said. "In our sector, Chinese groups are small and rarely seen outside China."

Remy said his group was also expanding in China and Argentina, countries that have not banned hydro-fracking, which critics say could trigger small earthquakes and pollute groundwater.

French President Francois Hollande took a publicly tough tone against fracking when he took office in May, declaring it too early to rule out the possibility of it causing environmental damage and ordering the withdrawal of seven exploration permits.

But Hollande is also grappling with unemployment at a 14-year high and a wider loss of economic competitiveness, which could make pleas from pro-shale bosses, his high-profile industry minister and oil-services firms harder to resist.

SNF says its polymer-producing sites in France are competitive and that labour costs - touted by some observers as a handicap for French firms - represent only 7% of its sales, meaning low-cost Chinese producers cannot offset their transport and customs costs with cheap labour.

"Developing hydro-fracking in France would help our oil-services industry issue more patents and maintain its standing," said Roland Vially, a geologist with public-funded energy research centre IFP.

"It's the second-largest in the world, which is quite unique for a country with no oil in its soil," he said. SNF now employs about 3500 people around the world and hires 50 to 60 workers every year in France, most of them skilled, Remy said.

Saltel Industries, of Brittany, which makes inflatable patches for perforated oil and gas wells, and drilling specialist Dietswell, based near Paris, have also banked on the shale boom.

"The good news is that the gas remains locked in the ground, it won't go away, so you can imagine that, at some point, reason will win over passion," SNF's Remy said.

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