Big Oil says to clean up shale gas business

Thu Dec 8, 2011 9:43am EST

* Big Oil says to lift shale game standards

* Green groups say they heard it before

* Companies see room to reduce costs

By Tom Bergin

DOHA, Dec 8 (Reuters) - Big oil and gas companies say their increasing dominance of shale gas exploration will bring improved drilling practices and should end the safety lapses that have led to environmental opposition to the fast-growing, multi-billion dollar industry.

Cases of water contamination and the leakage of flammable methane gas into homes are due to occasionally shoddy activities by some of the small players, who developed the industry over the past decade, rather than fundamental problems with shale gas drilling, some industry executives said.

Oil majors such as Exxon Mobil, BP and Royal Dutch Shell Plc have begun to buy up the first movers in the industry. At the World Petroleum Congress (WPC) in Doha this week, big company bosses said they would help the shale industry improve its game.

"I think Shell, or for that matter Exxon, coming in a big way into this shale gas operation will actually drive the standards up," Shell Chief Executive Peter Voser told a joint press conference with Exxon CEO Rex Tillerson.

Environmentalists said, however, the desire to avoid legislation was likely behind Big Oil's claims of future better practices.

"We do not believe this. The large companies violate the law regularly," said Amy Mall, senior policy analyst with the Natural Resources Defense Council in Washington, D.C.

The oil and gas industry fears that public opposition will drive increased regulation and restrictions on where it can drill.

"Nature has given mankind the gift of natural gas. But our hope now is, 'Please don't let government mess it up'," Jim Mulva, chief executive of ConocoPhillips told the Congress.

The industry leaders say their massive research efforts can help ensure the safety of the 'fracking' technique, which involves blasting water, sand and chemicals into deep underground reservoirs to release the gas trapped inside.

"I think companies like Exxon, we always put a high priority on technology, so whether that's shale gas or any other resource development, technology is a key part of it for us," Rich Kruger, president of Exxon's production unit, told Reuters.

Jack Gerard, president of the American Petroleum Institute, the U.S. oil and gas industry's main trade association, said tough financial constraints on some of the companies that led the shale gas revolution may have contributed to some of the problems associated with drilling.

"There's a lot of competitors in the business, and as people are driving those opportunities and looking for opportunities ... it tends to move rapidly, and sometimes they're not thinking of the total consequences," he said.

But Erika Staaf, clean water advocate with Philadelphia-based PennEnvironment, said the claim that bad practices would be phased out as so-called "rogue" operators are taken over was not new.

"That is a refrain that we've heard again and again," she said.

One thing the arrival of the big players to the market is unlikely to bring is additional money. As the business expands, companies are seeking to reduce the amount of spending on drilling.

Shell has established a "well manufacturing" joint venture in China, which it hopes will provide more cost-effective means of drilling shale gas wells that can be applied worldwide.

Speaking at the WPC, Andrew Gould, chairman of Schlumberger , the world's largest provider of services to the oil industry, said companies had significant opportunities to cut costs.

"Current methods are wasteful and expensive," he said.