Plans to begin shale exploration in Romania are facing opposition from local groups worried about the negative effects of hydraulic fracturing (or fracking) technology.  Chevron (NYSE:CVX) has been aggressively pursuing plans to explore shale prospects in Europe, targeting countries like Poland and Romania. In Romania, the company has obtained concessions to explore more than 2.2 million acres for shale gas. In neighboring Bulgaria, where Chevron also held exploration permits, authorities banned the process of fracking last January. Unlike Exxon Mobil (NYSE:XOM), which has major shale gas operations in the U.S., Chevron seems to be more determined to use its technology in international markets where gas prices are much higher than in North America.
We have a $109 price estimate for Chevron, which is at 5% premium to its current market price.
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Environmentalists across the U.S. and Europe have raised concerns regarding the environmental impact of fracking. The process has been banned in France and Bulgaria and companies risk EU wide regulations. However Poland has been against such regulation,  the country sits on some of the largest shale reserves in Europe and it is hoping to develop them to reduce its dependence on Russian gas imports. C
hevron has said that it would take the company around 3-5 years before it can decide on proceeding with shale exploration outside of the U.S. Many technical and logistical challenges have to be handled before natural gas can be extracted on a commercial scale in Europe. Differences in geology and higher population density in Europe are seen as hindrances to the adoption of shale exploration.
The Romanian president Traian Basescu has supported exploration of the country’s reserves,  but with new demonstration against fracking in March, the government may be forced to reconsider its plans as in the case of Bulgaria. Our gas production volume and price estimates for Chevron assume that the company will be able to begin production of shale gas in international markets such as Europe and Latin America over the next few years. Chevron will also be bringing up its massive LNG projects in Australia in this period, targeting Asian markets.
- Chevron Warns of Challenges for Fracking Abroad (trefis.com)
- Chevron Sticks to Shale Exploration Despite Low Prices (trefis.com)
- Exxon’s Polish Fracking Plans Hit an Air Pocket (trefis.com)
- Exxon Takes the Long View with European Shale Prospects (trefis.com)