– SHALE INSIGHTS: Chris Faulkner, Breitling Oil and Gas Corporation

Shale-960-200-Blog-Banner1Mr Chris Faulkner, CEO, Breitling Oil and Gas Corporation

Chris Faulkner, Founder, President and Chief Executive Officer Breitling Oil and Gas, drives the company’s long range economic and energy outlooks, which serve as the basis for strategic planning as well as investor relations, short and long‐term business strategy, mergers and acquisitions, and the development and application of new and existing technology for optimizing recovery efficiency within Breitling’s conventional and unconventional resources. His diverse and extensive background in the oil and gas industry in North America, Europe and the Middle East covers all aspects of oil and gas operations, including project management, production, facilities, drilling and business development. Mr. Faulkner serves as an advisor to the ECF Asia Shale Committee and sits on the Board of Directors for the North Texas Commission. Chris is speaking at the 2013 Shale Gas World Europe. In the build up to the event we asked him for his thoughts on the shale industry.


Breitling Oil and Gas Corporation

Based in Dallas, Texas, Breitling Oil and Gas was founded in October of 2004 on the fundamental principles of applying state‐of‐the‐art petroleum and natural gas exploration and extraction technology to the development of onshore oil and natural gas projects. Our focus areas include Texas, Oklahoma and Louisiana. Breitling offers oil and gas investment opportunities through direct participation programs and oil and gas direct participation working interest which enable investors to participate in the potential cash flow and unique tax benefits associated with oil and gas investments. Especially important in a downturned economy, oil and gas investments allow savvy investors to diversify and reinforce their investment portfolios with a stable commodity that is in steady demand. Breitling Oil and Gas is a large independent (nonintegrated) oil and natural gas company in the U.S. with proved reserves throughout most major basins in North America. Breitling’s exploration activities are focused on adding profit generating production to existing core areas and developing potential new core areas. Breitling’s production operations supply liquid hydrocarbons and natural gas to the growing world energy markets. Worldwide production operations are currently focused in North America. The Company also holds ownership interests in both operated and outside‐operated leases in Canada, Europe and the Middle East. Breitling Oil and Gas’ primary goal is to increase the value of acquired properties through a combination of exploitation, drilling and proven engineering extraction practices, with its most significant emphasis on CO2 tertiary recovery operations.


What are the benefits for Europe in opening an unconventional portfolio?

The evidence is clear that there are substantial benefits to be gained for Europe from successfully developing its unconventional oil and gas resources. For decades Europe has been a net energy importer, and the latest IEA projections show that its dependency on imported oil and gas will continue to rise. IEA projects imported gas dependency will jump to more than 80% by 2035 from 60%


IEA projects imported gas dependency in 2010, especially with the retreat from nuclear in some countries. Because of the unconventional gas revolution in the US, EU gas prices trade at a multiple of 5 to those in the US. That this creates a competitive imbalance in energy cost terms for European manufacturers focused on exports is inescapable will jump to more than 80% by 2035 inescapable. The best indicator is to look simply at the commensurate

impacts on the US: creation of hundreds of thousands of jobs in the upstream oil and gas sector; a new global competitive edge for gas‐intensive, export‐oriented industries such as petrochemicals, steel, fertilizer, etc.; hundreds of billions of dollars added to government treasuries from taxes on increased profits, royalties, etc. Additionally, there are environmental benefits in that domestically produced natural gas offers the most economic opportunity to reduce greenhouse gas emissions in Europe’s energy mix as nuclear gets phased out in key consumers such as Germany.


How can we deal with uncertainties in public perception towards shale development?

You best deal with uncertainties in public perception by addressing those perceptions directly, bringing the science and date to bear to educating the public. Transparency is key, as is a constant communications effort. It is no small challenge, given the daily demonization of industry by those who would oppose all oil and gas development. But the effort to educate and communicate should be

Transparency is key as is a relentless.


How will shale impact upon the European energy portfolio?

I don’t see an impact at the same game‐changing level for key, constant communications effort  don’t game Europe as that of the US. For one thing, the US has advantages not only in terms of geology and oil and gas infrastructure, it has the institutional experience and geologic know‐how that comes with millions of wells and uncounted volumes of well data. But in certain areas, even modest levels of success can be leveraged to make a significant difference—mainly in reducing dependence on

volatile gas imports.


Where are the greatest opportunities for Europe to replicate the US shale boom?

Again, it isn’t likely that Europe will replicate the US shale experience because of differences in geology, infrastructure, institutional knowledge, and, quite frankly, a big difference in corporate cultures and local governments’ acceptance of onshore oil and gas development in general. (Obviously there are exceptions to the latter point in the US such as California and New York


The best prospects

York, but on the whole US antipathy toward industry is concentrated more at the federal level and with small but vocal groups of activists.) Additionally, most of the shale focus in Europe has been on gas rather than oil, which is now capturing most of the shale attention in the US today.

That is largely an accident of geology for European shale gas seems to be geology. Having said that, the best prospects for European shale gas seem to be in Eastern Europe, notably Ukraine, Hungary (despite the ExxonMobil disappointment), and the Baltic Basin, especially Poland; the UK; and the Netherlands. There is attractive potential in France too, but its firmly in Eastern Europe entrenched nuclear industry and well‐established LNG imports probably result in little incentive to chase domestic shale gas.


What are the industry requirements for producing shale gas?

From a technology and know‐how standpoint, there is no substitute for the institutional knowledge among US independents, who engineered the US shale boom. It’s no coincidence that European energy giants such as Total, Statoil, and ENI have rushed into US shale deals with these companies.

There is no substitute for

h Otherwise, it’s the same formula for any successful resource development: a stable structure for capturing industry rents via reasonable fiscal, royalty, and tax policies; a sound, consistent, science‐based regulatory regime; and a widespread recognition that, for all the talk about renewables the IEA still sees EU gas import

the institutional knowledge among US

renewables, dependency growing from 60% to 80% in the next couple of decades. Shale gas, if proven viable in Europe, has the potential to rein in that growth and perhaps stabilize it at 60%. The next time Russia cuts off gas supply via Ukraine in the dead of winter in a fit of pique would be a good time to remind Europeans of that potential.


When can Europe expect unconventional production?

Given the already slow start, it’s difficult to envision a scenario in which significant commercial volumes of shale gas will be achieved before the end of this decade. Remember, even the US boom didn’t really manifest itself until the mid‐to‐late 2000s, and that was after the granddaddy play, the Barnett Shale, took off in 2003 after 20 years of trying to crack the code there. But I’m willing to bet that the first significant volumes of shale gas to be consumed in Europe will come via LNG carrier from the US Gulf Coast.