Niche French Chemical Firms Ride U.S. Shale Gas Wave
France may have banned the controversial hydro-fracking extraction technology, but the shale gas revolution in the United States is proving a boon for small, specialised French players in the oil services sector.
Large French oil services firms such as oil rigs builder Technip or surveyor CGGVeritas have benefited from the development of shale oil and gas in the U.S. in the last few years, but little-known chemical firms have also carved out profitable niches.
SNF, a privately-owned company founded in 1978 near the southeastern town of Saint Etienne, is one of them.
It started out as a maker of polymers - complex, minuscule particles of plastics - for the water industry, which uses their soluble properties 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 for decades, was fired up by the sudden boom in the U.S. in hydraulic fracking, the high-pressure pumping of liquids into rock cracks to release gas.
"What happened in the last three or four years is a massive deployment of this application in the United States," the company's chief executive, Pascal Remy, told Reuters.
"It was very, very quick. Our sales were multiplied by five in maybe three years."
SNF, which had expanded to the U.S. shortly after its creation, was one of the few companies able to quickly open a new production site in Louisiana two years ago to meet the rise in demand, with its polymers 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, Remy said.
Beating its nearest rival, German chemicals giant BASF, the French group said the reason for its success is that it had always focused on polymers and never sought to diversify, investing heavily on capacity on three continents.
"We are lucky not to have any big Chinese oil group 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 the hydro-fracking technique, which critics say could trigger small earthquakes and pollute groundwater.
French President Francois Hollande hit a publicly tough tone against fracking since he took office in May, declaring it too early to rule out any environmental damage and ordering the withdrawal of seven exploration permits.
"The debate is a bit sterile today. We don't really understand why this debate is not being held on more technical grounds," Remy said.
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 - only represent 7% of its sales, meaning low-cost Chinese producers cannot offset their transport and custom 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 3,500 people around the world and hires 50 to 60 mostly skilled workers every year in France, Remy said.
Brittany-based Saltel Industries, 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 one point reason will win over passion," SNF's Remy said.