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France Blocks Drilling In French Guyana On Environmental Concerns

06/13/2012 | 03:17pm US/Eastern

By Geraldine Amiel and Alexis Flynn

Citing environmental concerns, France Wednesday suspended offshore oil exploration drilling permits in its overseas district of Guyana, a move that surprised oil majors that have beem eyeing a hot new geological play.

The French environment minister, Nicole Bricq, a member of President Francois Hollande newly-established administration, confirmed the decision, citing concerns for the local marine fauna. The permits will be suspended until the mining code has been reviewed. The current code wouldn't allow either the local population and stakeholders to be consulted on drilling, she said.

"The government doesn't call into question exploration on the Guyanese reserves but wishes to deeply reform the mining code to restore the national sovereignty in terms of the exploitation of its own resources and better protect the environment," the minister said in a statement.

The move, which was cheered by environmentalists, underscores anew the difficulty oil majors face in getting access to choice reserves. Oil majors around the world have embarked upon a global race to find new reserves and replace their current production.

Although located on the other side of the world from France at the East-Northern tip of South America, French Guyana is a French department and considered French soil.

A spokesman for Royal Dutch Shell PLC (>> ROYAL DUTCH SHELL PLC-B), the operator of an offshore project, said he had no information on the French government's move. "We have not been officially informed of this action and have no comment at this time," he said.

Shell, along with partners Tullow Oil PLC (>> Tullow Oil plc) and Total SA (TOT), has made significant discoveries in its license areas in the region, which geologists believe contains oil reservoirs that mirror those off the coast of West Africa.

Total wasn't immediately available to comment, while Tullow referred all questions to Shell as the operator.

The move comes a few days before the drilling operations were expected to start.

Ms. Bricq' move was praised by environmental protection association Guyane Nature Environnement. "We hail this decision," the association's representative Christian Roudgé said in a telephone interview. "These are risky industrial activities and they should be properly framed, which was not the case with the current mining code," he added.

The NGO called upon the government last week to end the exploration process, claiming that the project was weak in terms of plans to address potential pollution, with oil companies planning to use dispersant pollution products and drilling methods which are not allowed in France.

Write to Geraldine Amiel at geraldine.amiel@dowjones.com and alexis.flynn@dowjones.com

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