Have some of the biggest French banks been trapped by the shale gas and oil bubble? According to data collected by a report by the NGOs Reclaim Finance and Les Amis de la Terre, published on Wednesday May 13, the four main establishments in France have granted $ 24 billion (22.1 billion euros) in funding to the North American shale industry between 2016 and 2019.
Societe Generale is by far the most active bank in the sector, with almost $ 11 billion in financing alone over the period. Next come Crédit Agricole ($ 6 billion), BNP ($ 3.6 billion) and the Banque Populaire Caisse d´Epargne group ($ 3.3 billion). Other players, such as Axa and Rothschild & Co, have also committed $ 12 billion over the past three years to finance companies active mainly in the shale sector.
In order to maintain a good level of production, it is therefore necessary to drill continuously, which requires colossal investments.
The active presence of major French banks in the sector since 2016 can be explained by the renewal of shale drilling in North America. Mastery of this technology has enabled the United States to become the world's leading producer of oil and natural gas. But from the start, this revolution has had a weak point: wells drilled with hydraulic fracturing technology produce a lot at first, then decline rapidly.
In order to maintain a good level of production, it is therefore necessary to drill continuously, which requires colossal investments. Shale oil was profitable with a barrel of oil at $ 50 or more. But the black gold crisis brought about by global containment measures has brought this model down, probably for a long time.
Banks financed infrastructure
This intrinsic fragility has not prevented French banks from financing not only companies active in drilling, but also infrastructure. This is particularly the case for Societe Generale, which granted direct funding of $ 3.9 billion between 2016 and 2019 to pipeline and gas terminal projects. "The scenarios of the International Energy Agency that the bank uses to pilot integrate the role of gas, including North American shale gas, to participate in the transition to a low carbon economy in certain geographies. This indeed has better environmental efficiency than coal for the production of electricity ”, justifies Societe Generale. The Paris climate agreements, signed in December 2015, nevertheless outline a trajectory in which new hydrocarbon drilling should be banned.
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