BASF's Wintershall eyes German shale gas potential

* To study two areas in North-Rhine Westphalia

* Aware of economic, environmental uncertainty

By Andreas Rinke

BERLIN, Sept 7 (Reuters) - Wintershall, the oil and gas arm of German chemicals group BASF, said it was to explore for shale gas in Germany, making the possibility of large-scale fracking more likely in a country where distrust of unproven energy technology runs high.

Germany has yet to decide whether it will be economically and environmentally sensible to allow shale gas to be extracted by fracking - a drilling method that employs special processes, injecting large amounts of chemicals and water.

For its part, Wintershall, like U.S. peer ExxonMobil , is keen to explore the prospect of a new type of gas reserves in the centre of Europe where conventional supplies are dwindling, following a boom in U.S. shale gas production.

"We plan geological investigations at two concessions in North-Rhine Westphalia to see if the potential is there," Wintershall chief executive Rainer Seele told reporters on Friday, adding that the areas totalled 3,900 square kilometres.

Germany's Federal Institute for Geosciences and Natural Resources (BGS) has estimated the country's unconventional gas reserves at 0.7-2.3 trillion cubic metres.

In the United States, fracking has produced so much gas in recent years that domestic prices fell 75 percent, making the country independent of gas imports and changing gas flows in the world market.

Germany, where certain forms of fracking have been used safely for decades to tap conventional gas reserves, relies heavily on imports. It produces 14 percent of its gas at home, while Russia supplies 40 percent.

"Germany cannot not just rely on imports permanently," Seele said.

The main challenges for shale gas production in Germany will be to reconcile the new extraction processes with the need to safeguard drinking water, avoid seismic risks from hollow areas and prevent the release of trapped methane.

Parliamentary hearings have focused on future risks and studies have been commissioned at federal level.

Individual German states will need a federal ruling to be clear whether they can ban or allow the novel exploration methods on their territory. North-Rhine Westphalia has suspended its permission for fracking to go ahead while the process is under way.

Wintershall said it already used fracking methods in Germany and also Argentina, the Netherlands and Russia. (Writing by Vera Eckert; Editing by Dan Lalor)