September 17, 2012 / 2:27 PM / 5 years ago

OMV abandons Austrian shale gas plans

VIENNA, Sept 17 (Reuters) - Austrian energy group OMV has abandoned plans to produce shale gas in Austria because the hoops it would have to jump through to address environmental concerns made the project economically unviable, it said on Monday.

Shale gas is trapped in rocks and requires "fracking" to unlock - a drilling method that involves pumping pressurised water, chemicals and sand underground and is criticised by many environmentalists, who say it can pollute water supplies.

Energy groups are keen to explore the prospects of a new type of gas reserve in the centre of Europe, where conventional supplies are dwindling, following a boom in U.S. shale-gas production that has freed the country from gas imports.

But OMV said the introduction of a law in Austria that obliges companies to have a detailed environmental inspection before each planned project meant it was not worth its while.

"In this context, the project is economically not viable," OMV's head of exploration and production in Austria, Christopher Veit, told Austrian ORF radio.

OMV had said last December it planned to spend up to 130 million euros ($171 million) plus development costs to search for shale gas in Austria, but only if environmental issues could be resolved.

Like all exploration projects, the chances of its panning out were slight, it said at the time, but success could have covered Austrian demand of 8 billion cubic metres for two or three decades, it estimated.

Oil majors and small exploration companies have flocked to exploit what are estimated to be vast reserves of unconventional gas in Poland.

Austria, Hungary and the Czech Republic are seen as having some potential but not on the scale of Poland, and not enough to justify huge regulatory hurdles. Shale exploration is on hold in the Czech Republic due to environmental concerns.

An OMV spokesman said the decision would not affect any potential future plans to explore share gas elsewhere. ($1 = 0.7606 euros) (Reporting by Georgina Prodhan and Angelika Gruber; additional reporting by Michael Shields, and Michael Kahn in Prague; editing by James Jukwey)

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