German oil rush in the east

Telegraph:

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Companies from across the globe, including Britain, have been competing to locate and tap oil fields once considered too small to be profitable.

But with prices now flirting with a record $140 a barrel, and forecast to keep rising, an oil rush is on to recover every last drop of Germany's energy resources.

"In 1990, all oil production was stopped in East Germany as it was not profitable," said Klaus Freytag, from the office of mining, geology and raw materials, in the former East German state of Brandenburg.

"Now with prices increasing six-fold, the boom is so big that there is a shortage of oil experts, exploration teams are booked out for many months in advance and drilling equipment is totally unavailable for purchase on the market."

German reserves hardly compare with the Arabian Gulf or Russia. Peak production in the 1960s and 1970s was just eight million tons a year, compared with current annual Saudi production of more than 500 million tons.

But while oil sources are being tapped across the country, investors are focusing particularly on the impoverished regions of East Germany.

"The East German regime constantly suffered from a lack of hard currency so they invested a lot in thorough exploration for resources," said Mr Freytag. "The explorations were very well documented, so today, we have an extremely precise knowledge about the raw materials there. That's why the terrain is attractive for new investors."

Mr Freytag said that 15 exploration licences had been awarded in Brandenburg in past two years. Companies include energy giants such as Exxon Mobile and Gaz de France. But smaller groups have also been tempted, such as Celtique Energie, a British firm which has been backed with American venture capital to unearth oil near the Polish border.

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I think Texas companies could supply the drilling equipment in pretty short order for cash payments. Texas banks, on the other hand, are reluctant to finance rig deals. When the boom is over the value of the rig reverts to scrap metal.

Still, it is good to see the Germans getting serious about finding oil production. I wish the US Congress would show the same enthusiasm for going after US resources, but that is unlikely with Democrats in charge.