Toreador resources Corp. (TRGL)

[Picassa]

PARIS—U.S. oil company Toreador Resources Corp. has bet big on pumping millions of barrels of oil locked away in deep shale rock formations in northeastern France. But it could be some time before this oil sees the light of day.

Amid growing concern over the environmental impact of drilling for shale gas and oil, the French government is considering banning exploration in the country—a first in Europe.

"We have all our eggs in this one basket," said Toreador Chief Executive Officer Craig McKenzie. "It's unthinkable that all drilling could be banned."

Shale oil deposits are pockets of oil trapped in pores of sedimentary rock called shale. Miners use a process known as hydraulic fracturing—or fracking—in which water, sand and chemicals are pumped into the ground to crack open the rock and force the oil back to the surface.

In Europe shale oil and gas reserves remain relatively unexplored compared to the U.S.—where they are touted as an abundant source of cheap local energy. Poland is estimated to have large reserves of shale gas, while exploratory projects are taking place in the U.K. and Germany.

France is unique in that it potentially has some of the most abundant shale oil reserves in Europe, Mr. McKenzie said. "We looked at other basins in Eastern Europe and we didn't find any as promising as the Paris basin," just southeast of the French capital.

However, environmentalists have raised concerns about fracking, saying the chemicals used in the process could contaminate groundwater supplies. "It is clear that this technique is not acceptable," said environmentalist José Bové, who has lobbied against the practice, in an interview. "You can't just pump toxic material into the ground."

Mr. Bové cited a U.S. report published by senior House Democrats earlier this week that stated that the drilling fluids used to extract the shale oil and gas contained chemicals, some of which are possible human carcinogens. The oil and gas industry dismissed the report's findings, saying it relied on weak data.

The French government has ordered a scientific enquiry into the economic and social effects of shale gas and oil that is due to be presented in June. But with the 2012 French presidential elections looming, politicians are under pressure to act.

In May, the French Parliament will debate a fast-track law that proposes banning the exploration of shale oil and gas.

"France is currently the first country in Europe which is considering banning exploration of shale oil and gas," said Jean-Luc Romain, an energy analyst at CM CIC-Securities in Paris.

The country's "obsession with precaution is preventing all progress in expanding energy resources."

Toreador said it is respecting a government-imposed moratorium on unconventional drilling, which has been imposed until mid-june.

Toreador Resources' Mr. McKenzie said that there no evidence that mining for shale oil pollutes water reserves. "What is unfortunate is that there seems to be a parliamentary debate ahead of the results of the [scientific] studies," he said.

Toreador is prepared to be totally transparent on the chemicals it uses in water, which include soap and a type of disinfectant, Mr. McKenzie said.

Toreador recently sold its interests in operations in Eastern Europe and Turkey to focus its business on exploring oil sites around 100 kilometers southeast of Paris.

In 2008 Toreador acquired extra permits to explore the Paris basin. Two years later it entered a partnership with Hess Oil France SAS and planned preliminary exploration.

Toreador estimates that about 40 billion barrels of oil could reside in the part of the Paris basin it has access to.

Until late in 2010, all was going to plan. Then Mr. Bové—famed for destroying a McDonald's Corp. restaurant during a protest against globalization—turned his attention to shale oil and gas. Political opinion followed soon after.

Toreador's market capitalization has since has shriveled by about 50% to $182.4 million. Toreador has no immediate plans to leave France, but the company is looking "at all options," Mr. McKenzie said.

Nearly 80% of France's energy comes from nuclear power plants, according to the French energy ministry. "France needs to look into energy diversity," Mr. McKenzie said.

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