Business aspects of shale gas exploration/production

Unconventional natural gas, including the well known shale gas, means potential concrete meaningful economical benefits to Poland. First of all, a lower gas price, national  energy security improvements and an enhanced position of Poland in the European Union and worldwide. The development of extractive industry will create new jobs and sizable revenues to the State Treasury.

  • How that goal can be achieved?
  • How realistic are our hopes associated with the so-called shale revolution around the world and shale gas production in Poland?
  • What is the economics of exploration/production projects?
  • How the projects implemented in Poland are affected by global oil and gas market developments?
  • Do other countries compete with Poland for the investors and their assets?

Gas price is highly contingent on its supply. An additional gas production in Poland is expected to bring gas price down.

A higher supply from domestic sources has other consequences for gas pricing in Poland. Domestically-produced gas and production capacities will mean an alternative to gas imports, improving Poland's position in negotiations and, indirectly, will help to purchase imported gas at a lower cost.

Less expensive gas, which is an important cost factor for the chemical industry and a potential source of electricity, will be the primary benefit from domestic production. This benefit translates directly to a number of secondary benefits. Lower costs borne by industrial consumers will make them more competitive with direct positive effects on the employment market and State Treasury's revenues.

At the same time, domestic gas sources enhance supply stability and this translates into broadly defined Poland's energy security. Secure gas and electricity supply means an improved confidence of both citizens and companies in the State, which is a precondition for economic development of the entire country. Many industries will be unable to develop without natural gas and its secure supply.

  • How to build infrastructure facilities to accommodate higher gas production?
  • In what directions should go changes in national and regional energy policies?

Shale gas exploration and production mean more than merely less expensive gas and supply security. This is also a number of complex technologies and expert knowledge. Those employed in that industry will benefit directly from the development and all of us will be the indirect beneficiaries.

  • How to develop extractive industry in Poland?
  • How to combine scientific research with operations of individual companies and of the Government in order to expedite the development of that sector?

Global aspects of shale gas exploration/production must be kept in mind. Additional natural gas production from unconventional sources in the USA and Canada has already changed the global market of that commodity and the competitiveness of particular countries.

Striving for domestic production, Poland is part of that play, as both active and passive player affected by other players' decisions and moves. The European Union and USA – traditional importers of energy commodities, China and India – entering the market as significant buyers and producers alike, Middle East countries and Russia – the leading producers, all of them have a huge effect on any decisions related to oil and gas production in Poland.

Their decisions on, for example, climate change or production/trade policies have an effect on global oil and gas prices. Companies from these countries invest in development of unconventional oil and gas resources. This is one more element that should be considered when discussing the shale gas revolution in Poland.

  • What Poland should do in order to enhance domestic production capacities and improve its international position?
  • What other countries do and how their actions influence our situation?

Finally, the last and probably the most important element: the economics of exploration/production projects. The cost component in combination with technology and techniques that on one hand reduce the costs and increase revenues on the other, are the key factors affecting the viability of our shale gas projects. Several other questions emerge.

  • What is the effect of exploration, appraisal and production technologies on the viability of the shale oil and gas business?
  • What is the effect of production and transmission infrastructure on that viability?
  • What is the effect of regulations, including those on tax liabilities?
  • How the extractive industry affects the cost of capital?
  • Will technology development enable a viable commercial development of existing shale oil and gas resources?

We will attempt to answer in our service these and other questions on economic aspects of shale oil and gas industry. Some of them have been included in the Economy Section.

Enjoy the reading!

 

author: Antoni Fałkowski, redaktor tematyczny Działu "Gospodarka" w serwisie "Gaz i ropa z formacji łupkowych"

 

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