Moskwik: Poland's shale gas resources will be known around 2030

Recent years have shown that Polish shale gas is a difficult project, much more problematic than initially planned. The results reported so far are hardly optimistic. Moreover, it should be kept in mind that the estimated volumes of gas contained in the rocks will be lower than those of economically producible resources.

In terms of sheer numbers, twice less shale gas exploration concessions have been awarded in 2014 comparing with the previous year. According to Environment Ministry's data, shale gas exploration concessions are held by companies from 17 capital groups, both Polish and foreign ones. It should be noted that the year before concession holders belonged to 21 groups. Last month, Chevron and Lotos Petrobaltic relinquished three concessions (Kraśnik, Frampol and offshore Sambia W, respectively).

Similarly, the number of gas exploration wells is lower comparing with 2012 (in 2012 - 24, 2013 – 14, 2014 – 15 of them, respectively) [1]. Importantly, more than 10 shale gas exploration companies or corporation withdrew from Poland in the past two years (notably ExxonMobil, Marathon Oil, Eni and Talisman Energy).

Inadequate analysis of the macro-environmental factors may be the reason behind foreign companies' decision to withdrew from Poland (in addition to geology, which is beyond their control. Macro-environment is defined as a set of external factors that influence the business operating in specific country or region, in specific climate zone and under a specific political, legislative, etc. system. Obviously, macro-environmental factors are different in case of a business operating in the U.S.A. and for the same business operating in Poland, China or France. The most important feature of the macro-environment is that it strictly defines business operation and development framework, while the business itself is unable to change these conditions. From the enterprise viewpoint, macro-environmental factors are perceived as dates and events that should be known and interpreted as opportunities or threats which are beyond enterprise's control. As usual, there are some exceptions from that rule, for example, an economically or politically strong company may successfully attempt to have an effect on some macro-environmental aspects. [4]

Polish concession holders follow that trend: Petrolinvest Company controlled by Ryszard Krauze relinquished two thirds of its concessions, Polish Oil and Company (in which Government holds 70% of shares) holds 12 concessions as of October 2013, comparing with 16 of them in the past.

Last year Piotr Woźniak said that approx. 300 wells are needed in order to assess Poland's shale gas resources (100 of wells in each of the Basins – Lublin, Podlasie and Baltic, respectively). Assuming a drilling rate similar to that reported in the past years, the number of 300 wells would be achieved as late as 2030. It would be of purpose to compare the rate of drilling in the U.S.A., at the Barnett Shale (Texas), one of the world's first commercially producible shale plays. About 800 wells are drilled there each year [2]. Poland cannot be compared with the U.S. in terms of shale gas operations. However, the outlook for Polish shales may change, should at least one of the Polish basins prove to be as prospective as the productive U.S. plays. [3]

Recommendations for Poland

The Polish shale project is an investment that may start to yield any serious profits after several years or decades. A properly designed and implemented strategy should make it possible to use all the opportunity we have. Shortcomings include the legislative framework, the need to enact new regulations on gas production and its taxation. At this stage of exploration in Poland, it is important to enable the flow of funds generated by production by allowing for relatively expensive production licenses and relatively inexpensive exploration concessions, so as to encourage foreign corporations that are now, as mentioned above, are now withdrawing from Poland. The State should hold a significant share in the budget of each profit-earning well. Moreover, the tax system should encourage investments in technology development so as to establish a domestic R&D base.

Expertise sharing is vital: Polish authorities should develop, jointly with oil and gas  major, programmes of exchange with foreign research centres. Holding an event that would enable the collaboration of Polish and foreign students in unconventional oil and gas projects will facilitate information exchange and make it possible for Polish students to gather precious experience as they study.

An analysis of the oil sector development in Europe demonstrates that the Norwegian oil and gas production system is the best model for building our oil and gas sector. Obviously, it would be impossible to copy the entire model, but we should focus on the key basic factors that have enabled the oil success of Norway.

author: Kamil Moskwik, editor-in chief,





[4] Analiza Strategiczna przedsiębiorstwa, Grażyna Gierszewska, Maria Romanowska

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