When Exxon announced its intention to exit its shale gas projects in Poland in mid-June the general response in the oil and gas press was that the departure had dealt a huge blow against that country's nascent shale gas industry.
Another development – which has not helped sentiment towards the shale gas sector in Poland – was a report from the Polish Geological Institute in March this year that contradicted a 2011 U.S. Department of Energy report suggesting Poland may have as much as 171 trillion cubic feet of shale gas. The Polish report estimated that only 24.8 trillion cubic feet of recoverable shale gas reserves exist in the country.
Investors involved in the Polish shale gas sector have become more than a little nervous to say the least. For example, since March's report from the Polish Geological Institute San Leon Energy, which describes itself as "a significant player in the Polish market", has seen its shares lose around 25 percent of their value on London's Alternative Investment Market.
Of course, shares in many European oil and gas juniors have taken quite a hit in recent months, mainly in response to the Eurozone economic crisis, but Exxon's departure from Poland will not have helped firms such as San Leon drum up financial support for their own Polish plans.
However, 24.8 trillion cubic feet is still a very large amount of shale gas that, as Poland's deputy environment minister said at the time, would make Poland Europe's third-largest holder of gas reserves.
Poland, along with its eastern European neighbor Ukraine, sees the large resources of shale gas available in the country as attractive. Both of these countries, for political reasons, would prefer to escape their reliance on natural gas supplies from the Russian Federation.
Shale gas development is certainly tough to do in Eastern Europe, particularly when compared to U.S. shale gas development, due to difficult land access, inadequate infrastructure, increasing protests against hydraulic fracturing and limited availability of drilling equipment. But the stranglehold that Russia's Gazprom has over the eastern European gas market, thanks to its near monopoly over gas in the region, means that there is political will within the Polish government to drive shale gas development forward.
Poland would also benefit from an economic stimulus in terms of the tax receipts that a vibrant shale gas industry might provide, as well as the employment that domestic production would deliver.
The political will to deliver shale gas in Poland is backed up by what New York-based GBI Research describes as "suitable fiscal regimes" in the country.
However, there are significant issues to be overcome in Poland, such as the lack of a competitive market when it comes to drilling contractors and equipment suppliers, according to GBI.
In a recent report, called "Gas Shales in Europe, 2012", the research firm pointed out that there is limited availability of drilling contractors and land rigs for shale development in the country. While there were around 15 land rigs available in Poland in the summer of 2011, of which only five could be used for drilling deep shale wells, as many as 50 rigs will be needed by 2020.
Meanwhile, said GBI, pressure pumping equipment for shale projects is scarce in Poland since around 80 percent of global pressure pumping supply capacity is concentrated in North America.
Other issues include land access and infrastructure problems, as well as environmental concerns, that are likely to hinder shale gas development.
For instance, as GBI points out in its report, large parts of shale gas license areas in Poland are located in high-population areas near major cities, including Warsaw, Gdansk and Lubin. Other license areas cover agricultural land and tourist destinations.
"Such locations will require comprehensive environmental impact assessments before any major development can take place. These issues are compounded by the transportation infrastructure in Poland, which is not suitable for allowing access to heavy equipment for shale development. The roads are in poor condition and the railroad infrastructure is inefficient and does not provide last mile connectivity," said GBI.
One positive for the shale industry is that the Polish government has taken an opposite stance to shale gas drilling than that seen in some other European countries. While Bulgaria and France have both opted to ban fracking, in line with demands from the public, Poland has severely opposed any unrest against fracking and has stated that government-commissioned tests have proven fracking to be environmentally safe.
Still, there is always the risk that the European Commission could bend to the public pressure throughout Europe that is calling for a thorough investigation into fracking and a European ban. Poland, an EU member state, would have to submit to such a ban if it were ever introduced.
However, those currently involved in Poland's shale gas industry should be reassured by the fact that majors Chevron and ConocoPhillips are continuing their shale operations in the country. Big independents, such as Talisman Energy and Marathon Oil have also accumulated what GBI describes as "sizable acreages" in shale gas basins in Poland.
Chevron has four licenses to explore for natural gas from shale formations in southeast Poland. In October last year the firm completed a 12-month 2D seismic acquisition program across these licenses and data collected in this program was used to plan a multi-well exploration drilling campaign. So far, drilling has been completed on two wells in two different concession areas and results are currently being evaluated.
ConocoPhillips has been cooperating with Lane Energy in Poland since 2010, when the two companies began drilling and evaluating the potential of six licenses in northern Poland. More recently, in March this year, ConocoPhillips took over the operatorship and a 70-percent stake in three shale gas concessions in Poland from the UK firm 3Legs Resources.
Clearly, results from the drilling campaigns conducted by these two majors will play a big part in deciding the future, and scale, of the Polish shale gas sector. But, for now, their continued presence in the country is a strong signal that Poland can build a commercial shale gas industry.
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