Shale Boom in Europe Fades as Polish Wells Come Up Empty
While shale could help Poland lessen dependence on Russian supplies and cut its gas bill, a government proposal for a levy on production threatens to curtail investment. Europe’s best hope for a shale-gas boom is indeed fading as explorers in Poland confront rising taxes, political concerns focused on environmental degradation, a lack of rigs and rocks that are harder to drill than expected.
The National Post and BusinessWeek report that failed wells by Exxon Mobil curbed the optimism that led two dozen companies to grab licenses. Shale-gas reserves may be lower than estimated, and well drilling costs almost three times as much in Poland as in the U.S.
“The growth of shale in Poland will also be slower than in the U.S. because it would need to build the infrastructure the U.S. already had available,” said Laura Loppacher, an oil and gas analyst at Jefferies International Ltd. in London. “We know the gas in place is there, but it’s unclear if it can be extracted at a rate that’s commercial.”
“Another negative factor is uncertainty concerning EU pressure to tender exploration and production licenses separately, unlike now where exploration companies have certainty over control of output,” according to Marek Matraszek, Warsaw-based head of CEC Government Relations, which advises companies dealing with the government.
“It has been decided that rights acquired by investors will be honored,” Piotr Wozniak, the country’s deputy environment minister and chief geologist, said last week.
Whatever the size of Poland’s reserves, the industry isn’t yet giving up.
“We need dozens if not hundreds of wells before we can estimate Poland’s shale gas potential,” said Tom Maj, Poland manager for Talisman Energy Inc. (TLM), the Calgary-based oil and gas explorer. “Wells must be kilometers rather than dozens of kilometers apart, as they are now, to fully assess the reserves.”