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Polish Shale Ambitions Fine Without Exxon

By Daniel J. Graeber | Tue, 19 June 2012 22:25 | 1

Exxon Mobil this week said it was abandoning its shale natural gas ambitions in Poland. Warsaw aims to tap into its shale deposits in an effort to break the Russian grip on the natural gas sector. The country recently scaled back its shale reserve estimate, however, and is set to unveil a new series of laws governing the emerging sector. Nevertheless, the move by Exxon did little to shake other explorers like Chevron, and with Exxon moving closer to Russian developments, its departure from Poland isn't the end to the shale story there.

The U.S. Energy Department's Energy Information Administration had estimated that Poland could hold as much as 5.3 trillion cubic meters of natural gas. That would be enough for the country to satisfy domestic demand for the next 300 years, effectively cutting the Kremlin out of Warsaw once and for all. A Polish review of shale deposits revealed in March, however, that the reserve estimate was closer to 550 billion cubic meters on average.

Though acrimony from the Cold War era lingers in Warsaw, the Polish energy sector remains heavily dependent on Russia for oil and natural gas. Officials at Russian natural gas monopoly Gazprom shrugged off the shale bonanza by saying Polish natural gas would be an expensive commodity for potential consumers. At the same time, however, Gazprom said that its own natural gas designated for the South Stream natural gas pipeline was a secure source despite what it expects to be an expensive resource.

Poland has doled out more than 100 shale exploration licenses to international oil companies like Exxon and Chevron. While Exxon said it was leaving, authorities at Chevron said they were moving ahead as planned. Chevron, working in southeast Poland, said it was evaluating the results from two exploratory wells and remained committed to its work in the country. Exxon in February, however, said two of its shale natural gas wells in Poland weren't commercially viable.

Shale is an emerging phenomenon. The geology was sidelined until roughly 20 years ago when new drilling practices gave explorers optimism about the resource potential. Now, the United States is the shale natural gas leader, something that wasn't the case when Poland was weighed down by Iron Curtain. Exxon, before announcing it was leaving Poland, moved closer to Russia's Rosneft in arctic shale oil deposits, which could be on par with the massive Bakken shale deposit in North Dakota. While explorers eying shale reserves in Poland may be cautious given pending laws governing taxation and environmental issues, it's premature to say Exxon's departure is a significant blow to Warsaw's shale ambitions. Countries like France and Bulgaria have banned shale developments on environmental concerns, meaning Poland is open for business. The Polish shale story will continue even without Exxon.

By. Daniel Graeber of Oilprice.com

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  • al lindner on June 20 2012 said:
    I smell Putin's influence with Exxon's decision, trying to make shale gas exploration in Poland look unattractive.

    Development of shale gas resources in Europe is Putin's worst nightmare!

    I hope Chevron is very successful in their Polish exploration program.

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