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Polish Shale Gas Hopes Hit Major Roadblock

By John Daly | Mon, 20 May 2013 21:38 | 1

Since the December 1991 fragmentation of the Soviet Union, no issue has divided the post-Soviet states and its former Eastern and Central European colonies than energy issues. As the post-Soviet space slowly lurches from a centrally planned economy to something somewhat resembling capitalism, energy exports have remained a critical support of the Russian Federation’s economy. In the U.S. government’s Energy Information Agency’s authoritative “Country Analysis Brief Overview,” of the Russian Federation’s hydrocarbons, the following salient bullet points are made:

“Russia holds the world's largest natural gas reserves, the second-largest coal reserves, and the ninth-largest crude oil reserves.

Russia was the largest producer of crude oil in 2011. During the year, crude oil production averaged about 9.8 million barrels per day.

The Russian Federation’s Transneft holds a monopoly over Russia's pipeline network, though they’ve been impacted somewhat by seaborne exports since 2011. Russia holds the largest natural gas reserves in the world, and is the largest producer and exporter of dry natural gas.”

Poland?

Well again, back to EIA statistics.

(Poland) “Total oil production – 2012, 27.68 TBPD (thousand barrels per day), consumption – 537, 830 thousand barrels per day.

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Now?

Both Canada’s Talisman Energy and U.S. Marathon announced that they are abandoning their Polish operations, with Marathon noting that the company’s decision was based on "unsuccessful attempts to find commercial levels of hydrocarbons."

Talisman?

According to a press release, Talisman’s Polish assets and its licenses to explore for shale gas in the Baltic Sea will be referred to the Irish group San Leon Energy, which will acquire a 100 percent interest in Talisman’s Gda?sk and Braniewo S licenses and increase its share in Talisman’s Szczawno license interest to 50 percent. San Leon said, "The decision on Talisman exiting the Polish market is associated with the company’s strategy refocusing its mining operations in two key areas - the Americas and the Asia-Pacific region."

Why Talisman’s rush to the exit?

Apparently varying statistics. In April 2011, the EIA estimates about recoverable shale gas resources in Poland were at wild variance with those of Poland’s Geological Institute the following year.

Talisman is the second foreign energy company to quit Poland, as in 2012 U.S. firm ExxonMobil abandoned its Polish operations after test wells failed to produce commercial quantities of natural gas.

It is not as if Warsaw has not been trying. Poland, member of the European Union, the North Atlantic Treaty Organization and central Europe’s biggest economy has assigned more than 100 shale gas exploration contracts in its drive for energy security, most of which have been assigned to local state-controlled companies. The problem is, nearly all exploratory wells have come up either dry or nearly so.

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The Polish government, counting its natural gas chickens before they hatched, was overly optimistic that Polish shale natural gas production would both revive its stalled economy and assist in reducing its high unemployment rate, currently at roughly 14 percent, which only looks good in the EU context of Spain’s dramatic 27 percent unemployment.

Aside from the immediate fiscal benefits, Warsaw also hoped to reduce its natural gas imports from the Russian Federation, which currently charges Poland nearly $500 per 1,000 cubic meters of gas, some of the highest rates for gas imports in Europe.

So, down the road?

The majority of the Polish government’s nat gas drilling permits will see potential production begin in 2015.

While the track record is disappointing up to now, one of the few certainties about Eastern Europe is that there are no certainties. The most influential Pope of the 20th century was Polish, so those looking at betting on the indigenous Polish energy market could do worse than direct their prayers there.

By. John C.K. Daly of Oilprice.com

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  • Vovan on May 21 2013 said:
    A bummer but keep on drilling, V. Putin

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