Bottom Line: Shale gas explorers in Poland get a bit of a boost (but not enough) as the government prepares to postpone shale gas production tax collection for five years after it comes into force.
Analysis: Poland’s new law on hydrocarbon taxes comes into force in 2015, but the government - very wary of more explorers abandoning its prospects—is planning to postpone this for five years, meaning that taxes would not be collected until 2020. Not too long ago, Poland was heralded as Europe’s best shale gas prospect, but drilling has been slow and somewhat disappointing so far. Over 100 permits have been awarded but the country is still far from proving that it has enough shale to become gas dependent and loosen Russia’s grip. A total of 39 wells are planned for this year—only 2 of which have been drilled so far. Marathon Oil Corp. (MRO) is seeking to divest its 11 licenses in Poland and Canadian-based Talisman Energy Inc (TLM) pulled out in April. Exxon Mobil Corp (XOM) has also pulled out, while Chevron Corp (CVX) is staying, for now.
Recommendation: Poland’s shale gas production tax delay is not law yet, but is likely to be pushed through. However, this is not the elixir for exploration as the new hydrocarbon law overall is not attractive to investors, raising the government’s stake to a whopping 80% of production profits. There are other aspects of the hydrocarbons law that will also quash investment and make explorers think twice: It would require foreign companies to partner with the state-run company. As such, that tax delay is not enough to make this a lucrative venue. Right now the situation is that foreign companies who invest a lot in exploration in Poland cannot be assured of actually being able to receive a return on their investment.