Has Greed Just Ruined Poland’s Shale Gas Industry

Poland seems to have killed its own shale gas industry before it even got a chance to fully get off the ground.

In 2011 the US EIA estimated that Poland contained shale gas reserves of around 187 trillion cubic feet, more than a fifth of the total reserves attributed to the US. Prospectors moved in from the US and Canada, hoping to be involved in the rise of Europe’s richest shale gas deposits.

Tom Maj, head of Polish operations for Talisman Energy Inc. of Canada, explained the attraction: “Exploration in a new basin is always an extremely risky and expensive venture. Nevertheless, the geological data gave some ground for optimism. Furthermore, the surrounding environment was attractive: relatively high gas prices in Europe, access to markets and infrastructure and, of course, a sense that the project had strong domestic support for geopolitical reasons.”

According to the Polish Environment Ministry 39 wells were planned for 2013, however only two were actually drilled. This is because the Polish government, greedy for the revenues that a shale boom could bring, decided that all gas explorers must take a state-run company as a production partner, and then boosted taxes to such an extent that they would take about 80% of profits, according to Ernst & Young.

Related article: Polish Shale Gas Hopes Hit Major Roadblock

Maj, who has just closed Talisman’s offices in Warsaw as the explorer deserts the country, said that “what’s been done here is what Poles call dividing up the bear hide before you’ve shot the bear. This has been hugely damaging to the shale gas project as evidenced by the negligible number of wells of the past few months.”

John Buggenhagen, who resigned yesterday as exploration director in Poland for San Leon Energy Plc., expressed his disbelief, saying, “who’s going to come and invest billions of dollars to monetize this gas if the government is talking about taking huge profit margins away from the companies?”

ExxonMobil has followed Talisman out of Poland after its first wells produced disappointing results and it decided that it was not worth the investment to stay, and Marathon Oil, finding similarly disappointing results.

Chevron remains positive and has decided to stay, claiming that it intends to work in Poland for many years.

By. James Burgess of Oilprice.com