Analysts sceptical about Poland minister's shale gas call

20 January 2012 11:59  [Source: ICIS news]

LONDON (ICIS)--A call from Poland's new treasury minister for an acceleration of shale gas exploration efforts and drilling activities may not correspond with what is realistic, investment bank Wood & Company said on Friday.

Treasury minister Mikolaj Budzanowski said he expected each of the state-owned firms involved in the emerging Polish shale gas industry to carry out at least 12 drills for shale gas annually and then conduct at least 12 hydraulic fracturing, or “fracking”, procedures on them each year.

"In the next two years we will undoubtedly see huge engagement by our companies [in shale gas exploration],” said Budzanowski.

The efforts, mainly involving gas monopoly PGNiG, oil, gas and petrochemicals group PKN Orlen and refiner Lotos, should make the first shale gas extraction possible, on a small scale, in 2014, or 2015 at the latest, he added.

However in a note to investors, Prague-based Wood & Company was sceptical about the minister's comments.

“This is not the first time Polish politicians have called for accelerated exploration. However, we find such statements somewhat unusual, given that exploration licences well define the obligations of the licence holders and that exploration drilling is a complicated matter, which cannot be speeded up artificially, especially if the necessary expertise, know-how, technologies and support operations are not yet fully available in the country,” wrote analysts Robert Rethy and Bram Buring.

“Moreover, the lingering fiscal uncertainty may also make oil companies careful with exploration spending. As far as we understand it, PGNiG and Orlen plan to follow a much more cautious exploration programme (while Lotos may be spending very little, if anything at all, in the near term), with PGNiG planning six shale gas drillings in 2012, and Orlen aiming at four to five drillings overall in its upstream operations,” the analysts added.

The analysts noted that they were also “very sceptical regarding production plans given the lack of any commercial discovery”.

Even if 2012 brings major discoveries, the exploration, appraisal and field development processes might take another four to five years, at least, before larger-scale commercial production could begin, Rethy and Buring added.

Budzanowski's statement came a day after Bulgaria banned shale oil and gas exploration through fracking, because of environmental objections.

Poland depends on Russian supplies for approximately two-thirds of its gas consumption of 14 billion cubic metres/year.

With an eye on hugely reducing this import burden if mass unconventional gas reserves prove extractable, the Polish government has so far awarded more than 100 exploration permits to companies including international groups Chevron and ExxonMobil.


By: Will Conroy
+44 20 8652 3214



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