Commission study threatens Poland’s shale gas plans - bank

10 September 2012 15:23  [Source: ICIS news]

LONDON (ICIS)--Plans by Polish companies to ramp up shale gas exploration and production in the country are in question following the publication of a new European Commission study calling for new and tighter regulations on the industry, an investment bank said on Monday.

A study from the Environmental Directorate of the Commission argues that the pursuit of shale gas in Europe may pose a high risk to human health and the environment, said Prague-based investment bank WOOD & Company.

“The report is one of the most comprehensive studies done so far on shale gas, and contains the strictest recommendations for any future regulations in the EU, as opposed to reports carried out by the Industry or Energy Directorates,” wrote an analyst at the bank, Robert Rethy, in a note to investors.

However, he also noted that it “is far from certain what approach the EC [Commission] will take on the matter, before the issue moves into the final decision-making process. It may call for the drawing up of a new directive specifically for this activity (the toughest solution), or just provide soft guidelines (the softest solution)”.

One recommendation in the study is that hydraulic fracturing, or “fracking”, for the unconventional gas should not take place in any area where groundwater is used for drinking purposes.

Poland, which aims to ramp up shale drilling to reduce its dependence on Russian gas, announced in July that it is to invest in the development of original technology for shale oil and gas extraction within 36 months. Poland currently obtains two-thirds of its annual gas consumed from Russia.

Companies such as oil and petrochemical groups PKN Orlen and Grupa Lotos are backing the initiative as an important component of their plans for diversifying their activities into the shale gas sector and cut their energy supply costs.

“Clearly, there are major lobbying forces in place on both sides in this debate on shale gas and fracking,” said Rethy.

“Poland is openly lobbying for a liberal approach as it hopes to gain more energy independence through shale gas and is going as far as claiming that such studies (as the one above) are being indirectly supported by [Russian gas monopoly] Gazprom to protect its interests,” he added.

“Other countries went for straight prohibition for now (France and Bulgaria). In any case, the more regulations on the matter, the more cumbersome and more expensive it would likely become to perform shale gas exploration, which would hurt the economics of this source of energy,” Rethy said.

By: Will Conroy
+44 20 8652 3214

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