I’m talking about Poland. In an attempt to broaden its energy portfolio and wean itself off Russian natural gas, a renewed push for shale development is kicking off.
As of last month, new Polish Environment Minister Maciej Grabowski has made it a personal mission to turn Poland around and remove the red tape that previously pushed out some of the biggest names in the industry. The reversal of high coal consumption will also be at the top of the agenda.
In his first news conference early this month, he said, “If I decide that amendments are needed, I intend to present a final version within weeks, not months,” according to Bloomberg. He added, “Investors have been waiting for this for a very long time and they won’t speed up works without stable regulation.”
Poland has had high hopes for its shale gas reserves for some time now, but poor drilling results, mounting red tape, and a reluctance to cooperate from Polish companies have turned off many of the energy giants who were once interested.
Now, as Poland tries to find balance and rejuvenate investment, the process is being criticized for taking too long. Today, there are only 49 wells in Poland, according to Polskie Radio; another 287 wells are needed for a reliable assessment of shale gas resources.
At the current rate, Poland wouldn’t realize its full potential until the 2030s.
Done Deal
It’s time to get moving! One deal just signed by state-owned Polish Petroleum and Gas Mining (PGNiG) with a subsidiary of energy giant Chevron (NYSE: CVX), called Chevron Polish Energy Resources, is ready to make up for lost time.
Exploration will start in southeastern Poland, and the deal will enable both firms to keep costs down. Most importantly, it will speed up exploration and the process of estimating resources in Poland’s shale reserves.
The collaboration is part of PGNiG’s new policy to be open to working with other companies.
For now, neither side is disclosing any reserve potential in the working region.
What we do know is that if the joint venture proves successful, both sides would expand territories and work together in different licensed areas as 50/50 partners.
A final binding agreement is expected to be signed in 2014.
Foreign Investment
Chevron remained in Poland as things were headed south, and it seems the company has weathered the storm and proven its commitment to Polish exploration.
Poland pays some of the highest prices in Europe for Russian-produced natural gas. But an import terminal is underway, and the hope is to lure cheap natural gas from North America as it starts pouring into foreign shores.
And while Chevron may be the first example of cooperation between a Polish firm and a foreign investor, it shouldn’t be the last – especially from North American companies, which present great shale gas expertise.
It’s important to remember that Poland once had very high expectations, but mismanagement, delays in legislation, and a disappointing reassessment of potential reserves left many packing their bags and looking elsewhere. Exxon Mobil (NYSE: XOM), Talisman Energy (NYSE: TLM), and Marathon Oil (NYSE: MRO) all headed home as recently as this year.
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The Investment
There is a long way to go for Poland’s shale resources, no doubt, but it finally feels like it’s at least going. This new deal with Chevron will likely spark others to follow, even as estimates put Poland’s shale gas reserves lower than initial measures: 187 trillion cubic feet down to 148 trillion cubic feet, according to a June report by the U.S. Energy Information Administration (EIA).
Of course, there is always concern over hydraulic fracturing, or fracking. Some European governments have already placed a moratorium on shale gas development.
Although that seems unlikely in Poland, there are still other issues to resolve, including technology and infrastructure, regulations, legislation… all are at the forefront of Poland’s recent shale movement.
The deal with Chevron shows that those issues are being resolved.
Is Poland going to be the next major shale gas producer? Not anytime soon. We’ll never see a shale gas boom in Europe like the one in the U.S., but Poland is definitely the biggest hope for Europe’s natural gas future, and now things are starting to turn up.
The nation has granted roughly 100 licenses to ensure that it happens.
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