Tuesday 3 February 2015

Companies are resigning from shale gas exploration in Poland

More and more companies are leaving Poland and their work on the exploration of shale gas. After ENI, ExxonMobil, Total, Canadian Oil and Marathon. Chevron announced at the end of January that they are not going to continue with execution of their exploratory concession either.

Unfortunately, more companies are deciding to stop shale gas exploration in Poland. Companies, which are resigning from their plans for drilling and any subsequent exploitation of shale gas, primarily withdraw foreign companies that already have some experience in this field. Firms that already resigned from their Polish concessions for exploratory drilling in recent months are ENI, ExxonMobil, Total, Canadian Oil and Marathon.

Chevron announced on the last day of January (2015) that they will not continue the project in Poland, as the country has ceased to be competitive compared to other opportunities in the world. The company will continue its activities in Romania.

Internet portal “Forsal” points out that past September, there were given only 68 licenses for shale gas exploration. It is 37 less in comparison to September 2013. It seems that, over the course of 12 months, there have been a drop in issuing concessions by more than a third. The decrease of interest in exploration had been visible already for some time, but it was not until the drop clearly intensified. In the whole year of 2013, total number of active licenses decreased by 19, and in the period from January to August 2014 – by 26.

Biztok.pl had an opportunity to talk with Andrzej Szczesniak, fuel market specialist, who is convinced that lack of interest in further shale gas exploration in Poland is due to its small quantities at the reservoir and high costs of production. Furthermore, recent commodities prices are not very favourable to the Polish shale gas. Low price of Brent oil on world markets affects the decrease in gas prices. This in turn causes the Polish shale gas is becoming less competitive and slows down the interest in further exploration.

In case of Chevron, as Szczesniak points out, financial situation of the company had also significantly influenced decision about leaving Poland. Chevron profits in the fourth quarter of last year fell by nearly 30 percent compared to the same period of 2013. Chevron announced, inter alia, a significant delay in construction of LNG terminal in Canada, translating into additional costs related to the delay.

Last but not least, element that might significantly influence the “shale gas environment” is current shape of Polish mining law (for mining, we mean mining of coal as well as exploration of fuels such as gas and oil). As many sources point out, Europe, in comparison to the United States (where shale gas brought revolution in the energy sector) is much more cautious in the area and attempts to start the extraction, due to the protests by environmental and political groups. This statement illustrates very clearly situation in Poland. To be precise, currently the drilling contractor is responsible for mining damage that arise during the like poisoning of the groundwater, damage from earthquakes, road infrastructure, technical development of the area and buildings. Not many companies, without assistance of the state, are capable and willing to bear such costs that, sometimes, can be higher than financial bill. Dealing with the protests of such nature can be very difficult and can influence the image of a company for many years.