World Wires

Poland stumbles as shale gas industry fails to take off

 

Pulitzer Center for Crisis Reporting

A map of Poland, unevenly colored in shades of yellow, brown, green and purple, like a half-finished jigsaw puzzle, hangs prominently on the walls of the country’s ministries, state agencies and corporations. Official visitors are cordially invited to take a closer look.

The label in the upper right-hand corner of this new map reads, “Map of Concessions for Hydrocarbon Exploration and Production.”

Poland, which last century was the target of foreign armies shaping the region’s political history, today is being divided up by a hydrocarbon fever that the Polish government has energetically encouraged. Hoping to reproduce the recent “energy revolution” brought about in the United States by the advent of fracking and other drilling technologies, the Polish government has spearheaded shale gas exploration in Europe in the hopes that one day it will have its own dynamic natural gas industry.

“Shale gas exploration and extraction is a priority for our government, and that’s the reason we’ve decided to focus the investment energy of many companies,” says Mikolaj Budzanowski, Poland’s treasury minister, supervising the country’s state-owned oil and gas enterprises.

So far, 111 exploration concessions have been awarded to about 30 companies, both state-owned and international, on a territory of more than 35,000 square miles – nearly a third of the country.

Despite the enormous infusion of capital and promises that production could start as early as 2015, however, Poland’s gas industry has yet to take off. Hampered by difficult geology, a paltry service sector, a lack of adequate infrastructure, as well as an uncertain regulatory and tax environment, there have been few exploratory wells drilled.

That, in turn, has delayed assessment of the actual size of reserves and left in doubt whether the industry could ever be commercially viable.

In 2011, the U.S. Energy Information Administration published an enormous figure – 5.3 trillion cubic meters of gas – in estimating the natural gas reserves in Poland, which generated the initial burst of political and investment enthusiasm. Then in 2012, the Polish Geological Institute together with the U.S. Geological Survey, using stricter methodology, decreased those figures by a factor of 10.

“You can say that the basin in Poland has historical data that is on the edge of being good or bad. Depending on how strict you are, you can make it easily negative or expand it easily to a bigger number,” says Pawel Poprawa, one of the first Polish geologists to start working on the shale gas issue, as far back as 2005, and a co-author of the Polish Geological Institute report.

According to Poprawa and many other experts in the field, the only way to arrive at a more realistic estimate of Poland’s gas potential is to do exploratory drillings, lots of them. All other reports are simply “first guess.”

“We’re very optimistic and we think there’s real potential here in Poland, although we have to drill a lot more wells before we feel confident for development,” says John Buggenhagen, exploration manager of London-based San Leon Energy, which bills itself as Europe’s largest shale gas company by acreage and holds the second largest number of concessions in Poland after the government.

Dimiter Kenarov is a freelance journalist based in Istanbul and a contributing editor of the Virginia Quarterly Review. Reporting for this story was underwritten by a grant from the Pulitzer Center on Crisis Reporting and Calkins Media.

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