One of the things we do in North America that isnt done anywhere else in the world is that we drill, drill, drill, drill, drill, he said. And the way to find hydrocarbons is to drill.
But it is exactly the sheer scale of drilling required that may prove impossible for Poland. Unlike conventional gas, shale gas development needs a much larger number of wells, a substantial portion of which will contribute almost no production. Only a few of them, rich in natural gas liquids or tapping the so-called sweet spots, could prove commercially viable, and the decline of production could be rapid, up to 75 percent in the first year, according to the International Energy Agency.
Studies have offered various growth scenarios, but all of them agree that if Polands shale gas industry is to have a real economic impact, a substantial number of wells would be necessary.
The Kosciuszko Institute, a leading Polish think tank, assumes that Poland would drill an average of 500 wells per year to create 155,000 jobs over a period of 10 years. The Oxford Institute for Energy Studies has calculated 700 to 1000 drillings per year.
Thats wildly more than Poland has drilled. Over a period of three years, only 33 test wells were drilled, with 10 of those hydraulically fractured, out of which just two were horizontally drilled and fracked the definitive procedure for assessing potential.
Government officials recognize the challenge.
Whoever was thinking of a direct parallel to the American gas boom is, of course, wrong, said Piotr Wozniak, Polands chief national geologist and the undersecretary of state at the Ministry of Environment, which is responsible for giving out concessions. It would be absolutely different. It would develop differently, at a different pace, and the results would be different.
Results have not been encouraging. Exxon Mobil withdrew from Poland in 2012, saying its wells had failed to demonstrate sustained commercial hydrocarbon flow rates, while ConocoPhillips relinquished its 70 percent option in three concessions in northern Poland, although it retains three more. It has been reported that Canada-based Talisman Energy also has started talks to sell off its Polish exploration licenses.
Meanwhile, with market uncertainty growing, the share price of small independent companies engaged in unconventional gas exploration in Poland has plummeted precipitously, which has forced them to nearly halt operations.
A major challenge has been the price of wells, and drilling services in particular. Although Poland is one of the oldest oil and gas producers in the world its first oilfield dates back to 1853 it never managed to develop a competitive market for services. Unlike in the United States, its industry has been dominated by the state monopolist PGNiG and its daughter companies, distorting the economics of the market.
According to European Union statistics, Poland has just 11 drilling rigs available (there are 70 in the whole of Europe), compared to about 2,000 in the United States a huge impediment to any future large-scale operations.
In addition, Polish shale gas has proved to be on average 1.5 times deeper some deposits are more than two miles underground than most formations in America, ramping up costs. All in all, the average price of an exploratory well in Poland, horizontally drilled and hydraulically fractured, comes to about $15 million, compared with just $4 million in the Barnett Shale in Texas.