Polish Shale Gas Search to Get $515 Million From State Firms

Polskie Gornictwo Naftowe i Gazownictwo SA, Poland’s dominant gas distributor, and four other state-controlled companies joined forces to explore for shale gas in central Europe’s biggest nation.

PGNiG, utilities PGE SA (PGE), Tauron Polska Energia SA (TPE) and Enea SA (ENA) as well as copper producer KGHM Polska Miedz SA (KGH) signed a cooperation deal to spend 1.72 billion zloty ($515 million) by 2016 to search for the gas locked in shale rock formations.

“To succeed in this project we need to have a strong team of companies that are among the biggest corporations in Poland,” Treasury Minister Mikolaj Budzanowski, who supervises state companies, said at a news conference in Warsaw today.

Poland is speeding up shale gas exploration to lessen its dependence on Russian imports. PGNiG, which buys two-thirds of its gas from OAO Gazprom, sued the Russian company in an arbitration court to get lower prices in its long-term contract, which ends in 2022. Poland aims for “substantial” shale gas output by 2019 to strengthen its position with Gazprom before talks start on renewing the contract, Budzanowski said on March 29.

The group plans to drill and fracture hydraulically three vertical and about 30 horizontal wells on the area of 160 square kilometers (62 square miles) of PGNiG’s Wejherowo license in northern Poland, Chief Executive Officer Grazyna Piotrowska- Oliwa told a news briefing. The division of investment outlays and benefits from prospective output among partners has yet to be decided, she said.

Fracking uses water, sand and chemicals to open fissures in rocks and release gas. It has made the U.S. the world’s largest producer of the fuel.

Extra Gas

Poland’s recoverable shale gas reserves probably total as much as 768 billion cubic meters, the Warsaw-based Geological Institute said last month after analyzing wells drilled from the 1950s to the 1980s. Poland, which consumes about 14 billion cubic meters of the fuel a year, has issued 110 exploration licenses to companies including Chevron Corp. (CVX), Talisman Energy Inc. (TLM) and Marathon Oil Corp. (MRO) The country hasn’t started production from the licenses yet.

Poland may also use the extra gas to fuel power-generating units. Utilities in the country, which produces 90 percent of its electricity from coal, plan to add at least 4,000 megawatts of gas-fired facilities in the next eight years. A 400-megawatt plant uses about 540 million cubic meters of gas a year.

Poland expects to have 248 shale gas wells by 2017, with 49 started by the end of this year, Rafal Miland, deputy director at the Environment Ministry’s geological concessions department, said on May 24. The cost of one well is between $10 million to $15 million, according to the Geological Institute.

To contact the reporters on this story: Maciej Martewicz in Warsaw at mmartewicz@bloomberg.net; Marek Strzelecki in Warsaw at mstrzelecki1@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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