Poland must ease the bureaucracy of obtaining shale-gas exploration permits and clarify fiscal rules to ensure large energy companies aren’t driven from the nation, Talisman Energy Inc. (TLM) and Wisent Oil & Gas said.
Licensing can take as long as nine months and require more than 30 different environmental permits, said Wes Skrobowski, chief executive officer of Warsaw-based Wisent, which has four exploration licenses in northern Poland. Excessive red tape is pushing investors toward other countries, Talisman said.
The central European country, which estimates its shale resources at about 50 years of consumption, is eager to tap the fuel to cut dependence on Russia, which supplies two-thirds of its gas. Explorers in Poland have found that wells can cost almost three times as much as in the U.S. as they’re drilled deeper and harder, while transport links are undeveloped and permitting takes longer. Exxon Mobil Corp. (XOM) has quit the country.
Shale-gas companies are concerned that a new hydrocarbons law planned for this year will raise taxes on profit beyond the 40 percent proposed, Tomasz Gryzewski, head of corporate affairs at Talisman in Warsaw, said yesterday in Vienna. The fiscal uncertainty, combined with bureaucratic obstacles, is steering investors to places such as Ukraine or the U.K., he said.
“What we desperately need is a kind of deregulation that will simplify the issuing and obtaining of permits to explore shale gas,” Gryzewski said. “But things are moving so slowly here. You may see a couple of big players pulling out soon.”
Exxon, the largest U.S. oil company, decided to exit Poland last year after two exploratory wells failed to flow at rates justifying production. Other companies with Polish licenses include state-controlled Polskie Gornictwo Naftowe i Gazownictwo SA, ConocoPhillips (COP), Chevron Corp. (CVX) and Talisman.
Shale-gas producers use hydraulic fracturing, or fracking, to tap fuel from rock. The technique, which involves blasting water, sand and chemicals underground to open fissures, has allowed the U.S. to surpass Russia as the biggest gas producer. Concerns among environmental groups, regulators and landowners that fracking may contaminate water have led France and Bulgaria to ban the practice. Other European nations are reviewing it.
Aside from licensing setbacks, investors in Poland are also concerned the government will claim equity in existing operations as a condition for issuing a production license, according to Talisman’s Gryzewski. The country outlined plans last year to set up a state-run company to oversee oil and gas extraction and take a share in ventures responsible for output.
“All this uncertainty is really wearing everyone down,” he said. “Business doesn’t like uncertainty. Just tell us what the rules are and let us proceed.”
“Finalizing legislation on shale-gas exploration and production is among top priorities of the government,” Environment Minister Marcin Korolec said at a news briefing on Jan. 17. “We’re in the last phase of discussions.”
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