Poland Spurs Shale Gas Push by Scrapping Exploration Fund Plan

Poland dropped plans for a state-run fund to hold stakes in shale gas licenses in an effort to reignite investment after foreign companies including Marathon Oil Corp. (MRO) and Exxon Mobil Corp. (XOM) exited the country.

“In order to encourage investors, we had to choose a less bureaucratic model of the law,” Prime Minister Donald Tusk told reporters in Warsaw today. “We need to hurry” as billions of zloty needs to be invested to make the shale gas industry profitable, he said.

The number of wells completed in Poland halved last year amid drillers’ concerns over what rights the proposed fund would have in exploration ventures. Poland has granted about 100 licenses to foreign and domestic companies to tap unconventional gas resources, ranked as Europe’s biggest by the U.S. Energy Information Administration.

Poland’s government, which has failed to approve a shale gas law since at least June 2012, will discuss drilling legislation in two weeks, Tusk said.

Dropping the fund, known as NOKE, “will encourage exploration activity and will also increase investors’ confidence in Poland,” said Kamlesh Parmar, the chief executive officer of 3Legs Resources Plc (3LEG), a partner with ConocoPhillips in Poland.

Commercial Gas

Maciej Grabowski, Poland’s environment minister, expects the country’s first commercial shale gas well this year. The total number of shale gas wells will increase to about 80 after companies drill at least 30 this year compared with 13 in 2013, Grabowski said at the press conference.

Each well costs about 50 million zloty ($16 million) to drill and the country needs at least 200 to test its shale gas potential, he said earlier this year.

San Leon Energy Plc (SLE)’s Lewino well in northern Poland, which showed gas flows of as much as 60,000 cubic feet per day in testing, may be brought to commercial production by October, according to the head of United Oilfield Services Sp. z o.o., which hydraulically fractured Lewino.

“The potential start of production can have a fundamental significance for our energy security,” Tusk said. “But counting chickens before they are hatched makes no sense. Before we count profits we first need to start producing it.”

Poland, which relies on Russia for two-thirds of its natural gas, plans to “fully diversify” its deliveries of the fuel in “several” years, Tusk said. The country is also building a liquefied gas terminal and increasing energy links with neighboring countries.

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

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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