Polish firms join forces to accelerate shale gas exploration

Five Polish companies agreed to work jointly to accelerate shale gas exploration work on the Wejherowo license in northern Poland, the Treasury Ministry announced. Poland’s Treasury holds a majority interest in all five companies.

The five companies are natural gas utility PGNiG SA, three power utilities, and a copper miner. The power utilities are Enes SA, PGE Polska Grupa Energetyczna, and Tauron Polska Energia SA. The copper miner is KGHM Polska Miedz SA. The five agreed to invest as much as $515 million.

Assuming successful exploration and development efforts, the group estimates that gas produced as part of the joint project could be brought on stream in 3 years. Finalization of details of the cooperative agreement could take 4 months, participants told reporters at a news conference in Warsaw.

The announcement comes after ExxonMobil Corp. announced during June that it had decided against proceeding with exploration of shale gas in Poland because two early wells had not demonstrated sustained commercial flows. (OGJ, July 2, 2012, p. 44).

Poland has granted more than 100 shale exploration licenses to numerous companies, including Chevron Corp., ConocoPhillips, and Marathon Oil Corp. Poland has three shale basins (see map, OGJ, Nov. 7, 2011, p. 36).

The cooperative agreement calls for work on part of the Wejherowo licence held by PGNiG, and specifically on the Kochanowo, Czestkowo, and Tepcz pads (the KCT project), where preliminary surveys and analyses already confirmed gas.

The Wejherowo license area covered by the cooperation agreement is 160 sq km. The Wejherowo license is one of the 15 shale gas exploration licenses held by PGNiG. The license is believed to be one of the most prospective ones based upon results from the Lubocino 1 well, where fracturing operations in September 2011 resulted in gas flow from Silurian and Ordovician shales.

Each investor will have a specific percentage share in the KCT project budget. An operational committee will be set up so that each of the five companies will be guaranteed involvement in supervising the project implementation. The group participants did not discuss how they might split costs and revenues.

PGNiG will be the license operator throughout the exploration and appraisal phase. At the production stage, operatorship will be entrusted to a special purpose vehicle that will hold the production license.

Treasury Minister Mikolaj Budzanowski said work stemming from the cooperative agreement will leverage economies of scale so Poland can learn about its shale deposits faster.

“It is also the right way to a long-term goal: looking for new ideas and developing innovativeness. If we fail to do that, we will not meet the challenges inherent in the EU climate policy and the related necessity to limit carbon dioxide emissions,” Budzanowski said.

Poland sees its shale resources as way to become competitive on the European energy market.

“By engaging in gas exploration now, the power companies are securing access to less expensive Polish gas supplies for their gas-fired power plants, which are currently under construction,” Budzanowski said.

Grazyna Piotrowska-Oliwa, PGNiG president, said, “Production of shale gas will facilitate ensuring stable energy supplies at prices acceptable by the market.”

Contact Paula Dittrick at paulad@ogjonline.com.

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