3Legs Resources PLC unit Lane Energy Poland has signed an agreement with ConocoPhillips for joint evaluation of Lane's six Baltic basin licenses covering 4,000 sq km in Poland.
Lane said ConocoPhillips will fund an initial shale gas exploration program of seismic and drilling. A 3D seismic program was started in July and the parties intend to spud a first well in the first quarter of 2010.
Lane Energy Poland will act as operator on the initial phase. ConocoPhillips will have the right to acquire a majority equity interest in the concessions, which lie in northern Poland in the Baltic basin region near the Port of Gdansk.
"Our assessment of the reservoir potential, based on independent testing of core samples and review of historical well log data, is extremely encouraging," Lane said.
Lane said its agreement with ConocoPhillips represents "a landmark transaction for the 3Legs Resources Group, which it believes will enable it to maximize the potential of its Baltic basin licenses."
Larry Archibald, ConocoPhillips's vice-president of exploration, told the Barclays Capital energy conference that the agreement with Lane Energy gives ConocoPhillips the option to earn 70% and operate up to 1 million acres.
Archibald added that the acreage in northern Poland is flat, easy to reach, and any natural gas produced can go into the European Union market, which has good demand.
Analyst BMI also gave an upbeat assessment to the agreement: "Should commercial volumes of gas be proven, we could also see an improvement in Poland's energy security situation."
The analyst noted that Poland has recently been attempting to secure "a long-term supply deal with Moscow but has run into difficulties after Russia contested the ownership structure of the Yamal-Europe pipeline operator EuRoPol Gaz."
As part of its effort to produce gas domestically, Poland's environment ministry last December awarded ExxonMobil Corp. two 5-year exploration licenses to search for gas in the Mazowieckie and Lubelskie provinces, in the eastern and southeastern areas of the country.
The first concession covers a 1,200 sq km area near Wolomin, northeast of Warsaw. The second covers a 1,000 sq km area near Zamosc in southeastern Poland.
Poland has 5.8 tcf of proved gas reserves and produces 4.3 billion cu m/year or 31% of domestic consumption via state Polish Oil & Gas Co. BMI forecasts Polish gas production to rise to 4.8 bcm in 2009 while consumption will rise to 13.8 bcm.