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A Warning To Britain: Ministers & Bureaucrats Are Killing Poland’s Shale Gas Dream

Henry Foy, Financial Times

Poland’s much-hyped shale gas boom could take as long as six more years to become commercially viable, as foreign oil and gas companies abandon their exploratory plans citing bureaucratic tangles and an unfriendly investment climate.

Poland dreamt of domestic shale gas providing both an alternative to relying on politically unpalatable Russian energy and a windfall to state tax coffers.

Global petrochemical companies such as ExxonMobil, Total and ConocoPhillips flocked to the country, snapping up concessions and making Poland Europe’s biggest shale gas market by drilled wells.

But instead exploratory wells have failed to meet expectations and many drillers have grown impatient with regulatory delays that executives say have smothered their ambition.

Of the 11 foreign companies that invested in the country’s shale gas market over the past four years, seven have abandoned the market, after spending a cumulative £500m.

That has left domestic, state-backed companies such as PKN Orlen, Lotos and PGNiG with the financial and regulatory backing of the government, and a handful of well-funded global players, to wait for a change in fortunes.

“We gave it our best shot. We got to a point where we could not justify carrying on. We demonstrated some potential, but our company could not justify committing further capital based on the results so far,” says Kamlesh Parmar, chief executive of British driller 3Legs Resources, which pulled out of Poland in September.

“It is going to take longer and cost more money than most people imagine. Those operators that continue will have to have the funding and patience to give their projects the best chances of success.”

The steady withdrawal of investors and explorers and rising disillusion with Poland’s shale gas prospects is not likely to be helped by the recent sharp fall in global oil prices, which have cast doubt on the financial credibility of the fuel even in well-established drilling markets such as the US.

The country’s environment ministry, which regulates the industry, says that it could take until 2020 before Poland begins to deliver commercial shale gas at a level of profit seen in the US.

Drilled by 3Legs in 2010 and 2011, the wells did produce some gas, but not enough to start commercial production.

Mr Parmar says the weight of red tape, that can mean waiting 18 months for permission to start drilling for gas, slowly eroded the company’s finances and appetite to continue investing in new wells.

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