The blurry future of Polish shale gas

At the end of last week, ConocoPhillips announced its intention to halt shale gas exploitations in Poland. The last energy giant company drilling the polish soil left after having invested roughly $220 million since 2009. Previously, several international energy firms such as Exxon Mobil Corp., Total SA and Chevron Corp. reached the same conclusion. These premature withdrawals have dramatically lowered the high expectations on Poland’s shale gas.

According to official estimates from the European Parliament, Poland and France have at their disposal the largest natural reserves in Europe. Predictably, the Polish government has invested massively on shale gas during the last decade. National authorities have presented this energy source as an environmental friendly alternative to coal and as a way to reduce gas imports from Russia. Nevertheless, the departure of ConocoPhillips leaves to the state-backed companies PGNiG and PKN Orlen, together with minor international firms, the burden of drilling and refining shale gas reserves. This situation could jeopardize the future of this energy source in Poland. Indeed, each drilling costs about $15 million and both small transnational companies and Polish state-run enterprises have much less economic resources at their disposable compared to multinational energy giants.

Quoted by Reuters, Tim Wallace, ConocoPhillips country manager in Poland, justified this decision by claiming that “commercial volumes of natural gas were not encountered”. However, multiple problems have affected the exploitation of Polish shale gas. On the one hand, as reported by Politico, a 2012 research conducted by the Polish State Geological Institute revealed that the amount of extractable deposits does not fulfil initial forecasts. Furthermore, throughout the years, several firms have encountered remarkable difficulties in drilling the soil of Poland and extracting its shale gas. On the other hand, cumbersome legislation and red tape have discouraged international companies from entering or remaining in the national market. Finally, exogenous factors such as the recent drop in oil and gas prices have certainly played a role in halting shale gas exploitations in Poland.

The “shale exodus” might impact both the Polish and the EU political scenarios. At the national level, Poland may be forced to rely even more on coal and Russian gas supplies. Consequently, the downgrade of shale gas could jeopardize the Poland’s energy security strategy and undermine its project of diversifying energy sources.

Furthermore, these recent developments might affect political discussions on shale gas and fracking at the EU level. Although the refusal to this energy source expressed by powerful members states such as France and, to a lesser extent Germany, the EU has always played a limited role in regulating shale gas extractions through fracking. Every attempt to legislate in this field has been hampered by the firm opposition of oil and gas industries backed by UK and Poland. However, the current scenario could destabilize the equilibrium in Brussels. Polish uncertainties might encourage European institutions to step forcefully in the debate and oppose fracking.

In this regard, the president of the International Gas Union, Jerome Ferrier, recently declared that Europe will not experience the shale gas revolution recently occurred in the US. In his opinion, this discrepancy is mainly due to political reluctance of EU and member states authorities.

 

 

(Image: Polish Prime Minister Ewa Kopacz, June 2015. Photo credit: M. Śmiarowski/KPRM on Flickr)