The exit of the last major global energy firm this month could mean the death knell for the country’s industry. By Andrew Kureth
Updated 7/8/15, 3:21 PM CET
WARSAW — Hopes kindled just four years ago that Poland would become a gas exporter — a “second Norway,” in the words of then-foreign minster Radek Sikorski — have been doused by the decision of U.S. energy giant ConocoPhilips’ Polish subsidiary to halt exploration.
The exit this month of the last global player from Poland’s shale gas market, leaving just a few domestic and smaller foreign firms among whom drilling has come to a near halt, further undermines the case for fracking in the European Union, where Poland and the UK have been its strongest backers.
Instead, the government has prepared draft legislation that shifts the date of introduction of the natural gas and oil extraction taxation from January 1, 2020, to January 1, 2019. In the same go, the special carbohydrate tax law has been abolished.
“Currently, shale gas deposits on Poland’s territory do not provide sufficient avenues for economic exploitation. As a consequence, the legislator’s condition for [the existence of] a special carbohydrate [extraction] tax that would provide the state’s budget with appropriate shares in income from shale gas extraction has not been met,” explained the ministry citing the energy ministry’s analysis.
According to the Polish environment ministry, there are a total of 20 shale gas exploration concessions in Poland. This is 88 concessions less than on July 1, 2013. The ministry also noted that “a drastic drop in the dynamics of shale gas exploration is noticeable.”
The overall unprofitability of shale gas extraction may be attributed to the policy of the Civic Platform (PO) - Polish People’s Party (PSL) coalition that ruled Poland from 2007-2011. Over this period the government organised talks, discussion panels, brochures and other advertisement but concrete legislative action that would bring about the extraction of shale gas was scarce.
Secondly, in order to make shale gas extraction profitable, crude oil prices need to be high, whereas the current situation is just the opposite.
Furthermore, shale gas deposits may be found in Poland’s nature reserves and national parks such as the Białowierza Forest. Natural resources exploration in such areas is wrought with regulations and limitations due to the presence of protected flora and fauna in these natural habitats, something that makes shale gas extraction very difficult. Finally, over the last five years, exploration of shale gas in Poland has revealed how geologically complex the deposits are. New technologies and techniques would have to be developed to extract the deposits and they could not compete with the cost of US shale gas which has a much more favourable geological environment. Hence estimates of shale gas resources in Poland are now a fraction of what was previously thought.