Right about the time the unconventional gas fields of North America started to transform the industry in this country, the Eastern European country and recent EU member Poland began to dream its very own dream of energy independence. Discoveries of extensive shale gas reserves in the Baltic and Lublin base even led Prime Minister Tusk to make a personal pledge to develop the reservoirs in order to break Polish reliance on imports of Russian gas. Hailed as the Norway of Eastern Europe, Poland quickly attracted the attention of E&P companies and big players such as Talisman, Exxon, and Marathon began to open test wells around the country. By 2013, more than 40 exploration sites had been drilled and Poland was considered the hottest LNG prospect in Europe.
But then something happened and as of today, not a single one of the costly exploration wells has been transformed into an operational production site actually flowing gas. Why? How is it that the transition from exploration to production of Polish natural gas was stopped in its tracks? Exxon, Marathon, and Talisman, in fact, have withdrawn the Polish shale altogether, abandoning their test wells citing costly and altogether unsatisfactory results as the reason for their withdrawal.
One element Polish politicians failed to adequately assess was the geological make-up of the Polish shale formations. As exploratory efforts quickly showed, Polish shale is much harder to break up then its North American equivalent, making commercial operations not only much more costly but quite impossible in some areas. When looking for new production sites, high investment scenarios that potentially could be unprofitable don’t exactly attract foreign investment, especially if those risky conditions are accompanied by restrictive regulations and high taxes.
While Polish premier Tusk did promise the development of his nations natural gas reserves he forgot to create an investor-friendly climate. Many foreign companies withdrew from the Polish market exactly because of difficult bureaucratic procedures, short-term permits, and taxes upwards of 40% on shale gas related profits.
Finally, one of the strongest competitions for Polish gas comes from within the energy industry itself. While natural gas is a cleaner burning energy source than coal and would help Poland to benefit from EU substitutions for clean energy, the country is also home to the largest coal reserves in all of Europe and currently produces more than 90% of its electricity from coal. As old habits are hard to shake off, it seems doubtful that Polish natural gas development will move forward at the pace that many foresaw just 3 years ago.
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