The Polish government plans to introduce a new regulatory and tax regime that would cap taxes at 40 percent of profits for companies extracting oil and gas in Poland. It says the move will help create a stable investment framework for the country’s shale gas sector.

“We are launching this system to ensure that investors who are currently investing in Poland can feel assured what the state’s strategy in this matter is. After all, we are talking about billions of złoty in investments. It is very important for us that investors feel safe and that these investments can be made in a transparent manner,” Tomasz Arabski, the head of the prime minister’s office, said at a news conference.

“Our aim is to create the best regulations possible. We need to take care of the citizens and the investors, but on the other hand we need to secure the State Treasury’s interests,” said Environment Minister Marcin Korolec.

Poland plans to impose a tax of 5 percent of the value of gas extraction and a tax of 10 percent of the value of crude oil extraction. It also plans to introduce a 25 percent tax on the difference between revenues and expenses.

The extraction fee will be raised to zł.20-24 per 1,000 cubic meters of gas, up from the zł.4.90 to zł.5.89 charged at present.

Including a flat 19 percent corporate income tax, “we think the burden on investors’ profits should measure around 40 percent,” Deputy Finance Minister Maciej Grabowski told the Polish Press Agency.

The new tax regime is expected to come into force on January 1, 2015.

Attractive package

“Based on the 40 percent figure, this is an attractive fiscal package,” said Peter Csaszar, an energy analyst at KBC Securities. He noted that the global average for total government take is around 65-70 percent.

In terms of tax burden, “Poland would rank at the lower end, lower than countries such as the UK or Norway,” he added.

“This may act as a stimulus for further shale gas investments in Poland,” said Mr Csaszar.
However, he cautioned that the initial excitement about potential shale gas reserves had fizzled out, adding that this may be a reason for the low tax.

“Poland seems to have a less favorable geology than elsewhere, with reserves now being estimated downwards and unsuccessful drillings reported,” he said.

According to the Polish Geological Institute, Poland’s shale gas reserves are likely to stand at between 0.35 and 0.77 trillion cubic meters, much lower than the 5.3 trillion cubic meters estimated earlier by the US Energy Information Administration.

Gareth Price