A new report published bythe United States Energy Information Administration (EIA) estimatesthat Poland's shale-gas reserves are more substantial than previousassessments suggested. Energy and natural resources consultancyAdvanced Resources International (ARI) had previously estimatedPoland's shale gas reserves at some three million cubic meters (tcm)but the EIA's latest analysis released April 5th suggests 5.3 tcm ofshale gas could be sitting beneath the surface.
If correct, this couldbecome a real geopolitical game-changer for Poland. Specifically, itwould enable Poland to diversify its energy portfolio (away fromdomestic coal and Russian natural gas), develop as an energy exporter(while increasing domestic natural gas reserves) attract much-neededFDI and strengthen commercial interests in the sector, especiallyfrom the United States.
Poland's annual gasconsumption amounts to 14 billion cubic meters, meaning existingreserves could supply the country's needs for the next 200-300 years.Despite the Polish government's support of large-scale drilling andexploration, many risks persist.
First, even though theEIA's findings are encouraging, estimates are still preliminary.Moreover, there are growing concerns among both local authorities aswell as citizens and environmental groups as to the safety of shalegas exploration, particularly when it comes to tainted water suppliesand land degradation. Finally, inadequate infrastructure andregulatory issues remain barriers to efficient shale gas development.
In September 2011, the USGeological Survey and the Polish Geological Institute plan to issue areport determining the size and scope of Polish shale gasdevelopment. However, an accurate picture will not be available for afew more years, once exploration is significant enough to producereliable data. Nevertheless, the EIA report places Poland as a clearshale-gas leader in Europe.
There are three key Polishregions for shale gas exploration: The Baltic region in the north,Lublin in the southeast and Podlasie in the east.
So far, Poland'sEnvironment Ministry has granted 85 concessions for exploration. Lastmonth, Dutch-British giant Shell announced that it too was looking tojoin the long list of international energy companies exploring shalegas reserves in Poland, which already includes the US's ExxonMobil,ConocoPhilips and Chevron.
In addition, smaller firmssuch as Canada's Realm Energy International and the UK's SanLeon Energy and Aurealion Oil and Gas have acquired leases andexploration rights. The major long-term challenge for these foreigninvestors, however, will be making shale gas commercially andfinancially viable due to its high cost of extraction.
Increased Polish andEU-wide concerns over energy security and generally favorable Polishpublic opinion over developing the shale gas industry, is positivenews for investors and gas exploration operators and suppliers.However, Russia (Gazprom) which provides over 25 percent of EuropeanUnion gas imports and nearly 70 percent of Polish gas imports hasbeen left mostly on the sidelines.
The large Americanpresence in Poland's shale-gas industry development will no doubtresult in strains in the improving, yet still fragile Polish-Russianrelationship.
On the other hand, Polandwill need to accelerate regulatory and legal reforms in order to makeits energy sector more competitive and accessible to investors.Additional steps needed to encourage investment include improvingaccess to exploration equipment (drilling rigs), buildinginterconnectors to other EU and non-EU national gas pipeline systemsand, most importantly, deregulating the energy market sothat new market players can have direct access to endconsumers.
