State-Owned Firms Rally Behind Shale Exploration
BMI View: Poland ' s quest to become a major shale gas producer has been somewhat dampened by developments in 2012. Withdrawal by ExxonMobil and rumours that Talisman Energy could follow the same path is contributing to worsening investor sentiment. Poland ' s attempt to keep exploration active has materialised in the form of state-owned PKN Orlen ' s intervention .
Polish shale gas exploration has faced several disappointments since the beginning of 2012. The estimate by the US Department of Energy in 2011 that recoverable shale gas could reach 4.8t rn c ubic m etres (tcm) , was downgraded by the Polish Geological Institute which declared earlier this year that recoverable resources would only vary between 346 and 768b n c ubic m etres . The alleged irregularities with shale gas licences within the Department of Geology and Geological Concessions in January also affected investor sentiment. To dampen the mood further, in June, major i nternational o il c ompany (IOC) ExxonMobil announced its withdrawal from th e nascent Polish market (see our online service, June 19 2012 , ' Shale Hopes Dented By Exxon's Departure ' ) after drilling two wells with unsatisf actory results.
Our forecasts reflect that Poland will remain import - dependent in spite of its shale exploration attempts . We see production moving from the current 6.3bcm to 7.2bcm in 2016 following small developments such as the recent Polskie Górnictwo Naftowe i Gazownictwo (PGNiG) conventional discovery (see our online service, August 20 2012, 'Conventional Fort unes' ). We still have moderate expectations for shale gas production, which we believe could push national output up to 14.2bcm by 2021.
|Far From Independence|
|Natural Gas Production & Consumption In Poland (bcm), 2004-2017|
ExxonMobil moved closer to exiting Poland on December 7. Two more concessions were sold, out of the six that the IOC was initially allocated, leaving only one left to be disposed of. These were acquired by state-owned refiner PKN Orlen through its subsidiary, Orlen Upstream, bringing its total number of exploration licenses in Poland to 10 (subject to approval by the Polish Department of Geology and Geological Licenses). Several sources also reported that PKN was in talks to buy Talisman Energy's Polish assets .
This deal extends the concentration of shale gas assets in state-owned firms. While the overwhelming majority of conventional licenses are held by PGNiG, with the remaining mostly shared between Poland exploration and production (E&P)-focused DPV Services and FX Energy, shale licenses had been evenly distributed among NOCs, IOCs, and independents. With the deal between Exxon and PKN, the number of state-owned shale licenses, shared between PKN and PGNiG, will reach 26 - more than twice the number owned by the largest private player, Marathon Oil. Bringing Talisman's assets under Orlen Upstream's concession portfolio would further this trend.
With private players exiting the market, Poland has to increasingly rely on its own efforts to kick-start domestic shale gas production so as to meet the government's ambitious target of flowing first gas by end 2014/early 2015. Although state-owned firms have the political will to develop Poland's shale gas resources, a lack of experience in this technically challenging play could prove commercial production difficult. At the same time, a lack of experienced upstream players in Poland could also provide opportunities for oilfield services companies, particularly those with shale gas expertise, to establish a presence in the market to support the nascent shale gas market in the country.