Poland’s gas giant PGNiG and California-based Chevron Corporation (NYSE: CVX) agreed Monday to search for shale gas in southwestern Poland as the eastern Europe nation accelerates efforts to wean itself from dependence on its major gas supplier, Russian state-owned firm Gazprom OAO (MCX:GAZP).
The announcement comes after numerous western energy companies have given up trying to find commercially viable shale gas prospects.
Russia recently announced it would raise natural gas prices for Ukraine, which transports gas via pipeline to central and western Europe. Then the Kremlin, responding to the revolution in Kiev, annexed Crimea from its former Soviet satellite.
Though Europe wants to diversify its energy sources, many European countries are not exploring for shale gas over concerns that the hydraulic fracturing methods used to extract it will harm the environment and violate carbon emission targets. Britain and Poland, however, are actively exploring for shale gas.
Polish government officials have boasted of the nation’s reportedly sizeable shale gas deposits before, but a handful of companies have left the country after brief negotiations due to unclear government regulation and difficult geology.
Poland’s ministry of the environment has had authority over oil and gas exploration licenses and hands out five-year agreements that can be extended only once, for two years. According to the Polish Exploration and Production Industry, the country’s primary lobby group for the oil and gas industry, shale gas fields take longer to develop than conventional fields, so companies may have insufficient time to find oil and gas before the deadline.
Here are four international companies that have, after initial enthusiasm, left gas exploration in Poland to Chevron and ConocoPhillips (NYSE: COP).
Irving, Texas-based Exxon Mobil (NYSE: XOM) left Poland in June 2012 after drilling only two wells because the wells failed to yield commercial quantities. It had acquired the rights to explore for shale gas in late 2008, when Poland began working to replicate the shale gas boom in the U.S.
Marathon Oil Corporation (NYSE: MRO), headquartered in Houston, announced last May it would abandon its Polish shale gas operations “after an extensive evaluation of the company’s exploration activities in Poland and unsuccessful attempts to find commercial levels of hydrocarbons,” Marathon said at the time in a statement. The exit is expected to be complete in the second half of this year.
Shortly after Marathon Oil’s announcement, Canadian energy explorer Talisman Energy Inc. (TSE:TSM) announced a transfer of interests in Poland to its partner San Leon Energy. The company explained its decision in positive terms, saying only that it planned to focus drilling in only two major areas, America and Asia Pacific. Translation: drilling results in Poland disappointed.
Italy’s Eni SpA (BIT:ENI) pulled out of Polish shale gas exploration in mid-January. It had three concessions in northern Poland. The decision was first reported by a local Italian daily, Puls Biznesu, quoting unnamed sources who did not specify why the company was leaving the projects. Poland’s supreme audit chamber blames the environment ministry’s administrative inefficiency.
Chevron, though, remains committed to its Polish operations in the southwest. PGNiG spokeswoman said Monday that PGNiG and Chevron will jointly assess gas deposits and share geological data to choose exploration sites. There are currently about 50 wells in Poland, and hundreds are needed to offer reliable assessments.