Poland must choose shale gas or nuclear, top utility says

WARSAW Wed Oct 24, 2012 11:39am EDT

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WARSAW Oct 24 (Reuters) - Poland will have to choose between investing in shale gas exploration or a nuclear programme to ensure future energy needs, the chief executive of Poland's top utility PGE said on Wednesday.

State-controlled PGE is responsible for the planned construction of Poland's first nuclear power station and is also involved in financing exploration of Poland's potentially lucrative shale gas reserves.

The European Union nation of 38 million is pursuing both shale gas and atomic energy to help reduce dependence on gas from Russia, which provides most of Poland's supplies, and on highly-polluting coal, the source of 90 percent of its power.

But the high cost of each energy track makes it likely the former Soviet-bloc nation will in the end only pursue one form of energy.

"These two programmes cannot be successful (at the same time), one excludes the other," PGE Chief Executive Krzysztof Kilian, who has close ties to Prime Minister Donald Tusk, told a power sector seminar.

"You cannot drive on the left and on the right at the same time, because it will have serious consequences."

Kilian's remarks come after Tusk failed to mention nuclear energy in a policy speech from two weeks ago, opening the way to speculation the country would drop atomic energy.

Tusk said in the speech he expected Polish companies to invest 5 billion zlotys in shale gas exploration by 2016 and foreign investors to contribute a further 50 billion.

Public and political enthusiasm for nuclear power has also waned amid a slowing Polish economy and following the Fukushima nuclear disaster in Japan last year.

Analysts have also been sceptical over PGE's ambitious investment plans, which assume spending of around 330 billion zlotys through 2035.

"I have never believed in nuclear power as PGE already has plans to invest in conventional generation, distribution and renewable power," said Maciej Hebda, head of research at Warsaw-based broker Espirito Santo.

Poland relies on Russia's Gazprom for more than half the gas it consumes. Warsaw wants commercial production of shale gas to start as soon as possible so it can limit this dependence.

Poland has granted 111 shale exploration licences to foreign companies such as Chevron Corp or Marathon Oil and state-controlled companies PGNiG and PKN Orlen .

Poland had high hopes for shale after a study by the U.S. Energy Information Association in 2011 estimated its reserves at 5.3 trillion cubic metres, enough to cover domestic demand for some 300 years.

But estimated reserves were slashed to about a tenth of that in a government report published in March.

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