Work together better, shale gas investors tell Polish companies

Wed Mar 27, 2013 10:06am EDT

Related Topics

* Sharing results could speed results

* No evidence yet of vast recoverable reserves

* Poland's firms say open for cooperation

By Agnieszka Barteczko

WARSAW, March 27 (Reuters) - Foreign investors in Poland's shale gas sector need better cooperation from local firms to improve drilling results and to make strides in tapping unconventional gas supplies, companies and state geologists said.

Poland sees its potential shale gas resources as a way to reduce the European Union's member reliance on Russian supplies but test wells that so far have shown no evidence of large recoverable reserves have dented initial hopes.

This makes it critical for state-controlled firms to better share information with foreign investors to quickly determine where it will be profitable to continue exploring for shale, officials from a number of exploration companies said.

With an uncertain legal framework offering another challenge, companies and geologists say improving the working relationship with local firms is the best way to keep more foreign investors from pulling up stakes as U.S. major Exxon Mobil did in 2012.

"A shale gas concession has its limits and if certain geological trends are observed in one area then it is worth consulting with the company, which owns the neighbouring licence," said Jerzy Nawrocki, head of the Polish Geological Institute, which is supervised by the environment ministry.

"I hear from foreign companies that Polish firms do not share information with them. This does not make their life easier."

Poland estimates its recoverable shale gas reserves at between 346 billion and 768 billion cubic metres, far less than initial estimates but still enough to meet its gas demand for decades.

John Buggenhagen, exploration director at San Leon Energy , which holds 7 concessions in the Baltic Basin, said his company has been frustrated when trying to work with Polish firms to share data and buy land together.

"Over the last 5 years we have tried to find opportunities to cooperate with (Poland's gas monopoly) PGNiG group but to date have not done so," he told Reuters.

"We could have cooperated with them on joint land acquisitions, we discussed cooperation on data sharing, we discussed technology transfer, but they said they do not wish to do so at this point."

The European Union member and central Europe's biggest economy has so far granted more than 100 shale gas exploration concessions. As few as 42 wells have been completed.

Poland's state-controlled companies, including PGNiG, PKN Orlen and Lotos, own 32 concessions while a range of small exploration companies and oil majors like Chevron hold the rest. These foreign investors bring the expertise and experience needed in exploiting hard-to-reach gas from shale formations.

Talisman Energy, which is considering leaving Poland, said better cooperation with Polish firms accustomed to dominating the market could help foreign investors lower drilling costs.

"This reluctance to share information might be explained by the fact the PGNiG has been used to its monopoly position," Tomasz Gryzewski, Corporate Affairs Lead at Talisman Energy Polska said.

Chief of British 3Leg Resources Kamlesh Parmar said sharing data with PGNiG would benefit both companies because the two firms own adjacent concessions near the Baltic Sea.

"Cooperation is a little bit more difficult between bigger state companies and a medium company like ours, but we are working on it," Parmar said. "Cooperation can always improve."

State-owned PGNiG, which owns 15 concessions, said that U.S.-based Halliburton and Schlumberger are conducting the fracking for its wells and it was open to finding ways to work better with outside investors.

"Unfortunately not all firms can offer us an equal exchange of the data, which would satisfy both sides," PGNiG said in an e-mail. "However we are always open for such an cooperation."

PKN Orlen predicted that cooperation would improve as unconventional gas exploration in Poland moves beyond the initial stages of development.

"This situation is likely to change and the number of joint operations will increase," PKN said in a statement.

"An important element of cooperation with foreign firms seen today is exchange of knowledge and experience at service works, analysis of rock sampling and also during the fracking."

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