UPDATE 2-Eni to pull out of Polish shale gas exploration-sources

Tue Jan 14, 2014 12:14pm EST

Related Topics

* Industry sources cite challenging geology as reason

* Firm already gave up two of its three permits

* Eni declines to comment

* Other foreign firms have already quit Polish shale (Updates with quotes from industry sources)

By Pawel Bernat and Stephen Jewkes

WARSAW/MILAN, Jan 14 (Reuters) - Italian energy firm Eni will give up all of its Polish shale gas permits because of tough geology and an unclear regulatory environment, the same issues that have already pushed other foreign firms to quit Polish shale, industry sources said.

The difficulties in Poland, which was touted a few years ago as having the best shale gas prospects in Europe, could send a chill through other countries on the continent that are trying to exploit shale gas, including Britain.

The Italian company owned three licences in the north of Poland. In a statement sent to Reuters, Poland's environment ministry said two of the licences had already expired with no plan from Eni to renew them. It said it had no information on the third permit, which runs until 2018.

But three industry sources, who spoke on condition of anonymity, said Eni would pull out of the third permit as well, ending its shale gas activities in Poland entirely.

Eni declined to comment.

"The (Eni) guys are packing their bags; they are leaving Poland. I think the reasons were predominantly costs, regulation and geology," a person familiar with the matter told Reuters.

Another industry source said the third licence will be given up before it expires and that challenging geological conditions were the main motive for Eni's decision.

The sources confirmed an earlier report in Polish daily Puls Biznesu that Eni was preparing to pull out of Polish shale gas entirely.

The Italian firm's move is another blow for Polish shale gas, which the government hopes will help cut Poland's dependence on imported gas from Russia.

Over the past few years, investor enthusiasm for shale gas has waned because of a downward revision of the size of potential resources, uncertainty about the legal framework and difficult geological formations for shale gas drilling.

Oil firms, including Marathon Oil, Talisman Energy and Exxon Mobil, have also quit Poland. Eni's departure would leave Chevron as the only energy major with Polish shale gas concessions.

Shale gas production involves a process known as fracking, forcing liquid into rock formations at high pressure to prise them apart and release gas. Some environmentalists say the process is harmful, but the industry says it is safe. (Reporting by Pawel Bernat in Warsaw and Stephen Jewkes in Milan; editing by Jane Baird)

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