Polish firm plans factory to supply input for fracking shale gas

Tue May 27, 2014 5:02am EDT

* Firm says to open EU's first ceramic proppant plant

* Proppants used in shale gas drilling to boost output

* Company issuing shares to close financing for project

* Plant to start production in second half of 2015

By Marcin Goettig

WARSAW, May 27 (Reuters) - Poland's Baltic Ceramics Investments is issuing shares to help fund construction of a factory that will produce a high-tech substance used in fracking, part of a developing supply chain for eastern Europe's shale gas sector.

The company plans to produce ceramic proppants, tiny and almost indestructible engineered spherical balls that are injected deep underground to help push oil and gas to the surface, part of the process called hydraulic fracturing.

"We will have the first such factory in the European Union," Dariusz Janus, head of IndygoTech Minerals, the holding company controlling Baltic Ceramics Investments told Reuters.

Ceramic proppants, which can withstand high temperatures and pressures, are used to keep the fractures in the shale rock open, especially if deposits are more difficult to tap, which experts say is the case in Poland.

Over 50 exploratory shale wells have been drilled so far in Poland, and experts say that dozens more are required to determine whether large-scale commercial production of shale gas is viable.

That means millions of dollars of spending on exploration, which has already led United Oilfield Services to open a logistics base in Poland in August last year. U.S. giant Halliburton is also constructing a hub for Polish operations.

Baltic Ceramics wants to have the factory up and running in the second half of 2015. It has made successful tests of its product in the United States and is ordering equipment for the factory, Janus said.

The company has received $11 million from the European Union's structural funds, a further $4 million from Poland's public funds for boosting innovation and is currently issuing $3.4 million in shares to complete financing for the project.

Other countries in eastern Europe, including Romania and Ukraine, are seeking to develop shale gas, adding to the potential demand for services and supplies.

OUTLOOK

Baltic Ceramics aims to produce 135,000 tonnes of proppants per year, about 5 percent of global demand. It says it owns deposits of enough raw materials to cover up to 80 years of production.

"We have already received inquiries about our product from firms looking for shale gas in Poland, Romania, Ukraine and Britain," Janus added.

Demand for ceramic proppants has risen sharply in recent years, driven by the U.S. shale oil and gas boom.

Also the Russia-Ukraine crisis raised the pressure on Poland and the rest of the European Union to cut reliance on Russian gas imports. Janus said the political situation was "very favourable" for the firm.

He said the key advantage of Baltic Ceramics was its location in Poland, which will allow it to provide operators in Europe with ceramic proppants significantly faster and cheaper than firms such as Carbo Ceramics or Imerys, which produce their proppants in the United States.

Poland has had ambitions to replicate the U.S. shale boom, but a downgrade in estimates of its gas reserves, more difficult geological conditions than in the United States and the exits of some global energy firms have cast doubts on its shale prospects.

In a potential turnaround, energy firm San Leon hailed the first successful shale test in Poland in January and said the use of ceramic proppants was vital to achieving it. ($1 = 3.0533 Polish Zlotys) (editing by Jane Baird)

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