Poland cuts estimate for shale gas exploration wells

Thu Jul 31, 2014 7:40am EDT

* 80 shale wells to have been drilled by late 2014

* Initial forecast was for 100 wells

* First commercial shale gas production still expected this year

* But large-scale production still years off

By Anna Koper

WARSAW, July 31 (Reuters) - Poland is seeing less exploratory drilling for shale gas than expected, environment minister Maciej Grabowski told Reuters, dealing a setback to the country's efforts to find a cheap alternative to the natural gas it imports from Russia.

Grabowski said he expected just over 80 exploratory wells would be drilled this year, down from the 100 he projected in a newspaper interview in June.

However, he remained confidence that the first commercial production of Polish shale gas would start this year.

"By the end of June there had been 64 exploratory shale gas wells drilled in Poland. A further 20 are planned (for this year)," Grabowski said in an interview.

"Those are only estimates. Some of the wells are mandatory, but some of them are optional. In the process of concession extensions, new declarations (of intent to drill wells) might appear as well", he added.

Poland has embraced shale gas, hoping to replicate a boom in cheap energy seen in the United States and find an alternative to the natural gas it imports from Russia, a neighbour with which is has tense relations.

The drive for shale gas has become more urgent since the conflict broke out in Ukraine, through which Russia sends almost half of its gas exports to the European Union.

But initial hopes have been somewhat dimmed due to a downgrade in estimates of Poland's gas reserves, more difficult geological conditions than in the United States and less foreign investment than expected.

The U.S. Energy Information Administration in 2011 estimated Polish shale gas 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 2012.

Energy firms have yet to find commercial reserves and several big players, including Exxon Mobil, Marathon and Total, have either given up exploring or are not renewing exploration concessions.

Despite this, Grabowski said that based on information the ministry was receiving from energy companies exploring for shale gas, commercial production would start this year.

"A well like that would show that there is real possibility of extracting shale gas in Poland. However, extracting gas on an industrial scale, and clearly perceptible to the economy, is not a matter of this year or next," he said.

Poland's parliament has approved some amendments to the legislation governing shale gas, including broadening the concessions to cover both exploration and production.

Under the old rules, a firm that found commercial quantities of gas needed to seek a new concession from the government if it wanted to extract that gas.

"We don't have plans to introduce any further incentives for investors, because we're not receiving signals that they need them. If they appear, we will consider them," Grabowski said.

Chevron and ConocoPhillips are the only major players left in Poland's shale sector, although in January independent energy firm San Leon said an initial test on a permit in northern Poland had shown a potential yield of up to 400,000 cubic feet per day. (Editing by Henning Gloystein and Mark Potter)

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