* Marathon, Talisman say quitting Polish operations
* Polish government backs shale to replace Russian imports
* Critics say reality falls short of shale gas hype
* Estimates of reserves were drastically downgraded
* Energy executives complain about red tape
By Agnieszka Barteczko
WARSAW, May 8 Canada's Talisman Energy
and U.S. oil firm Marathon said they were quitting
Polish shale gas operations, raising questions over the business
sense of developing the deposits, once seen as a potential
Poland's government, determined to find a new source of
energy to replace the imported Russian gas on which it depends,
has trumpeted its rock formations as the biggest potential
source of shale gas in Europe.
The initial optimism among investors has been tempered by an
unsettled regulatory landscape, and a downgrade of estimates for
the size of potential reserves.
U.S. oil major Exxon pulled out last year, citing
disappointing drilling results, but the announcements from
Marathon and Talisman on Wednesday added up to the most dramatic
exodus from the sector to date.
Marathon said it had decided to end operations in Poland:
"after an evaluation of the company's exploration activities in
Poland and unsuccessful attempts to find commercial levels of
Talisman announced it was selling its Polish operations to
Irish headquartered gas exploration group San Leon Energy.
A Talisman executive in Poland told Reuters the main reason
for the sale was to allow the company to focus on its operations
in the Americas and the Asia-Pacific region. But he said the
picture inside Poland was also a factor.
"Of course what Talisman also took into consideration was
the situation in Poland's shale gas, including geological
uncertainty and unclear legal framework," said Tomasz Gryzewski,
Corporate Affairs Lead at Talisman Energy Polska.
The departure of the North American firms is likely to
further dent investor appetite to develop Polish shale gas,
which is seen as a political imperative by a government wary of
former occupier Russia, but has yet to produce any shale energy
in commercial quantities.
"Poland's shale gas exists only in the media, because in
reality nothing happens," said Grzegorz Pytel, energy expert at
Sobieski Institute, a Polish think tank.
"What is needed is a long term-strategy for the sector,
predictability and equal treatment of local state-controlled
firms and foreign investors."
Poland has issued more than 100 shale gas exploration
licences, and about 40 test wells are in operation, though none
is expected to start producing gas before 2015.
Foreign permit-holders still active in Poland include
Chevron Corp of the United States and Italy's ENI
, as well as a handful of smaller independents.
The new owner of Talisman's Polish shale gas operations was
bullish about the prospects.
"There is still significant and continued industry interest
in the Baltic Basin shale gas play, and we expect the results of
our fracking programme to attract further interest from
potential farm-in partners," said Oisin Fanning, executive
chairman at London listed San Leon Energy PLC.
HOW MUCH GAS?
Enthusiasm for Polish shale gas reached its peak in 2011,
when the U.S. Energy Information Administration 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 last year -- still enough to
supply Poland for decades but far short of the initial promise.
At the same time, the legal framework for shale gas
investors in Poland, while still more open than in most European
countries, turned out to be less straightforward than some
foreign firms had anticipated.
Company executives complain about the tangle of overlapping
environmental regulations which force them to seek permissions
from multiple agencies before they can drill. They say the fact
there is, as yet, no law adopted on taxing shale gas makes it
difficult for them to make business projections.
Opposition to drilling from green groups and local residents
has so far been muted, but international environmental lobby
groups are building up their presence in Poland and starting to
scrutinize Polish shale gas projects.
In part because of the question marks about whether shale
gas in Poland is commercially viable, investments so far have
been led by the state.
Firms controlled by the state, led by energy company PGNIG
, are the biggest holders of shale gas concessions.
Even state-controlled companies not traditionally involved
in energy exploration, including copper miner KGHM and
refiner PKN Orlen have committed to big investments in
shale gas, prompting concerns from some minority shareholders
that politics was being put before business.