The most recent forecasts of the International Energy Agency (IEA) indicate that the importance of gas will be growing. This is a strategic resource. IEA even writes that “golden era” is only coming for gas. Until 2035 the consumption of the blue fuel will go up by as much as 50%. Everything which applies to gas is broadly commented. Especially interesting discussion is taking place around the so-called unconventional resource deposits, including shale gas deposits. According to the analysts of the US Energy Information Administration, Poland may have the largest reserves of shale gas in Europe. Deposits of shale gas in Poland which are feasible for exploitation are close to 5.3 trillion cubic meters, state the preliminary estimates. If such data are confirmed, it would mean that Poland has the reserves for over 300 years (with a view of current consumption).
However, these are still estimates, not enough to create professional plans of the extraction development. For the time being, the opening of champagne bottles will have to wait. “In September this year we will have complete data about how large are the reserves of shale gas in Poland. Analyses made by the Polish Geological Institute and the US geological service are in progress,” says Henryk Jezierski, Undersecretary of State at the Ministry of Environment and Chief National Geologist, refraining from comments regarding the gas reserves. Also, the giant on our gas market, Polskie Górnictwo Naftowe i Gazownictwo (Polish Oil and Gas Company) is careful. The company made the first test well looking for unconventional gas, Markowola-1, in July 2010 in the Lublin region.
Also, the first two fracturing processes in Poland were performed. It follows from information which is available that, however, gas flow is not as high to announce success. To that extent, the second well made in the Pomorze region near Wejherowo, Lubocino-1, produced better results. Drillings up to 3.5 km deep were completed in March 2011. “In this borehole, in Silurian shale, promising gas flows were found but the analyses will take another few months,” stated the company. Nothing strange that the President of the giant, Michał Szubski, when asked about shale gas, is not willing to give explicit answers and explains that detailed tests are still needed. Such moderation has to be received positively, why should one give hope when we still know very little about gas-bearing shale? And if Polish shale turns out to be rich in gas? It has to be stated clearly, no Polish or European company has comprehensive technology needed to exploit gas-bearing shale.
The example of the first wells made for PGNiG shows this distinctly. As long as the drillings were made by the drilling companies from the PGNiG Capital Group (the giant itself made approx. 1725 drillings), we were unable to make the key fracturing operation ourselves. As PGNiG admits, in the Markowola-1 borehole the technology of Halliburton was used. In practice it means that Polish (and not only Polish) companies will be forced to purchase licenses. Patent rights in oil industry are exceptionally well protected and expensive. In consequence, to exploit Polish deposits of shale gas, PGNiG will have to spend not even millions but billions. Can PGNiG afford this? One hole costs at least a dozen million zlotys. Meanwhile, to exploit a deposit profitably, a lot of such holes have to be made (in USA – already over 35 000). Deputy Minister of State Treasury, Mikołaj Budzanowski, also discusses the fact that financial issues may be a significant problem. “Without a doubt, it will be the financial barrier which will decide about the speed of work on shale gas extraction. The capabilities of Polish companies are limited with a view of the cost of making a single borehole which reaches approx. 40-50 million zlotys. The basic cost of this process is the fracturing. Moreover, the “life cycle" of a single well is about 24 months, afterwards the process has to be repeated which of course involves more costs. Unfortunately, Polish companies are not so wealthy to be able to invest all the time.
Can shale crash on the financial reef? Not necessarily. Egypt also is not a financial tycoon but it produces millions of tons of oil and billions of cubic meters of natural gas. How is it possible? The technology and money for investment is provided by those who want to extract hydrocarbons at the Nile. Most probably similar mechanism will have to be also implemented in Poland. Numerous foreign companies are interested in Polish shale. If this is the case, they could finance exploration and extraction. In the future, their financial investment would be repaid from the sale of the discovered gas and after the repayment such companies would participate in part of the profit. The key factor which may slow down or even prevent exploitation of gas-bearing shale are the issues concerning impact on the environment. In the EU environmental awareness is constantly increasing and the governments in such areas take into account public opinion more and more. “We are looking at the problem and our biggest interest is raised by the applied technology. We know based on information coming from the US that the technology used in the extraction of gas from gas-bearing shale may be destructive to the environment,” says Jacek Winiarski, spokesperson of Greenpeace in Poland. “Large quantities of water with special chemicals are pumped to the boreholes. This leads to water pollution. As he notes: for the time being we may speak about shale only very generally. We still do not know how much of such gas there is in the deposits and whether the exploitation will be profitable.
Officials convince us that the exploitation is not harmful to the environment. “I would like to stress that the companies in Poland carry out drillings in a way which does not threaten the environment,” says Minister Jezierski. “The work is monitored by relevant institutions and so far we have not had any signals that the process used was dangerous for the environment. According to Piotr Litwa, President of the Higher Mining Office, the regulations protect the environment well. “With respect to safety and environmental protection they are restrictive enough to limit undesirable consequences of the work performed,” assures the head of the HMO. In the opinion of Minister Budzanowski, one has to “avoid hysteria". “The existing tests have shown that there was no environmental contamination when making the drillings.
Drillings are made at the depth of 3 kilometres, so below the level of water that could potentially be contaminated, for example due to the leak of chemicals,” emphasises Budzanowski. “We care for the environment and we are not into wasteful exploitation,” convinces Vice President of PGNiG, Marek Karabuła. “For the company to receive the permit for drilling, it must fulfil the requirements of over 130 regulations and laws. Even the best intentions will not be enough if it turns out that gas from gas-bearing shale will be too expensive. “How much will the extraction of shale gas in Poland cost?
It is difficult to produce explicit calculations,” admits Marek Kamiński, Director of Investment Advisory Department at Ernst & Young. “According to experts, it may be about 300 dollars per 1000 cubic meters of gas. With current price for Russian gas paid by PGNiG (approx. 320 dollars per 1000 cubic meters), the extraction of shale gas is relatively not so profitable. On the other hand, potential exploitation on a large scale would probably lower the costs. However, it should be recalled that the demand for gas will grow which also entails the price increase. Not long ago, the top management of the Russian Gazprom stated that at the end of the year the price of 1000 cubic meters of gas will go up even to 500 dollars. In such a context, exploitation of the shale gas which is “too expensive” would be definitely profitable. Also, economic calculation should include a value which is difficult to measure: energy security of the state. Relying more on the new, own sources of fuel, and even potential possibility of extraction alone also puts us in a better negotiation position in discussions with traditional suppliers. Shale gas in Europe, let us not forget, is a potential factor which may change the entire gas market, strongly impacting the prices and the structure of imports. In consequence, clear actions of those who, in the case the extraction is launched on a large scale, would have a lot to lose can be noticed around the issues concerning shale gas. Officially nobody opposes, however, loudly expressed doubts can be heard... “Russia is concerned that shale gas could review the existing pricing policy in Europe,” admits directly Bogdan Marcinkiewicz, Member of the European Parliament. Also, the nuclear lobby may not find shale gas interesting. It would be a noteworthy alternative in the case of plans to further reduce CO2 emissions. Even speculations are made that both parties may enter into alliance to slow down or even stop the possibilities of the shale business growth. In France, it practically has no chance to function. Probably it is just a coincidence that France is the European leader in nuclear power industry...
Source: Nowy Przemysł, page: 54, 2011-07-01, by Dariusz Malinowski
On the same topic also in:
Dziennik Gazeta Prawna, page: 6, 2011-07-22, by TŻ
Metro Warszawa, page: 2, 2011-07-22, by pap