PGNiG to list units leading Poland's shale gas hunt

By bne IntelliNews May 14, 2012

Tim Gosling in Prague -

PGNiG is proposing to merge its five exploration service units and list them on the Warsaw Stock Exchange as it seeks to raise cash to fund its shale gas push, the Polish state-controlled gas firm announced May 11. The plan also suggests the state is keen to prevent foreign investors from having too great an influence in the country's development of its unconventional gas reserves.

"The growing scale of exploration for unconventional gas may increase the amount of drilling and maintenance services and thus intensify competition on this market in Poland," PGNiG said in a statement, according to Reuters. "In this way it would be possible to privatise the companies by way of IPOs and raise additional financing." The company's board will present the plan to shareholders at its AGM on June 6.

Amidst an acceleration in activity since Civic Platform was reelected to head the government in October, PGNiG has been anointed to take the lead in Poland's dash to develop its shale gas reserves. The company is acting as point man as state-controlled companies from across the sectors have been pressed to join together to carry out the work. The government has made hefty promises that shale gas will enable the country to escape its reliance on Russian gas imports - currently just below 70% of consumption - by 2015.

The state company campaign took off at around the same time as less-than-bullish exploration reports started coming out from the international (mostly US) majors that kicked off the early shale gas search in Poland. Some foreign investors are now warning about politicization of Poland's unconventional gas industry and a tendency to favour domestic, state-controlled, companies, reports Platts.

By way of example, reports in January claimed that months of talks about a partnership between Polish oil refiner PKN Orlen and Canada's Encana were halted due to Warsaw's desire to prioritize domestic tie-ups. However, no Polish company has any experience of extracting shale gas. "The issue here is not about money, it's skill and know-how," claims one foreign investor. "Companies like PGNiG have no experience in shale gas and it was madness to stop the tie-up between Encana and PKN. The signal seems to be that Polish companies should start producing shale gas by the next election [scheduled for 2015]. I can understand it as political propaganda and as a signal to the Russians, but it makes no business nor technological sense."

There is clearly a lack of shale gas experience in Poland, especially compared with the US, where the segment has been so successful that it has changed the face of the global gas market. There have been no reports, however, that PGNiG has sought a strategic partner - which would clearly demand some element of control alongside the know-how and technology it could bring - before making a decision to list its drilling and maintenance service companies.

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