Poland casts more uncertainty over shale gas

By bne IntelliNews May 23, 2013

bne -

Illustrating just how much of a mess Poland's energy strategy is in, the country's finance minister claimed on May 23 that Warsaw will now delay the collection of taxes on shale gas production for five years from the planned start date of the levy - which has yet to be passed in legislation. The move is part of a professed push to attract investors back to Polish shale gas; however, it appears to do little more than boost uncertainty.

"The law on the taxation of shale gas will go into effect in 2015, but we will not levy the tax until 2020 to attract companies to extract shale gas," Finance Minister Jacek Rostowski said in a speech, according to Reuters. The move comes in the wake of the recent exit of Canada's Talisman Energy and US oil firm Marathon Oil from their concessions in Poland, which followed ExxonMobil's decision to quit last year.

Warsaw's failure to set out terms and conditions for the exploration and production of shale gas is reported to have put off some investment, which has the PM demanding his cabinet do better, or face the sack.

"Yesterday I told the environment minister very clearly that I expect him to prepare regulations that won't scare investors away," Prime Minister Donald Tusk told reporters on May 22, according to Bloomberg. "He must either acknowledge that this project requires a business-oriented mindset or someone else will take over the task."

Investors' biggest concern is that there is no guarantee that those exploring deposits will be handed the rights to production, he noted.

Meanwhile, analysts are split on the tax plans that Warsaw has announced. Some suggest that a cap of a 40% fiscal burden is better than in many other countries. Others side with current investors, who naturally complain that the rate is too high. However, the major point remains the uncertainty. If Warsaw is serious about attracting investors to build a viable shale gas industry that can help the country reduce its reliance on Russian imports, it needs to set out a clear and definite environment.

The failure to do that has helped spur recent speculation that in fact Warsaw may have lost its previous enthusiasm for shale gas, as evidenced by the recent sackings of the treasury minister and CEO of state-controlled gas utility PGNiG - both of whom were leading proponents of the push of Polish companies to fill the void left by falling interest from foreign firms. Warsaw is clearly tired of the complaints of state-controlled companies that they can't keep up with all the government's investment demands, and the recent cancellation of several power projects has not gone down well.

At the same time, reports last week quoting unnamed investors claimed that Warsaw has "declared war" against US and Canadian investors - which have valuable experience in shale gas exploitation. Even as officials announced in public a new campaign to help foreign investors enter the segment, the same figures were said to have told private meetings that Warsaw intends to keep the country's reserves for Polish companies.

At the same time, while all these terms and conditions are vital, they would not have such a strong effect on investors should test drilling results not have proved so disappointing thus far. For the moment, the wider Polish dream of becoming a major producer is faltering due to the expense and difficulty of accessing its deposits.

Related Articles

UK demands for EU reform provoke fury in Visegrad

bne IntelliNews - The Visegrad states raised a chorus of objection on November 10 as the UK prime minister demanded his country's welfare system be allowed to discriminate between EU citizens. The ... more

Poland's Law and Justice nominates hardline cabinet

Wojciech Kość in Warsaw -   Poland’s Law and Justice (PiS) party, which won an outright majority in the parliamentary elections on October 25, has announced a hardline ... more

Kaczynski expected to appoint hardline cabinet

Wojciech Kość in Warsaw -   The Law and Justice (PiS) party, which won an outright ... more

Notice: Undefined index: subject_id in /var/www/html/application/controllers/IndexController.php on line 335