Poland woos investors back to shale gas hunt with fast-track regulations

By bne IntelliNews February 6, 2014

Tim Gosling in Prague -

Poland will approve new investor-friendly shale gas regulations within a fortnight, Prime Minister Donald Tusk pledged on February 5. The move signals yet another about-face in Warsaw's confused energy strategy, as it launches a drive to tempt foreign investors back to the hunt.

Warsaw launched dreams of becoming a major gas producer in 2010 on the back of estimates of massive deposits of unconventional gas. Foreign investors snapped up licences, but the enthusiasm soon waned as reserve estimates were slashed and the government failed to deliver regulatory and tax clarity. Tusk turned to pushing state-controlled companies into the fray, but huge investment demands for investment in new power capacity have made that a struggle.

Now, Poland appears to have launched a new charm offensive to persuade those foreign investors still on the ground to stay and raise their efforts, and others to take another look. The first apparent step in the new push was an announcement from London-listed San Leon in late January that it's close to producing the first commercial shale gas flows in Europe.

Tusk told reporters on February 5 that the government will now rush through a regulatory framework within two weeks, noting that it has made significant concessions to investor concerns over previous plans. In particular, he said Warsaw will not now create a state-owned operator that would take a stake in each licence and control the investments. He also said licensing procedures will be streamlined. Investors had complained earlier of demands for different licences for drilling wells deeper and the lack of a guarantee that explorers will gain production licences.

"More and more countries are betting on shale gas... so we had to opt for a less bureaucratic model of regulations," Tusk said, according to the Wall Street Journal.

The scale of the about-face in Warsaw is startling. Just a year ago, investors reported having been called to a private meeting with environment ministry officials at which they claim their concerns were met with disdain, and they were essentially informed that foreign investment in shale gas was no longer welcome. However, Warsaw now appears to realize it really can't go it alone.

Italian giant Eni became the latest to give up the ghost in mid-January, leaving just two energy majors - Chevron and Conocco Phillips - still in the game. Meanwhile, state-controlled company finances are creaking under the strain. Tusk said last week that plans for two nuclear power plants, to be built at a cost of up to €15bn by a posse of utilities and miner KGHM, will definitely go ahead.

Reflecting that ongoing confusion over a strategy that aims to reduce Polish reliance on Russian gas, as well as make up a shortfall in generation capacity that the economy ministry suggests could stand at 1.1GW by 2017, Tusk was quoted as saying: "Today we understand that in order to count money from shale gas, we must first of all begin to extract it."

Recently appointed Environment Minister Maciej Grabowski has been drafted in to spearhead the renewed push for foreign experience with drilling for shale gas and cash. "This year, I think at least 30 wells for shale gas will be made," Grabowski said. "To date there were 55. This year will be a turning point for shale gas".

Parker Snyder, president of industry body the Poland Shale Coalition, told Bloomberg on January 30: "It's a definitive departure from the previous leadership, that was at best neutral and at worst hostile to foreign investors. [Grabowski] is very open to dialogue. Things are definitely getting more positive."

However, as Tamas Pletser at Erste points out, while Warsaw can offer whatever regulatory and tax temptations it likes, that can't overcome suggestions from current test drilling that the depth and complex geology of Polish shale gas deposits make many commercially unviable. "The new law was missing for a long time, but what we really miss is the good results of the fracturing," the analyst points out. "It seems to us that Poland cannot meet earlier expectations, even though new technologies may result in a breakthrough a few years from now. We believe that the companies cannot change 'Mother Nature', but they can lobby for a better law and lower taxation."

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.