Home Is Where the Shale Is

Poland’s PGNiG uses local strengths to hone in on shale gas

One energy enterprise going for unconventionals in Poland has a bit of a home court advantage. Stanislaw Rychlicki, Chairman of the Supervisory Board at the Polish Oil and Gas Company (“PGNiG”) described exactly what his company was up to, in Poland and abroad.

Rychlicki explained that PGNiG was the leading company on the Polish gas market, covering upstream (exploration o&g in Poland and abroad), midstream (trade and storage) and downstream (distribution).

He said the company had 90 exploration concessions with a total area of about 60,000 square kilometers. Out of 221 production concessions: 45 were in oil, 27 in oil and gas, and 149 in gas.

PGNiG’s exploration activities he said were taking place in Norway, Denmark, Libya, Egypt, Pakistan and that PGNiG subsidiaries were active in Denmark, Germany, Czech Republic, Russia, Slovakia, Hungary and Ukraine.

He said it was difficult to estimate the company’s recoverable resources: “It’s difficult to say, as it’s only a prognosis made mostly by American companies: 3000 million cubic meters, so it’s quite big.” (By comparison, Rychlicki mentioned the 1,400 million cubic meters of estimated recoverable shale gas in Poland.)

On a map of Poland, he showed areas of interest for tight gas and shale gas, indicating that the western part was the tight gas area.

“When you’re talking about shale gas prospective areas we’re talking about the north to the southeast of Poland,” explained Rychlicki. “It’s quite a big area. Some of it will probably be in an area in the south.”

He listed the foreign companies in Poland’s shale basins including Lane Energy and ConocoPhillips in the north part of Poland; as well as BNK Petroleum, San Leon Energy, Realm Energy International, FX Energy, etc.

“There are six petroleum provinces, where we’ve started to prospect unconventional and conventional gas oil fields,” he said, adding that PGNiG was drilling a first exploration block.

Rychlicki said there were also four concessions in the Warsaw Trough. “Analyses of the shales and geophysical surveys were completed in January and seismic is scheduled for March of this year.”

According to him, there were also hopes for unconventional production in the Pomerania Petroleum Province, where several conventional gas fields had been discovered.

Rychlicki outlined the risks and opportunities for unconventional hydrocarbon accumulations.

“Risks,” he explained, “include the unrecognized geology of gas shales. Urbanization of the area on which occurrence of unconventional gas is expected. We have more than 40% of environmentally protected areas in Poland, which is a problem for exploration and production. There are possible negative opinions of the local authority, which has been mentioned, especially in attractive tourist areas like Pomerania or Roztocze.”

He added that there was limited access to sufficient water in Poland, so having 10-20,000 cubic meters of water could be a problem.

High capital costs, lack of proper technologies, and uncertainty concerning gas prices were all additional risks, according to Rychlicki, who showed a satellite image of agricultural areas and nature preserves.

He commented, “When we start with prospecting, we have a big problem with that.”

However, Rychlicki couldn’t help but highlight the opportunities in Poland.

“There are potentially enormous natural gas resources, an opportunity for PGNiG to become independent from external gas sources, providing access to new technology, regional development and new jobs. It would mean green, cleaner energy for Poland and Europe.”

He said it was necessary to speak about the differences, however, between US and Poland. “The possible differences in geology include reservoir depth, tectonics, silica and clay minerals content, lower TOC content and thermal maturity, and locally possible nitrogen yield.”

He also noted the higher gas price in Europe in comparison with the US. “Exploration and production areas are either highly urbanized or used for agriculture,” Rychlicki said of Poland.

“Exploration will play an even more important role in our capital group, and can result in the increase of gas reserves,” he said, keeping in mind the risks.

Rychlicki revealed that PGNiG had started to cooperate with some foreign companies and had high hopes for finding big shale gas resources.

Poland, he said, still lacked special regulations in the case of shale gas exploration. “We are cooperating with US companies to try and use similar regulation as in the US. I know that regulations in the US could change from the point of view of waste water treatment.”

“It is many tons of water we use and about 80 percent comes back to the surface,” he continued, “so it’s important to use a special treatment for environmental protection. Maybe this problem will be solved with the authority this year.”

Of drilling costs without water treatment, Rychlicki said he didn’t know how much that would cost. “We’ve tried to find good regulations for what to do with this water, and of course there will be some costs but we don’t know how much because we’ve only made three wells in Poland.”

He added, “The government wants to solve this problem because they know gas is very important for our country.”

Regarding the infrastructure, he said it would be very important for the Polish gas market.

Rychlicki said, “When it will be big resources, we hope to be an exporter to other countries of the EU. Of course for this to be possible, we need about two years to have good information, to have reliable information about our resources. We need to do about 20 wells to confirm resources in our petroleum province, particularly where we’d like to find shale gas fields, and lab tests to evaluate TOC, silica content, etc.”

An attendee in the audience asked him about the prospects for an indigenous fracking company and whether that might bring costs down.

“Thirty five rigs is not enough to start big shale gas production,” explained Rychlicki. “15-20 holes this year will be made by various companies. We would like to start with four wells, Lane will have two and another company 5-6, so I think we have enough rigs. There’s a Czech company which has started to drill wells in Poland,” he reported.

"We have very good specialists in geophysical surveys and good geologists that have worked abroad,” he added. “For us, the cooperation with foreign companies is really very good for Poland.

“It’s not only the geology of Poland but the problems of regulation, bureaucracy which are different compared to other countries like the US, so our experience can be useful for companies looking to explore shale and tight gas,” concluded Rychlicki.