Implications of Shale Gas Development on Par with EU Accession

Effects comparable to those brought about by Poland's accession to the European Union, including a 0.8 pp contribution to national GDP, 510 thousand new jobs and some PLN 87bn in additional tax revenues, are among possible benefits which the developing shale gas industry may offer the country's economy. The benefits are envisaged by one of the three scenarios described in a report prepared together with the Centre for Social and Economic Research (CASE). The magnitude of potential gains depends on the amount of investments in the shale gas industry and sources of their financing, but even if the most conservative option were to unfold, Polish companies involved in shale gas exploration and production would have a chance to take a major step forward.

The report was publicly presented for the first time today, during a panel discussion entitled "Shale Gas Exploration Championship. A New Driver for the Polish Economy", organised by PKN ORLEN as part of the Economic Forum in Krynica.

"So far, the debate between shale gas enthusiasts and sceptics has not been supported by any unbiased research into possible impacts of the industry on Poland's economy. As a consequence, the exchange of arguments "for" or "against", "now" or "later", "on our own" or "with partners" has been underpinned by wishful thinking and prejudices rather than numbers, albeit estimated. This was the reason why we resolved to draw up the report. I firmly believe that it will present an important reference resource for politicians, who create the regulatory framework, as well as for other groups vitally interested in Polish shale gas," said Jacek Krawiec, PKN ORLEN's CEO.

The research findings suggest that three different scenarios may be laid out to trace the possible evolution of the Polish shale gas industry

- moderate growth – assuming that investment will come solely from domestic sources, 

- increased foreign investment – assuming that capital will be committed by both Polish and foreign investors, 

- accelerated growth – assuming heavy inflows of FDI.

Please note that none of the scenarios can be considered less or more likely, as their implementation depends on regulatory and political decisions. However, all of them leave aside the size of Polish deposits, which is yet unknown, and focus on the scope and rate of investment, as well as the possible financing sources. They all assume that by 2018 the preliminary investment phase will have ended, to usher in industrial-scale production.

The moderate growth scenario, which puts capital expenditure of Polish companies at USD 0.9bn a year and gas production at 3.5bn cubic metres, might create 74 thousand new jobs and boost tax revenues by PLN 20bn in 2012-2015, as well as accelerate the average annual GDP growth rate by 0.06 pp until 2025. Under the increased foreign investment scenario, which assumes investment of USD 1.5bn a year and production of 6.3bn cubic metres, Poland might gain as many as 103 thousand new jobs and PLN 24bn in tax revenues, while enjoying a 0.08 pp rise in the average annual GDP growth rate. In turn, the accelerated growth scenario requires as much as USD 4bn in capital expenditure to produce 20bn cubic metres of gas a year, but its effects are profound - the GDP growth rate higher by 0.4 pp in the entire period and by 0.8 pp in 2019-2025, approximately 510 thousand new jobs and a PLN 87bn increase in tax revenues. Should it materialise, this scenario would translate into 305 new production wells drilled yearly until 2025. It is the only path that could bring about a step change for the entire Polish economy, on a par with our country's accession to the European Union. For the third scenario to come true, it is necessary to scale up investment, which can only be achieved with a considerable inflow of foreign capital. To that end, Poland would need to prepare a development programme for the gas industry and the gas-fired power generation sector providing for such involvement of foreign investors.

The full report is available at: 

www.gaz.case-research.eu
www.konferencje.orlen.pl/en/publications/publications-2012 

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PKN ORLEN