Poland to Present First European Shale Gas Regulation
The government in Warsaw is to present draft legislation aimed at regulating Poland's fledgling shale gas industry.
The highly anticipated draft bill on the extraction and taxation of hydrocarbons from conventional and unconventional sources, will be issued today (13th of June).
According to the communique of the Ministry of Environment, the new hydrocarbon law proposes the introduction of new taxes and increasing share of revenues paid to regional coffers. It also includes provides for the establishment of a national fund, that would reinvest a portion of tax proceeds to support education, science R&D and social spending.
In addition, the legislation establishes a mining and hydrocarbon regulator, NOKE (Narodowy Operator Kopalin Energetycznych), which is to oversee the companies involved in the producution of fossil fuels in Poland.
Poland at present lacks regulations, which would apply to the development of unconventional resources such as shale gas and shale oil. The present legal system was created in the era of conventional sources and applied to a highly monopolized market.
Currently, oil and gas exploration and extraction is regulated by the Geology and Mining Law (Prawo Geologiczne i Gornicze, PGiG), which was amended in January 2012.
The Ministry of Environment has argued that the PGiG is already outdated and should be changed as soon as possible, notably before applications are made for shale gas production.
According to the Ministry, the PGiG does not provide legal tools for effectively executing rights of the state, i.e. does not allow the ministry to effectively control transfer of concessions. In addition, it does not guarantee transparency and is potentially in breach of applicable EU laws.
Industry is skeptical
The industry leaders are skeptical of the government handling of shale gas legislation.
According to John Claussen, the Poland country manager for Chevron Corp., it’s too early to decide whether the regulations should be changed.
“Probably a critical aspect is to collect more information, on rocks, gas etc.” suggested Mr. Claussen, speaking at the 12th AGH Oil and Gas Summit in Krakow, last month.
Jacek Wroblewski, the manager of the BNK Petroleum in Poland reminded, that exploration process was still in its early stage. “The process of testing production is in front of us.” he noted.
The CEO of the Orlen Upstream and the head of the Polish industry organization in Poland OPPPW, warned that the new legal framework must be understood by the international business community.
”To reach the momentum we need a new approach,” Wieslaw Prugar appealed in Krakow.
Prugar underlined that he can understand a need to secure tax incomes. On the other hand, he urged the authorities not to act in a manner that would make difficult or preclude required investment.
“I’m afraid that German type of geological law, repeatedly amended, will not be understood by internationals, especially those coming from the North America” Prugar said.
“In the world restricted by the crisis, business may decide to go somewhere else.”
Prugar underlined that the shale gas industry was a high return but also high risk business.
Mr. Claussen agreed that stability, predictability and simplicity of the regulatory environment, were key factors for industry and that developing unconventional sources needs an exceptionally sensitive approach.
In his opinion the legal system should be changed taking into account the development of the industry.
Cezary Filipowicz, the manager of the United Oilfield Services branch in Poland expressed his hope, that at the end rational decisions will be taken.
”The future of shale gas in Poland will be written by the first sweet spot,” Filipowicz predicted. “If the first one gives hope to the industry, then banks will be interested and hopefully government will take rational decisions.”
Government calming fears
Prime Minister Donald Tusk recently said that the new regulation would guarantee security and stability for business and the state.
Other government officials have repeatedly assured that rights of the companies already engaged in Poland will be respected, and taxes will not be unduly high.
The bill is supported by the Head Geologist and deputy Minister of Environment Piotr Wozniak, who is poised to become a special shale gas coordinator, although as Natural Gas Europe learned unofficially from a high ranking source at the Ministry of Environment, that nomination has been blocked by another of the ministries.
“After announcing the draft, we will speak to all interested parties, we will create new regulations together,” commented the ministry source.