A Snapshot of PGNiG

Marek Karabula, Vice President for Oil Mining at Polskie Górnictwo Naftowe i Gazownictwo (“PGNiG”) called himself  “the only O&G man in Poland.”

He also raised some questions at the conference Shale Gas Eastern Europe 2011 in Warsaw, Poland, including: “Can PGNiG frack the shale?”

“Maybe you will receive a bit more comfort from my talk,” he answered.

Mr. Karabula pledged to speak about two companies that he said might not mean a lot to the audience but were important to PGNiG.

“FX Energy, with whom we are in a cooperation in unconventional plays in Poland as the 51% stakeholder. We have discovered together two reservoirs,” he explained, “which could mean 15% of total reserves of Polish gas. We are inviting some companies to our good territories for cooperation.”

He also mentioned PGNiG’s cooperation agreement with Aurelian Oil & Gas, which is the operator and owns 80% of concessions in the south of Poland. “We are sharing the experience,” said Karabula of the shale plays. “It’s very deep, at 4,600 meters. We are open in this cooperation and really want to share the experience.”

According to Karabula’s presentation referring to a well in the Polish Carpathians, “A number of reservoirs, all of which are proven producers in the region, are being targeted by this well and the current prospect will be drilled to a depth of around 4600 meters. There are several other similar sized prospects on trend which will be derisked in the event of the success of this first well. Using existing 2D seismic data, up to 680 million barrels of unrisked prospective resources have been mapped over prospects in the block.”

“Let’s move to talk of trillions of cubic feet,” he suggested. “PGNiG also has 11% in a project with Statoil ASA, investing $1 billion in operations on the Norwegian Continential shelf. We are active abroad and learning from those guys.”

Next, he said, was Pakistan. “We are transferring knowledge and partnering as a 70% stakeholder. The drilling is being done by the Chinese in a typical production sharing agreement.”

Karabula said that while some people said PGNiG was a monopolist, the company had done things like introducing geoseismic, drilling and well stimulation companies to Poland. He reported that the company had drilled 3,042 wells since 1981.

“In one year we drilled over 200 wells, and this is important because we are challenged as to how many wells we can drill here. We are drilling,” he insisted.

Thousands of kilometres of 2D, and hundreds of 3D microseismic were being undertaken, he said of PGNiG, which was constantly acquiring data.

Karabula explained that in the present excitement over Poland’s shale gas play development, it would prove difficult for his company to retain professionals like the one in a picture included in his PowerPoint presentation.

“Is this man still with us? Am I going to lose my drilling experts?” he asked. “I hope I will be able to keep them with me. This man is working on the drill rig for Aurelian.”

He said that PGNiG’s had peformed 64 frack jobs, 21 of them in Poland.

“There are a few companies in Poland drilling, and most of them are not talking.”

He went on to list some of PGNiG’s subsidiaries who provide geoseismic, drilling and well stimulation.

According to Karabula, driller Nafta Pila was working with Chevron and Saponis; and Geofizyka Krakow and Geofizyka Torun were working for clients like Chevron and ExxonMobil.

Karabula listed his company’s in-house competences, including seismic field operations, seismic data interpretation, hydraulic fracturing, and directional drilling service.

“Together with Haliburton we have done our first frack on July 9. It was important for us, and important for them, but how did we do it?” he said of PGNiG’s own operations.

“The frack went well, but the gas was not there. It happens some times but we don’t give up, we are positive and know that we need to invest.”

He spoke of the challenge of horizontal drilling in an old gas field: the UGS Strachocina, whose scope of work included nine horizontal wells, measured depths of 1123 – 1406 meters.

“We are drilling as quickly as we can, but sometimes things go wrong,” he explained. “We are not talking about the shale, but the sandstone and the limestone. We lost 14,000 tons of mud. But we were able to do it, to stop it and complete the job.”

Pointing to a map of Poland’s hydrocarbons concessions, he said: “Those dots are 234 wells which were drilled in the past, and they are strictly for Silurian. The knowledge we have from them is helping us to design our new wells.”

Karabula added that PGNiG was using the GEM Elemental Analysis Tool and magnetic resonance imaging in its operations.

“We took 800 meters of core to be analyzed – a first in Poland,” he said.

In terms of water issues, and its availability, he said the company is talking about underground storage and experiences with water management.

“Equipment is a challenge,” he admitted. “There will be two brand new rigs bought by our subsidiaries just to drill shale plays in Poland.”

Karabula referred to the EIA resources estimate of unconventionals in Poland that was in nearly every newspaper that day. “This looks really nice, the technically recoverable resources,” he noted. “I can’t comment on it, but only can say that we at PGNiG we will explore shale gas as quickly as possible and will deliver it to customers under the condition that it’s financially feasible.”

He continued, “We put a lot of effort to make sure that our financial models are based on reasonable assumptions. My intention is to be the first in Poland and I will make sure that we will do it under our exploration license. We can do it.”

Can PGNiG frack the shale? asked Karabula, who said it was still an open question.

“We need to crunch the figures to make sure that we can deliver the gas to Poland and other customers,” he explained, adding: “Don’t forget excise and don’t be surprised by taxation, because there will be different rates for heating and for other uses.”