Tuesday, November 29, 2011

Poland’s Test for Shale Gas Might Test Its Resolve

Poland seems to be pioneering the shale gas development in Europe.  Unlike France, Poland embraced shale gas as an opportunity to reduce dependence on Russian gas and enhance its energy security.  According to Rice University’s Baker Institute, shale gas in Poland may account for about 55 percent of approximately 220 trillion cubic feet (tcf) of estimated recoverable shale gas resources in Europe.  The European Centre for Energy and Resource Security estimates that development of only a small part of the European shale gas would help reduce dependence on high-priced Russian gas and allow for greater diversification of gas sources.  With 30 companies exploring shale gas in Poland, there is hope that drilling will begin by the end of this year.  
But there is as much caution about shale gas development in Poland as there is optimism.  Shale gas in the US took 20 years before it reached the current boom.  A combination of a long history of drilling for hydrocarbons, deregulation of the gas market, competitiveness that brought down the costs of producing shale gas and equipment are behind the success of the shale gas in America.  It is yet to be seen how the US scenario could be replicated in Europe.  Costs of drilling appear to be the number one hurdle.  Given the difficulties to extract shale deposits in Europe due to complex geology, it may be more costly to bring them on line compared to the US.  Higher population density and access to water may complicate drilling in Poland, particularly given scarcer water resources in this eastern European country vis-à-vis the US.  The ongoing controversy in the US surrounding water use, well casing, and treatment of flowback water after shale gas production, it is likely that these issues will cause concern and opposition in Poland as well. 
The time, testing and lowered costs of production that led to US shale gas success may be needed for Poland’s boom.  Until then, the wild card is environmental groups that may prevail to stop drilling shale gas before it occurs, as it happened in France. 

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