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Exploration and Production of Natural Gas From Shale Formations in Poland
- 1. Photo: Marathon Oil Exploration and Production of Natural Gas From Shale Formations in Poland - Status of the Project Polish Exploration and Production Industry Organization Brussels, 22nd of January 2013
- 2. OPPPW at a Glance • Established in June 2010 • Brings together and represents companies exploring and/or producing hydrocarbons in Poland • Promotes understanding of legal, economic, political, social and environmental factors affecting the exploration and production industry in Poland 15 Members 6 Observers
- 3. Scope of Activities OPPPW supports its members and observers at the local, national and European levels by: • maintaining dialogue with representatives of Polish Government and both national and European Parliament in terms of exploration and production industry related issues • developing the best industry practices (e.g. in terms of local communities relations or natural environment protection) • public appearances (conferences, seminars, meetings with authorities) • media relations and public statements in terms of oil and gas exploration and production
- 4. Poland: Over 150 Years of Tradition in Natural Gas Exploration and Production Yesterday Today Tomorrow • Poland 150 years ago: • 84 oil and 271 natural gas • Rising role of Oil Superpower with fields (incl. 68 undeveloped) unconventional oil & gas 2 million tons of oil • 140,6 billion m3: produced in 1906 recoverable deposits • Liberalisation of natural of natural gas gas market • 1956-1989: hundreds of hydraulic fracturing • Annual domestic • In 2020 the demand for operations in consumption (estimated): natural gas in domestic conventional gas 14 billion m3 market may reach the wellbores volume of about 25 • Annual domestic production: billion m3 5,1 billion m3
- 5. Shale Gas Development in Poland: Current Situation • 112 exploration concessions for unconventional resources granted so far • 39 testing wells already drilled, 3 wells in progress • 10 hydraulic fracturing operations completed (in 2 horizontal and 8 vertical wellbores) • c.a. 270 testing wells to be drilled before 2020 Source: Ministry of Environment
- 6. Unconventional Resources Still To Be Evaluated • Extensive but still not verified production potential – credible assessment of Polish shale gas resources and its productivity will be possible after drilling and completion of several dozen exploration wells • Favorable economic environment (though the proposed changes in legislation increase investment risk) • Unfavorable legal framework resulting in extensive and complicated procedures Photos: Marathon Oil, ORLEN Upstream
- 7. Potential Barriers to Intensity and Pace of Work LEGAL FRAMEWORK BUREAUCRACY • Lack of specific hydrocarbon law • Bureaucratic barriers to the greatest extent slow down the process • Uncertainty and fears of instability in terms of current and future regulations and tax solutions • Extensive number and unnecessary time burdens for administrative • Proposed law changes seem not to commensurate with procedures (incl. environmental ones) specifics of Polish geology and business operations reality • Central and local civil services are not • Extensive freedom of interpretation of some of the regulations prepared enough to deal with and in the new geology and mining law supervise the enterprise • Lack of basic analysis and detailed data in terms of • Lack of professionals who understand implementation of announced directions for hydrocarbons law the specifics of upstream sector • Rigid environmental and concessive obligations system • Dispersion of competence • Incompatibility of upstream related regulations to the specifics of upstream business Delay in accurate estimation of the Polish upstream oil and gas deposits
- 8. Canada : Lessons Learned for Poland Investor friendly regulatory approach • Limit the bureaucratic barriers • Streamline the administrative operations • Clear regulatory structure and interfaces • Set up clear and appropriate requirements • Ability to adapt to changing circumstances • Acknowledge and mitigate risks Photo: ORLEN Upstream
- 9. Canada : Lessons Learned for Poland (cont.) Tax regime must attract investments • Outcome-based perspective • Encourage innovations • Thorough analysis of new regulatory framework is a must – identifying and addressing issues before approval • Taking care of incentives pattern for exploration sector Photo: Marathon Oil
- 10. Canada : Lessons Learned for Poland (cont.) High importance of public education and mutual understanding • Exemplary model of public relations whereby scientists and other third parties are enlisted to explain the process to a potentially wary public • Strong relations between government and industry (different objectives but good understanding) • Effective industry-community consultation • Strive for mandatory frack fluid disclosure
- 11. POLISH EXPLORATION AND PRODUCTION INDUSTRY ORGANIZATION Thank you! www.opppw.pl marcin.zieba@opppw.pl
Notes de l'éditeur
- 1. As a country we are in a very privileged position – we can learn from other countries’ experiences – follow on proven solutions and avoid methods which didn’t work. Lessons learned from Canadian experiences (lectures and presentations,e.g. visit of representative of Alberta government at OPPPW’s conference in November) give us a motto „Follow but learn from mistakes”. 2. Obviously we are not to duplicate the specific solutions, ex. tax limits as we live in different countries, there is different economic reality & different geological conditions, but we can and we should follow the proven tracks in terms of general approach and scheme for designing the framework for effective process of recognition and extraction of unconventional oil and gas.3. What we have already noticed in Poland the bureaucratic barriers to the greatest extent slow down the process. What we learned from our Canadian colleagues is that they put great attention to streamlining the administrative operations and separate the policy and regulatory functions where possible. What we see in Canada is very clear division of tasks between state and local level. In Poland we are still suffering from dispersion of competences. 4. Uncertainty and fears of instability in terms of current and future regulations may discourage investors from intensive business operation. What we should think about is set up clear and appropriate requirements to make the process predictable for investors.5. And finally, an exemplary feature of Canadian regulatory model of approach to be followed is flexibility. We need to acknowledge and mitigate risks, try to anticipatepotential scenarios and be able to react smoothly as well as adapt to the changing circumstances.
- 1. What know from Canadian vast experienceis that tax regime should first and foremost encourage investors. It definitely should provoke investors prioritize and bring their money to Poland, not any other place in the world. Intensive investments entail wealth of knowledge & best practices. Knowledge encourages innovations. Low foreign investments slow down economy. What we know from Alberta case – after the local government increase royalty by 20% in 2007, they notices significant drop in investment and they were forced to revise their regime what happened in 2009 and 2010 after the consultation process gave the opportunity anyone to speak.2. Alberta case shows that we need to acquire outcome-based perspective and thoroughly analyze new regulatory framework before it is set up. We need to identify and address all issues and scenarios before final approval to avoid revisions in short-time perspective. 3. There are also plenty of incentives pattern used for our business in Canada. We should carefully analyze them. Any reliefs for the sector can be inspiring, e.g. tax losses can be carried 20 years forward and 3 years carry-back.
- And the last (but not least) area of competencies where we should derive from is communication and education. What we observe is Canadian model present exemplary public relations / public affairs strategies whereby all parties involved aim at mutual understanding. In terms of relations between the industry and authorities we should aim at working out strong relations bearing in mind we have different objectives. Common good understanding is a must to work out the effective and good solutions. We consider the importance of public understanding of the process and continuous education and we do our best to promote the best practices, e.g strive for mandatory frack fluid disclosure (which is mandatory in British Columbia; and in Alberta, as far as I know, companies are required to disclose fluids to the local regulator and public disclosure is expected to be mandatory later this year). As the organization we also encourage the companies in Poland to disclose those data and currently we are working on reconstructing our web site to allow companies publish data via OPPPW site.