OPINION
BY WOJCIECH KOSC
Rule
Britannia Several European countries have joined Poland in a search for unconventional gas. To reflect that fact, the SGIG is now a continental European publication. CHANCES ARE THAT you are reading this issue
during a coffee break at the 2nd annual Unconventional Gas & Oil Summit in London. Chances are, you’re excited about the prospects of producing gas from shale in markets other than Poland. The shift in enthusiasm away from Poland and toward other markets in Europe has taken place for a number of reasons. Back in 2010, when unconventional gas fever grippped Poland, few countries in Europe were on track to prospect for shale. Poland, in contrast, was granting concessions to both international majors and land speculators alike. Today, while the exploration program is going forward on acreage operated by state-controlled entities like Orlen Upstream as well as private ones like San Leon Energy, dynamic growth has gone elsewhere. Remarkably, our readers speak with enthusiasm about Ukraine, a country no one had much bothered about two years ago. Poland is no longer the only country that’s looking for unconventional gas under the flag of diversifying energy sources and becoming independent from dominant suppliers. While
The oil and gas companies that parachuted to Poland are now going to lengths to get established in other markets.
4 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
still having the most wells drilled, momentum is building elsewhere. Take the UK as example. There, the conservative government announced tax breaks for operators to spur drilling activity. Cuadrilla Resources, a leading operator in England, has worked hard to gain public acceptance after tremors caused by their well stimulation program. As of today, dozens of operators are bracing themselves to prove the Bowland Basin in England’s Lancashire region, home to shale several times thicker than the Marcellus. On the other side of Europe, a moratorium on fracking was lifted in Romania, some early exploration is getting underway in Hungary, and the Lithuanian parliament approved granting Chevron licenses. Finally, Shell landed a deal with the Ukrainian government to prospect a major play in the east. In other words, companies that parachuted to Poland are now going to lengths to get established in other markets: MND, KCA Deutag, Viking. The Canadian company Phoenix, after a look, has seemed to chill on the idea of Poland. One executive told the SGIG that Europe will be the new center for shale gas and tight oil that no one has ever seen before. He based this on the fact that there only 70 rigs in Europe. A laughable figure perhaps, but Europe’s a good place to be if E&P takes off, sky-rocketing growth as a benefit of a low-base effect.
CONTENTS
p/8
OP-ED Rule Britannia
p/13
INDICATORS
42
p/18 TRENDING p/2 4
Market Update: Should have BCC’d the Prime Minister
p/32
Taxes & Royalties:
Fill the Coffers p/38
The UK’s
Shale Future p/4 4
River Runner:
JOHN BUGGENHAGEN p/4 8
CLEANTECH PAVILION
24
p/50 TOP 5 Cleantech Opportunities in Shale p/56
Interview JOHN BUGGENHAGEN PLANS TO PRODUCE GAS, ALL OVER EUROPE
Jerzy Nawrocki p/58 DRILLING RIGS p/6 0
PRO EURO Energy Services Expert’s Corner VP Eric Bollard*
8 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
CONTENTS
p/8 4
IP GROUP* Izabela Kawczynski
p/88 GLOBAL UPDATE Overview Global UK Ukraine France Germany Russia Romania Lithuania EU USA China Argentina Australia Brazil Hungary Spain
92 WHOLE LOTTA CHEAP GAS MAY BE SOON COMING TO EUROPE
88 90 92 96 98 98 99 100 101 102 103 104 104 105 106 106 107
p/109
OPER ATOR’s
WHO’S WHO
p/129
EUROPE SHALE
Services Directory
24
p/140 CH ROBINSON Flatbed logisitics* p/142
GRAZYNA PIOTROWSKA-OLIWA AND MIKOŁAJ BUDZANOWSKI CANNED
PICTORIAL
p/62
LAUNCH PARTY Shale Gas World Europe
Proppant keeping pores open
p/14 4
p/6 4
TOP 25 MOST INFLUENTIAL People in Polish Shale
EVENTS CALENDAR
p/146
“ T H E W E L L H E A D ” Industry point of view Frank Maio
*Advertorial
WWW.CLEANTECHPOLAND.COM
|9
Partners
To become a partner for the magazine, please contact the publisher The American Chamber of Commerce (AmCham) is a business organization that serves and promotes its member companies. AmCham fosters positive relationships with the government and promotes the free market spirit for the benefit of business. Ul. Emilii Plater 53, 00-113 Warsaw www.amcham.com.pl Cleantech Poland is a consultancy for sustainable business. Cleantech Poland provides services to the upstream oil and gas sectors. The Shale Gas Investment Guide is part of a portfolio that includes the magazine Cleantech. Al. Jerozolimskie 27/306, 00-508 Warsaw info@cleantechpoland.com PwC PwC provides oil and gas companies with services in assurance, advisory and tax & legal. A global services company, PwC has been in Poland for 20 years and counts many of the largest oil and gas companies as clients. Al. Armii Ludowej 14, 00-638 Warsaw www.pwc.pl SSW SSW provides comprehensive tax and legal advisory services. SSW, whose main practice areas are energy and natural resources, advises investors on the business implications of the government’s royalty proposal. Rondo ONZ 1, 00-124 Warsaw www.ssw.pl
COMPANY INDEX O 3Legs Resources (8, 19, 51, 82, 90) n n A Aurelian Oil & Gas (15) n B Baker Hughes (13)
Baltic Ceramics (63) Bank of America (99) Baringa Partners (40) BBC (83) Beach Energy (104) Blackrock Investments (47) Bloomberg (83) BNK (13, 15, 90, 107) BP (92) British Gas (92) n C CARBO (63) Carbon Connect Group (43) Center of Eastern Studies (97) Centrica (92) Cheniere Energy Partners (92, 102) Chesapake Energy (21) Chevron (13, 30, 96, 100, 101, 104, 105) City University (93) CNOOC (18) ConocoPhillips (19, 72, 74, 104) Cuadrilla Resources (21, 23, 43, 83, 90) D Dart Energy (15, 21) Devon Energy (18) n Dow (105) n E East-West Petroleum (100) EIA (77) Energy Research Centre (103) ENI (13, 97) Ensign (19, 59) EuroPol Gaz (20) Exalo (13, 18, 59) ExxonMobil (13, 20, 30, 72) n F Financial Times (83) n G Gas Natural Fenosa
Want to see if your company was mentioned? Here's our index to help you out.*
(96) Gaz-System (83) Gazeta Wyborcza (82) Gazprom (20, 25, 96, 97, 99) n H Halliburton (13, 23, 79) Heyco Energy Group (107) Hidrocarburos de Euskadi (107) HRT (106) Hutton Energy (22) HydroConfidence (54) n I IEA (99) Institute of Energy Studies (81) Iskander Energy (23) n J Jefferies Capital (47) Journal of Petroleum Technology (63) n K KCA Deutag (13, 19, 58) KPMG (101) Krevox (51) Kulczyk Oil & Ventures (82) n L Line Energy (15) n M Marathon Oil (23) The Marcellus Shale Coalition (30) Markets and Markets (63) Merrill Lynch (99) Mitsubishi (104) MND (13, 19, 58) MOL (100, 106) n N NETCo (63) NoHotAir (83) n O Oil & Gas Skills (107) Orlen Upstream (13, 72) Orlen Upstream (59) Orteng and Cemig (106) Oxane (63) Oxford Energy Associates (93) Oxford Institute for Energy Studies (93) n P Penn State University
(63) Petra (106) Petrobas (106) PGNiG (13, 16, 19, 20, 25, 27, 28, 29, 59 86) Phoenix (59) Pioneer (18) PKN Orlen (36, 72) Polish Geological Institute (80, 81) Prop Tester and Kelrik (63) PWC (17, 33, 35) n Q Quantum Fund (47) n R R2 Energy (107) Rice University (63) Romgaz (100) n S Saint-Gobain (63) San Leon 9, 13, 15, 22, 23, 33 46, 66, 68, 72, 79, 107) Santos (104) Schlumberger (13) Shell (96) Shesa (107) Sinochem (18) Sky News (83) South Australian Cooper Basin (104) SPK Geoservis (96) SSW Law Firm (55) n T Talisman Energy (13, 15, 23) Terrapinn (81) Carbon Brief (93) TMX/Falcon (106) Total (92) Trofagas (107) U United Oilfield Services (13, 23, 58), n W Waldo (7), Wawrick Business School (93) Weatherford (13) Wisent Oil & Gas (13), Wood Mackenzie (99) n Y YPF (105) Z Zeta Petroleum (23, 100) n
* Please see the Who’s Who of Concessions (p 113) and the Services Directory (p 131) for a complete list of companies operating in Poland
10 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
SHALE GAS
investment
GUIDE
I ND I CA T O R S MARKET OVERVIEW
-1-
A N A LY S T ' S V I E W
CHANGE OVER TIME
RIGS, PRESSURE PUMPING, WELLS
Change over time Rigs
PP* Wells Wells ** Wells *** in Poland (HHP) to date stimulated horizontal
May 2013
31
180,000 44
18
10
October 2012
35
180,000 31
10
2
* Pressure pumping capacity in hydraulic horse power
TOBIASZ ADAMCZEWSKI P R I N C I P A L A N A LY S T
** Including DFIT *** Including directional drilling
SOURCE: MINISTRY OF ENVIRONMENT BASED ON OPERATOR SELF - REPORTING, CLEANTECH POLAND RESEARCH
We are still waiting for major develop-
TOTAL KIT
P R E S S U R E P U M P I N G C A PAC I T Y Company
Storage (1)
Completion
HHP(2)
Baker Hughes Halliburton Schlumberger United Oilfield Services Weatherford TOTAL KIT (estimate)
Warsaw, Poland
Operational
20,000
Teresin, Poland
Operational
36,000
Wołomin, Poland
Operational
44,000
Łowicz, Poland
Operational
60,000
Central Poland
Operational
20,000 180,000
SOURCE: CLEANTECH POLAND RESEARCH
IN POLAND
(1) And maintenance facility (2) Hydraulic horse power in Poland, as of May 1, 2013
W E L L S T O D AT E
UNCONVENTIONAL OIL AND GAS
Well Names
OA*
CP/3Legs Res.
4
1
Łebień LE - 1, Warblino - 1H, Łebień LE - 2H, Strzeszewo LE - 1
PGNiG
7
3
Lubocino - 1, Lubycza Królewska - 1, Markowola - 1, Lubocino - 2H, Opalino - 2, Wysin - 1, Kochanowo - 1
ExxonMobil
2
-
Krupe - 1, Siennica - 1**
BNK/LNG/RG/SR
3
-
Wytowno S - 1, Lębork S - 1, Starogard S - 1
3Legs Resources
1
-
Łęgowo LE - 1
Chevron
3
1
Grabowiec - 6, Frampol - 1, Zwierzyniec - 1
Gdańsk
Olsztyn Szczecin
Orlen Upstream
6
3
Syczyn - OU1, Syczyn - OU2K, Goździk - OU1, Berejów - OU1, Berejów - OU2K, Stręczyn - OU1
Marathon Oil
6
2
ORZ Cyców - 01, SIE - Domanice - 01, RYP - Lutocin - 01, KWI - Prabuty - 1, BRO - NM Lubawskie - 01, SOK - Grębków - 01
Eni
3
-
Bągard - 1, Stare Miasto - 1, Kamionka - 1
San Leon
8
2
Siciny - 2, Belvedere - 1**, Chopin - 1**, Lelechów SL - 1, Czasław SL - 1, Lewino - 1, Szymkowo - 1, Rogity - 1
BNK
2
-
Gapowo B - 1, Miszewo T - 1
Wisent Oil&Gas
2
2
Rodele - 1, Babiak - 1
* Overall ** On a relinquished concession
new since October 2012
Well Locations
SOURCE: MINISTRY OF ENVIRONMENT AS OF MAY 2013, CLEANTECH POLAND RESEARCH
Company
INCLUDES PROGRESS REPORT
ment in unconventionals to commence in Poland. Some rigs have left the country, at least for now, to markets like Serbia, Pakistan, or Spain, Pressure pumping capacity is unchanged. While the government is working on new concession and tax regulations, operators (Marathon and Talisman) are leaving the market. The recent government shake-up in the ministry of treasury, which went hand in hand with the replacement of PGNiG’s CEO, reflects instability. Progress remains slow. Since October 2012, 13 wells have been drilled, two concessions have been relinquished (more pending) and still no production has taken place. The market needs good news and legislative stability for exploration capital to reach the country. On the positive side, development of prospective Baltic concessions remains a priority for some well-financed operators and completion jobs are on their way. The gas market liberalization process has finally kicked off and if all goes as planned, new gas resources will be part of a liquid EU market.
Bydgoszcz
Poznań
WARSZAWA Łódź
Lublin
Wrocław
Katowice Kraków
Rzeszów
wells in red are ongoing
MŚ* : 44 exploratory shale gas wells have been drilled and 3 more are on their way. 14 have been hydraulically fractured, 10 are horizontal and 4 went through a Diagnostic Fracture Injection Test. Currently there are 108 SG concessions.
WWW.CLEANTECHPOLAND.COM
| 13
SHALE GAS
investment
GUIDE
I ND I CA T O R S
-2-
DISBURSEMENT OF REVENUE
N E W TA X R E G I M E B Y N U M B E R S
Local (Gminy): 60% Regional (Województwo): 15%
High methane gas: PLN 24 per 1,000 m3
The National Environment Protection Fund (NFOŚiGW): 10%
Nitrogen-rich gas: PLN 20 per 1,000 m3 Oil: PLN 50 per tonne
CASH FLOW TAX
ROYALTY
Since the introduction of the proposed hydrocarbons tax regime, the Minister of Finance revisited the cash flow tax. In the current proposal, operators would be split into three categories, depending on their income to expenses ratio. Plans to keep the full government take in the area of 40% were also reiterated by government officials (more on page 32).
Unc. Gas: 1,5% Gas: 3%
ratio* <1: 0%
Unc.(1) Oil: 3%
ratio* 1 to <2: 12,5%
(1)
(1)
Oil: 6%
not deductible from CIT tax
ratio* ≥2: 25%
Unconventional, permeability < 0,1 mD
* Income to expenses ratio
PRICE OF ELECTRICITY (WEEKLY WEIGHTED AVERAGE RATE, PLN PER MWH)
C O U N T R Y S TAT S
Gas import
200 SOURCE: MINISTRY OF ECONOMY
Gas production 4.4 (BCM)
28%
100
Sep 2012
Dec 2012
6 34
2.67% 1.55% 1.74% 5.52%
SOURCE: PSE OPERATOR
5 29 5, 0 92 1, 68 -7
32.87%
4,000
55.66%
New estimates from the Polish Geological Institute are expected earliest in 2014. Jerzy Nawrocki, PGI’s Director, needs a larger volume of core samples and seismic data to come up with a more precise estimate than the 2012 figures.
14 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
Lignite Renewable
Hydro Industrial
NATURAL GAS CONSUMPTION FORECASTS (BCM PER YEAR) 21
20.2
20 19 18 17 16 15 14
SOURCE: MINISTRY OF ECONOMY
SOURCE: EIA, PGI
PGI, March 2012-high probability PGI, March 2012-max EIA, April 2011
Poland is under pressure to install new power generation capacity. By 2016 there might be a 1-2 GW shortfall in nominal power. As old power plants need to be renovated or shut down (up to 6,6 GW by 2020), replacing them will be crucial. Without cheap gas and RES support Poland will need to import more energy in the near future from neighbouring countries.
Anthracite Gas
2,000
0
Mar 2013
Low demand combined with a low price of coal are major determinants in the Polish price of electricity. At these prices even conventional power investments are being put on hold.
POWER GENERATION BY SOURCE
SHALE GAS POTENTIAL (BCM) 6,000
153.69
72%
11.4 (BCM)
SOURCE: POLISH POWER EXCHANGE
300 GAS CONSUMPTION IN 2012
17.1
14.5
2006
2010
2015
2020
2025
2030
The Polish government estimates that natural gas consumption will grow 70 percent by 2030. By that time, energy production from natural gas is planned to triple. Increased domestic production and efficiency in power generation will be key elements in implementing this plan.
SOURCE: MINISTRY OF ENVIRONMENT, MINISTRY OF FINANCE
District (Powiat): 15%
EXPLOITATION FEE
SHALE GAS
investment
GUIDE
I ND I CA T O R S S T O C K P R I C E O F S H A L E G A S E X P LO R AT I O N C O M PA N I E S ( 2 0 1 3 )
30.00
31.38
Nov
Apr
BNK PETROLEUM (BKX:CN) 1.10
0.95
0.70
0.30
0.75
0.38
Jun
Nov
$AUD
0.36 0.215
0.20 0.115
Jun
0.09
Nov
Apr
$CAN
0.08
0.05
0.01
Apr
DART ENERGY (DTE:AU)
0.04
LNG ENERGY (LNG:CN)
$CAN SOURCE: TORONTO STOCK EXCHANGE
Jun
SOURCE: TORONTO STOCK EXCHANGE
SOURCE: LONDON STOCK EXCHANGE
43.12
43.50
IN POLAND
Aurelian Oil & Gas and Talisman are no longer listed in the Shale Gas Investment Guide. Their acreage went to San Leon Energy, who is currently not only the largest unconventional acreage holder in Poland, but also the fastest growing oil and gas company in the country. Their recent recovery of 22% over a week shows a strong signal despite Marathon’s announcement to exit Poland. On the other hand, LNG’s end of year report announced a negative working capital of CAD $5.4 million. Having a 50% stake in two of San Leon’s concessions (Węgrów and Iława) this might mean further expansion of SLE’s interest in the basin.
0.02
0.02
Jun
Nov
Apr
SAN LEON ENERGY (SLE:LN)
SOURCE: AUSTRALIAN SECURITIES EXCHANGE
57.00
£GBP (p)
54.50
INDEPENDENTS
£GBP
13.00 9.59
9.00
7.70 7.32
5.00
0.056
Jun
Nov
SOURCE: LONDON STOCK EXCHANGE
3LEGS RESOURCES (3LEG:LN)
-3-
Apr
SHALE PRICE OF INDEPENDENTS
Currency
share price
3LEG BKX DTE LNG SLE
£GBP (p) $CAD $AUD $CAD £GBP
31.38 0.75 0.053 0.02 6.34
May 2, 2013
% Change
% Change
% Change
-6.33 -18.48 -3.64 -42.86 10.45
-44.46 -41.41 -81.07 -75.00 -38.15
-83.48 -87.44 -92.93 -96.30 -81.89
(in one month)
(in one year)
On April 29, 2013 the CEO of PGNiG, Grażyna PiotrowskaPGNiG (PGN:PL) Oliwa, along with Radosław Dudziński, the Chief Commercial Officer, were let go (read more on pages 24-31). Prime Minis- 6.20 ter Donald Tusk confirmed the management’s decision before PGNiG did so, which caused some uproar. Some experts claim that Tusk’s premature statement cost PGNiG’s shareholders 2% and the Polish Financial Supervisory Authority is 4.90 now looking into the matter. A two year jail sentence and 3.63 three million PLN penalty can - very much theoretically - be put on the PM if proven guilty of revealing insider informa- 3.60 tion. PGNiG’s stock price grew 45% over the past year when Jun Ms. Piotrowska-Oliwa was in charge.
(in two years)
PLN 6.1
5.49 SOURCE: GPW
Company
Nov
Apr
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| 15
SHALE GAS
investment
GUIDE
I ND I CA T O R S PRICE OF GAS
Volume Price
PLN / 1MWH
132.0
7567
159.50
123.5
3783
119.00 115.67
0
27 Feb
Jun
16 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
36.82
Light Sweet Crude Oil (WTI) Futures Brent Crude Oil Last Day
105.68
102
99.00
104.00
95.70
91.00
87
Feb
Mar
Apr
May
Compared to H1 2012, oil prices remain stable and trade around the 100 USD/barrel mark. This is a strong price trend, especially in comparison to falling prices of natural gas and coal.
PRICE OF COAL
STEAM COAL FUTURES $ USD / TONNE
Rotterdam Coal
107
Central Appalachain Coal
101.15 83.10
82
77.00
80.05 70.40
57
Jun 2012
Aug 2012
Oct 2012
65.84
Dec 2012
Feb 2013
Apr 2013
The dominant trend of falling coal prices remains a reality in 2013. Reuters reports that large Chinese coal stocks and hiked freight costs are the two major causes. For Poland this means that more cheaper Chinese coal will be imported and the domestically produced energy source will be less competitive.
C U R R E N C Y R AT E S
€ / TONNE OF CO2
Nov
NetConnect, Germany
112.00
CERs
May
0.42
POLISH ZŁOTY (PLN)
$ USD
€ EUR
5.00 SOURCE: CONSUS BROKERAGE HOUSE
EUAs
2.75
0
15.42
$ USD / BARREL
117
4.31
5
36.90
Henry Hub, US
WEEKLY AVERAGE
PRICE OF OIL
FUTURES 9.47
10
Polish Power Exchange
SOURCE: NYMEX
THE LIBERALIZATION OF POLISH gas should lead to the de-monopolization of the market and emergence of many, alternative to PGNiG, gas suppliers. Operators will have much more flexibility in terms of choosing a buyer and negotiating contract terms. Market based futures contracts, as an essential element of risk management, will allow for securing long term market positions. The creation of a liquid wholesale market along with the ability to trade on the commodities exchange are main elements of transparency and competitiveness, which upstream investors will surely appreciate. Increased domestic extraction is a priority for the Polish economy, which is why, along with exploration investments in new plays, competitive market mechanisms need to be developed in the gas sector. This would link new gas producers to existing domestic consumers, who are awaiting market-based gas prices. A liquid wholesale market should in a short period of time lead to the correlation of Polish gas prices to those observed at European gas hubs (Gaspool, NCG, TTF, NBP).
CARBON PRICE
Source (April 29, 2013) USD/MWh
The newly launched gas market in Poland will be the basis for calculating royalties and the cash flow tax in the proposed hydrocarbons fiscal regulation.
MARIUSZ CALINSKI PRESIDENT OF DUON
27 Apr
30 Mar
SOURCE: POLPX, EEX, EIA
115.0
SOURCE: NYMEX, ICE
SGIG asked Mariusz Caliński, President of DUON, a company with a dynamically growing gas trading portfolio, what the impact of liberalizing the Polish gas market will have on the upstream sector.
POLPX GAS
4.35
3.75 2.50
4.54
4.14 4.13 3.17 SOURCE: NBP
EXPERT GUEST
-4-
3.11
02 Jun
02 Nov
02 Apr
T R E ND I NG Jan 30/13 CHINA INVESTS FURTHER IN U.S. SHALE
ECAS
CHINA GAINED ANOTHER FOOTHOLD in the unconventional gas markets in North America as Chinese company has made a large investment into a Texas shale play.
Wang Yi, Chinese MFA, looking for a handout
Sinochem has decided to buy shares from Pioneer Natural Resources. For 40 percent of total shares, the Chinese consortium will pay $500 million to their American business partner, and additionally supply $1.2 billion for future drilling in the Eagle Ford shale play. Both Pioneer and Sinochem aim for a drilling program of 140 wells over the year and a total well count of 165 completed wells in two years. It is estimated by year end to flow an equivalent of 5,000 barrels of oil per day. Previously, Chinese concern, CNOOC, took over Canadian based Nexen for $15.1 billion. Devon Energy was purchased by Sinopec for $2.2 billion, covering the operatorâ&#x20AC;&#x2122;s activities in five major shale plays in the United States.
Nov 11/12
1 San Leon announces buyout of Aurelian @sanleonenergy.com
Dec 01/12
Feb 05/13
Chevron meets Lithuanian President @president.lt
Feb 06/13
Kelly Brezger BNK Polska, dismissed
Chevron can begin shale gas exploration in Romania
@bnkpetroleum.pl
@balkans.com
18 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
IN EARLY FEBRUARY, the Polish national oil company PGNiG combined five state owned services companies into a new one called Exalo. The five companies that merged are Nafta Piła, Kraków, Jasło, Diament and Krosno. The merger was part of an ongoing process aimed at restructuring PGNiG. After the consolidation, Exalo has 54 drilling rigs spread over 260 projects. The company employs 3,800 workers and posted revenues in 2011 of about PLN 1 billion (€225 million). Although the company planned a debut on the Warsaw stock exchange, it was delayed indefinitely. “We will be competing with companies such as MND, Deutag, Drilltech and Ensign,” said Henryk Dytko, VP of operations. MND and Ensign have moved their rigs out of Poland. According to a source familiar with the new Exalo’s rig locations, about half of their rigs are outside of Poland.
3LEGS RESOURCES (LSE: 3LEG) decided to leave the German and French markets and focus in particular on the western Baltic Basin in northern Poland. The company’s activities will be limited to the concessions northwest of Gdańsk: Damnica, Lebork and Karwia. According to Tim Eggar, chairman of 3Legs Resources, considering the company’s financial capacity and current license portfolio, “3Legs should limit the geographical focus of our activities to Poland, which is already the group’s core area of activity in any case.”
CLEANTECH POLAND
Mar 26/13 3 LEGS RESOURCES FOCUSING ON N POLAND
TRENDING
Feb 07/13 PGNIG FORMS EXALO FOR SERVICES
We’ll take this one
EXALO
3Legs Resources and ConocoPhillips are exploring shales in the western Baltic basin on three concessions where Conoco has 70 percent, while 3Legs has 30 percent. 3Legs also owns five other concessions in Poland. In 2013, examination of the most promising locations will continue, with testing on the Łebien LE-2H horizontal well and Strzeszewo LE-1 vertical well, as well as two new vertical wells.
Exalo: IPO delayed indefinitely
Mar 30/13
Mar 15/13
UK lifts moratorium on shale exploration
Chairman of Shell comes out in support of shale
Feb 06/13
@gov.uk
@tekniikkatalous.fi
Poland referred to the ECJ over renewables directive
Mar 30/13
Poland: limits proposed in legislation on fracking activists ´ wiadomosci@naftowe i gazownicze
@europa.eu
WWW.CLEANTECHPOLAND.COM
| 19
T R E ND I NG Apr 05/13 NEW YAMAL BYPASSES EARS OF MINISTERS
RUSSIAN PRESIDENT Vladimir Putin announced that a new tax regulation regarding shale exploitation is being prepared in Russia.
ON APRIL 5TH, EuroPol Gaz and Gazprom signed a memorandum of understanding in Russia about the possible construction of a second Yamal natural gas pipeline which would connect Poland, Slovakia and Hungary in about 10 years time. The pipeline would connect Europe with Russia via Belarus and Poland, bypassing Ukraine. Ukraine has been in conflict with Russia for many years over the price of gas and control of transmit infrastructure. Some members of the Polish government were surprised to hear the news. The controversy triggered dismissals of PGNiG CEO and the minister of treasury, amidst claims that Poland would rather follow a path to becoming more independent from Russian gas supplies.
NPR
Mar 31/13 RUSSIA EMBRACES SHALE, UNOFFICIALLY
Companies can count on a relief of 50 to 100 percent from the tax of exploiting shale resources. The amount of relief will depend on the permeability of rocks which convey the oil and gas. Duty on the export of raw materials will be abolished. The tax relief will also apply to companies that exploit Russian offshore deposits of oil and gas. According to Reuters, the new law is planned for January 2014. American based consortium ExxonMobil made an agreement with Russiaâ&#x20AC;&#x2122;s Rosneft to extract oil from shales in West Siberia. Although Gazprom and TNK-BP are planning exploitation of oil from shale deposits in Siberia, Gazprom officially stands in opposition to shale gas exploitation, saying hydraulic fracturing can be harmful to the environment and human beings.
Apr 02/13
A little bit of steel, a lot of significance
EuroPol Gaz is a joint venture of Gazprom and PGNiG. Both have 48% shares while remaining 4% belongs to GasTrading, held in majority by PGNiG.
Apr 05/13
Guenther Oettinger tells Germany not to reject fracking @faz.net
NE EUROPE
Preparing to do an about face
Ukraine: excitement is at a peak
Apr 03/13
Study: wastewater injection causes biggest earthquake yet in Oklahoma @geology.gsapubs.org/
@naturalgaseurope.com
Apr 05/13
Cantabria, northern Spain, bans fracking @uk.reuters.com
20 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
THE PRICE OF NATURAL GAS in the U.S. is climbing, spurring some analysts to say the shale gas revolution is slowing, the Financial Times reported. Commodity prices have been trending upward. In early April, Henry Hub futures closed at a high of $4.124 per million British thermal units, as the result of lower winter temperatures than expected.
ALTHOUGH SHALE GAS PRODUCTION has decreased U.S. emissions by 12 percent since their peak, shale gas is not yet thought of as a low emissions fuel source. That’s because shale gas, which is mostly methane, can escape into the atmosphere, and when it does, methane can warm the atmosphere 25 times more effectively than CO2. If just three percent of methane leaks into atmosphere, the warming effect gas can be more damaging than coal. According to the current estimate from EPA, about 6 million metric tons of fugitive methane has leaked from U.S. natural gas systems in 2011. These fugitive emissions are equivalent to 432 million metric tons of CO2 per year over a 20 year time. That can be compared to all CO2 emissions produced by Australia in 2011.
HOUSTON CHRONICLE
Apr 09/13 SHALE, NOT YET LOW EMISSIONS FUEL
In recent years, U.S. natural gas output has climbed thanks to the development of unconventionals, causing a drop in prices, and motivating explorers such as Chesapeake Energy into oil rich plays. New petrochemical plants have been built to take advantage of the cheap natural gas supplies. Goldman Sachs says Henry Hub future prices could reach as high as $4.50. “We expect US natural gas to soon return to pricing marginal production costs, which is a significant shift from the pricing dynamics of the past 15 years,” said Johan Spetz, one of the bank’s analysts.
GOODWIN SUSTAINABLE DEVELOPMENT
Gas prices: trending upward in the U.S.
Shell and environmental groups such as the Environmental Defense Fund are working together to create best practices to limit fugitive emissions. The little blue flame is spreading
Apr 08/13
Apr 17/13
Valeura Energy receives new Turkey license
Apr 05/13
UK social acceptance for shale on rise @nottingham.ac.uk
@valeuraenergy.com
TRENDING
Apr 05/13 NATURAL GAS PRICES IN U.S. ON THE RISE
Cuadrilla wins safety award, UK
Apr 14/13
@naturalgaseurope.com
Scottish regulator investigating Dart Energy coal bed methane leaks @heraldscotland.com
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T R E ND I NG May 01/13 HUTTON WINS $2 MILLION FOR SEISMIC
“IN ORDER TO SUCCESSFULLY deal with the impact of U.S. competitiveness due to a fracking boom, Europe should aim for developing few of its shale gas resources”, European commissioner for energy Günther Oettinger said at a ministerial meeting in Dublin in late April. The EU gas prices on average are four times higher than U.S. Because of this fact, a majority of EU member states are interested in exploring for shale gas, commissioner Oettinger explained. To facilitate the process, the EU will provide a legal framework to help with exploration and production, and at the same time manage environmental concerns, he added. “Europe cannot afford to put its head in the sand and ignore the impact of what has happened,” said Pat Rabbitte, the Irish energy minister regarding the recent U.S. shale boom. However French minister of environment Delphine Batho said, “There are other alternatives to improve competitiveness such as green growth.”
THE BLUE GAS - Polish Shale Gas R&D financing program awarded a $2 million (€1.54 million) grant to Hutton Energy to help carry out seismic work on some of the company’s concessions in Poland.
ECAS
PIOTR KNAPP
Apr 26/13 EU ENERGY COMMISSIONER SUPPORTS SHALE
Günther Oettinger is a fan
Apr 26/13
Zeta Petroleum and Chevron share Romania data @zetapetroleum.com
Apr 27/13
Now, let’s get on with the program
The project, called “Jurashale,” will focus on the Jurassic shale play on three of Hutton’s six Polish concessions: Łódź Zachód, Koło and Poddębice on 2,643 sq km (650,000 acres). The competition was created by the National Centre for Research and Development and the Industrial Development Agency to support integrated R&D projects designed to promote shale gas production. The Jurashale project is divided into eight work packages aligned with Hutton’s current seismic work programme. These work packages include acquiring approximately 265 km of new 2D seismic, interpretation and mapping.
May 05/13
UK targets 40 wells by 2015 @reuters.com
May 06/13
San Leon adds to Spain acreage via Frontera Energy
IGas: UK will have shale gas in three years
@sanleonenergy.com
@uk.finance.yahoo.com
22 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
SAN LEON ENERGY HAS GAINED FULL ownership of Talisman Polska, a subsidiary of Talisman Energy. The two have been in a partnership on the Gdańsk W and Braniewo S concessions. San Leon also acquired Talisman’s stake in the Szczawno concession. The development is an outcome of Talisman Energy’s decision to conclude shale gas exploration operations in Poland to focus on the company’s core interests in the Americas and in the Asia-Pacific.
UNITED OILFIELD SERVICES, an equity backed startup, has signed a memorandum of understanding with San Leon Energy.
UOS
May 08/13 HALLIBURTON AND UOS BACK EXPLORATION
TRENDING
May 08/13 SAN LEON TAKES OVER TALISMAN POLSKA
WALT DISNEY PICTURES
Will frack for food
Everything the light touches is our kingdom
In 2010, Talisman signed a farm-in agreement to earn a 30 pct working interest in the concessions in return for commitments, including drilling one well in each concession, with the option to increase its interest to 60 percent by drilling a further well in each concession. San Leon will now use Talisman Polska’s cash to fund the planned fracture of its Lewino-1G2 well in the Gdańsk W Baltic Basin concession.
The agreement provides fracturing services at “favorable rates” with payment in cash or SLE equity. The Lewino-1G2 well on the Gdańsk W concession will be fracked in Q3 2013. The agreement contains an option to frack six additional wells in several basins: Baltic shale, Carboniferous tight gas, Rotliegendes tight gas and main Dolomite oil. Earlier in the year, Halliburton signed an agreement to share the costs of exploration wells with San Leon Energy. Halliburton Germany signed a memorandum of understanding with San Leon Energy to jointly explore and develop the Carboniferous unconventional gas potential in San Leon’s Wschowa, Góra, and Rawicz concessions in Poland.
May 08/13
May 11/13
@marathonoil.com
@wscountytimes.co.uk
Marathon Oil announces departure from Poland
May 07/13
West Sussex county in UK hostile to Cuadrilla Resources
Iskander Energy raising profile in CEE with $7 million closing
May 11/13
Chevron to begin Romania operations, Constanta county
@iskanderenergy.com
@chevron.com
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M A R K E T F E AT U R E
Should have BCC’d the Prime Minister
24 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
MARKET FEATURE
. Grazyna Piotrowska-Oliwa, the woman who brought a measure of glamour and sophistication to the oilfield, and could play Schubert from memory, misstepped when a PGNiG-controlled company signed an investment memorandum with Gazprom, and was discarded like yesterday’s newspaper. BY PARKER SNYDER PHOTOGRAPHY BY RADEK PIETRUSZK A/ PAP
Had she copied-in the prime minister, the CEO of PGNiG might still be at the head of the government’s effort to develop shale. Instead, Grażyna Piotrowska-Oliwa finds herself wondering, what the heck went wrong?
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MND, a Czech drilling company, despite success in Poland, has moved their rig to Serbia
this: in April EuRoPol Gaz, a PGNiG-controlled company, signed a memorandum in St. Petersburg with Gazprom about a gas pipeline that would increase the east-west transit capacity of Russian gas through Poland by about 40 percent. The CEO of PGNiG, Ms. Grażyna Piotrowska-Oliwa, knew about the study, as did members of her board. But as it seems, the prime minister was kept in the dark, although the matter was a sensitive one involving Russia and energy security. When news about the memorandum came out, the Polish press asked prime minister Donald Tusk what he knew about the St. Petersburg agreement. The prime minister had no clue. Demonstrating he was clearly annoyed, he publicly admonished upper management of PGNiG and the treasury minister Mikołaj Budzanowski. PGNiG’s supervisory board met over a weekend in late April. By Monday morning, heads went rolling. When the dust settled, those who no longer had jobs were Mr. Budzanowski, Ms. Piotrowska-Oliwa, and 26 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
CLEANTECH POLAND
THE STORY GOES something like
MARKET FEATURE
If you haven’t noticed: Marathon is leaving. Talisman has thrown in the towel. Exxon is gone. It won’t be long before all the international investors have left and the oilfield is empty of innovation and capital
PGNiG’s chief commercial officer Radosław Dudziński. This is what’s been going on in Polish shale over the last few months. And it’s too bad. Decapitating senior leadership can never be helpful, but what makes matters worse is that before she was fired, Ms. PiotrowskaOliwa had been doing a decent job. She negotiated the gas price tariff paid to Gazprom down by 10 percent, and presided over the company for just over a year, when PGNiG’s stock price climbed 40 percent. Whatever the reasons for her departure, they were not related to her performance. As for Mr. Budzanowski, the former treasury minister knew it would take serious capital to copy the North American experiment. Perhaps a bit too enthusiastically, he championed shale gas as a solution to the country’s energy dependence, and orchestrated a strategy involving stateowned companies. This move was a good one, aimed at funding an exploratory process that is factory-like and expensive, involving lots of players. On the day he was fired, the consortium of state-con-
trolled companies - PGNiG, copper miner KGHM, power utilities Tauron, PGE, and Enea - were still negotiating the terms of some sort of joint venture. Mr. Budzanowski’s departure will delay the project. BURY ME IN FIELD FLOWERS The fallout leaves PGNiG in disarray. The state owned operator is headless, although a new executive search has commenced. There’s little doubt that the Polish NOC’s 13 unconventional wells and 20 conventional wells planned for 2013 will largely go un-drilled. The market for raising capital for shale gas exploration isn’t favorable either. PGNiG’s service arm Exalo, a new company formed from five PGNiG-owned service companies, has delayed a planned flotation on the Warsaw stock exchange due to poor market conditions. In other words, the government stands a good chance of failing at its strategic goal: commercial quantities of shale gas by 2015.
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SZYMON SZCZEŚNIAK
The vibe at Terrapinn: Ukraine, the UK, Germany, Romania and Lithuania show potential
Here’s the real problem: far from being controlled by the state in the same way that Mr. Putin manages Gazprom, PGNiG takes its cues from the state’s treasury minister, but is not incubated by the government from the consequences of public wrath. Russia is always a stumbling block, but having one’s supplier as a perceived national foe shouldn’t be cause for turning a company upside down. Politics aside, the business rules in Poland are cumbersome, and even PGNiG seems hog-tied by a system that is too bureaucratic. Put simply, Poland’s shale formula leaves too much room for failure. 28 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
PRACTICE TOUGH LOVE WITH YOUR CHILDREN How could it be done differently? Concession rights should be owned by the government, but only private companies should be allowed to exploit them. PGNiG’s concession rights for unconventional gas should be cleaved, and in one fell swoop, the company’s exploration and production arm privatized to an investor with no real interest in politics, who would de-list the explorer, and engage in a massive restructuring. Consider Ruch - another well known Polish company. In late 2010, the company, a fossil from the communism,
was sold to Eton Park, a U.S. hedge fund, which promptly de-listed Ruch, re-organized management, and then re-launched Ruch with a set of modern management tools and likeable products. For goodness sake, you can get a cappuccino there now. Marathon is leaving. Talisman has thrown in the towel. ExxonMobil is gone. The word on the street is the few remaining international operators are also considering whether to invest hundreds of million of dollars in a market that requires 6-12 months to permit an expensive well, being used to North America markets where the permit is obtained without hassle.
MARKET FEATURE
SZYMON SZCZEŚNIAK
PGNiG’s concession rights for unconventional gas could be cleaved, and in one fell swoop, the company’s exploration and production arm privatized to a hedge fund with no real interest in politics
International oilfield investors at a networking event in November, 2013
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The Marcellus Shale Coalition has worked hard to reach out. They’ve turned ice cream parlors on main streets into co-collaborators in the industry’s success
There are exceptions. ENI remains committed to Polish shale. Chevron continues to drill in the Lublin basin. ConocoPhillips, having taken over the JV with 3Legs Resources, will drill and frack in 2013. Among the independents, San Leon Energy still remains bullish on the prospects of producing gas from shales (see profile page 44). The London-listed explorer has enlarged their footprint in Poland to some 14.15 million net acres, which makes an “exit” from Poland all but impossible. Whether the independents can sustain exploration will depend on their ability to attract a joint venture partner such as Statoil, or an IOC like the U.S. based Hess or the South African energy and mining company Sasol. Orlen Upstream is moving along with their exploration program, having drilled their sixth well in April and looking to do more work on the concessions it took over from ExxonMobil. You have to look hard to find the 30 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
bright spots. The proposed mining and geology law will get passed soon, though it’s not likely that the permitting process will be sped up, or that multiple regulatory functions will get managed by a single entity as in Alberta, Canada. Those who have found gas are generally happy with the results. Earlier exploratory wells drilled by Saponis (BNK as operator) and 3Legs Resources (in JV with ConocoPhillips) have shown gas is there. GOOD ARTISTS COPY, GREAT ARTISTS STEAL On top of all the exploratory and regulatory issues, there’s a big question remaining: how do you gain local acceptance? Everyone wants gas, but hardly anyone wants it in their backyard. Take a look at the Marcellus shale play. At first glance, Poland and Pennsylvania are similar, which makes a comparison of the two relevant.
Pennsylvania has approximately the same population density as Poland and a resource base that has been similarly assessed: enough gas for tens to hundreds of years. Pennsylvania - like Poland - is rich in oil history (Edwin Drake was the first to flow oil in Pennsylvania in the 1850s, as did Ignacy Łukaszewicz in the 1850s in Poland). But there, the similarities end. In Pennsylvania, despite fierce opposition, the Marcellus has taken off, whereas Poland has struggled to produce shale gas, despite surveys that return a social acceptance rate of more than 70 percent. Politicians seem to unanimously want gas, although little progress has been made. Poland has yet to get anywhere near commercial production, despite access to the advanced technology and knowhow of North American companies. (Consider the Canadian company Ensign who imported a modern drilling rig only to have it sit in a
MARKET FEATURE
MARCELLUS SHALE COALITION
EXISTS: THE MARCELLUS SHALE COALITION
An industry led organization, the Marcellus Shale Coalition (MSC) works hard to reach out to public stakeholders. Despite widespread opposition in states such as Pennsylvania, Ohio and New York, they’ve managed to make the community into winners by promoting the benefits.
POLAND SHALE COALITION
PROPOSED : THE POLAND SHALE COALITION
The Poland Shale Coalition seeks to replicate the Marcellus Shale Coalition, as an industry platform for education and advocacy. Since landowners in Poland don’t own the resources, they have to be made into beneficiaries, taught that shale production is win-win for their businesses and communities.
Gdańsk shipyard for two years. It’s now being sent to Kurdistan in Iraq). How long before all the international investors have left and the oilfield is empty of innovation and capital? Consider how engaged Marcellus stakeholders have become with the local community, including but not limited to operators. First, success there follows an easy-to-understand and solidly predictable set of rules. Then, organizations such as the Marcellus Shale Coalition, work to create a winwin environment by reaching out to local businesses. They’ve turned ice cream parlors on main street into cocollaborators in the industry’s success. The Marcellus formula seems to be protecting the environment while delivering benefits: creating jobs and enriching farmers. What Poland needs is a Poland Shale Coalition that has the same win-win goals as the Marcellus Shale Coalition: enrich everyone while keeping the environment healthy.
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PAP
Watching you: finance minister Jan Vincent Rostowski has made it clear that if thereâ&#x20AC;&#x2122;s a shale gas boom in Poland, the first beneficiary will be the state budget
32 | SHALE GAS INVESTMENT GUIDE | WINTER SUMMER2012 2013
TAXES
Fill
TA X E S
the Coffers The sweet spots of shale are still waiting to be discovered in Poland, but the government is wasting no time in securing a hefty income once and if production takes off. It’s too early, some operators say BY TOBIASZ ADAMCZEWSKI
BILLIONS OF DOLLARS are at stake.
Foreign operators looking for shale gas have had the Polish government wake up to the idea of tapping into a potentially large source of revenue, once and if gas does flow in commercial quantities. In October 2012, Poland’s ministries of environment and finance produced an outline of changes to the geology and tax laws to accommodate the ongoing exploration and possible future production of gas from shales. Before the shale gas fever, there was no real question about state revenues from extracting natural resources. The state ownership of these resources went hand in hand with the state ownership of the domestic exploration companies that had the expertise to manage production of conventional oil and gas. But it quickly became clear that the effective management of potentially huge unconventional gas deposits would shift towards a more dominant role of private firms.
What followed was a debate about a tax model that would best secure the financial interest of the state and the operators but would at the same time ensure a “maximization of resources’ value,” as the government puts it. The underlying principles of the proposed regulations are: the final government take wouldn’t exceed 40 percent, new concessions would be given through tenders, a new government entity, NOKE (Narodowy Operator Kopalin Energetycznych, the National Operator of Energy Minerals), would have a stake in each concession and a capped ability to invest up to 5 percent of the CAPEX on that license. Operators would be burdened with a special hydrocarbon tax (SHT) based on positive cash-flow once gas starts flowing (15 to 25 percent, depending on income). Additionally, exploitation fees would increase and a market-value based royalty tax would be established, with a proposed rate of 1.5 percent for shale gas (see page 35 for the analysis of the proposed model by PWC).
“My mind is still trying to get around why the Polish government is looking at increasing taxes as opposed to saying that this is the most tax and royalty friendly environment and encouraging investment” John Buggenhagen, San Leon Energy
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Until 2012, concessions were given away on a first-come, first-served basis and their cost didn’t exceed PLN 260,000 per block of land. Since then, tenders have been introduced where the concession would go to the companies which are the most stable financially, technologically advanced, and willing to pay the most for the acreage. In terms of taxes, besides exploitation, mining and licensing fees, operators are subject to regular business taxes, such as CIT, PIT or VAT.
doned and licenses were granted without any legal preparation from the state. We lost billions of dollars and control over the licenses,” Mr. Jędrysek charged. DEAL WITH IT Disregarding voices like Mr. Jędrysek’s, the government continues to drum up its tax proposals as ones which will make Poland, “the most attractive place in Europe for gas extraction,” in the words of minister of environment Marcin Korolec. Politically, the strategy is a nobrainer. Taxing lucrative endeavors is how any government fills its coffers and then redistributes the revenue in MINISTRY OD FINANACE
FEES, NOT TAX According to Professor MariuszOrion Jędrysek, Poland’s chief geologist
in 2005-2007, and now an MP with the opposition PiS party, the government’s approach is mistaken. “The taxes should be as low as possible while the state should create its revenue from granting concessions and via a fixed stake in each of the concessions. This would ensure revenue, as well as transparency of concessions’ ownership,” Mr. Jędrysek told the Shale Gas Investment Guide. A few years ago when PiS was in power, Mr. Jędrysek had been working on such legislation. Following PiS’ defeat in the 2007 elections, the proposal was shelved. “All measures proposed in 2006-2007 were aban-
As crisis unfolds, ministry of finance has moved very much to the center of policymaking in Poland
34 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
EXPERT OPINION
Understanding SHT One of the key elements in the draft law prepared by the Polish Ministry of Finance is the special hydrocarbons tax (SHT). How the SHT is going to function is hardly straightforward. B Y M A R E K K I L I A N A N D G R Z E G O R Z K U S , P W C T A X C O N S U LT A N C Y
ADVERTORIAL
The Ministry of Finance plans that the SHT will have two separate tax rates: (i) 12,5% of the surplus revenues, when the ratio of gross revenues to expenses is greater than 1 but lesser than 2 and (ii) 25% if the ratio is equal to or greater than 2. In some cases, the SHT would be based on the resources’ previous month’s average price (reference price) rather than the company’s actual revenue. If the actual value of sold hydrocarbons were less than 90% of the reference price, the SHT would still be applied based on 90% of that reference price. Such mechanism does not take into account the specifics of gas or oil trading (e.g. the quality of gas or take or pay clauses). In practice, assuming that the reference price is 100 and for some reasons gas was sold for 50, the SHT base would still be 90. Furthermore, the draft law requires a monthly settlement of SHT, while the applicable tax rate i.e. 12.5% or 25% based on current wording seems to be determined for the whole tax year. Such lack of consistency may cause uncertainty during the tax year, especially at times when the above mentioned ratio would be slightly lower than 2. New regulations would also limit the possibility of past cost deductions to three years prior to the entry into force of the draft law. The new rules are planned to enter into force on January 1, 2015. In
INCURRED COSTS OF DRILLINGS IN MILLION USD 250
deductibility disallowed
deductibility allowed
new law
200 150 100 50 0 2010
2011
2012
2013
2014
2015
Source Ministry of Enviroment data (Drillings completed to date as of 2 April 2013), PWC approximate calculation.
practice that would mean that costs incurred before 2012 would not be taken into account for SHT settlements. Incurred non-deductible exploration costs to date are estimated to amount to 160 million USD (around 500 mln PLN). Given the above remarks it seems that investors would rather quickly fall into the 25% SHT category. There are, however, means of prolonging the period in which the revenue-to-expenses ratio is lower than 2 (for the 12.5% SHT rate to apply). For example, if production is going to start on one field, drilling activities could begin on another in the same time period to generate additional costs as there is no field ring-fencing. However, it is very likely
that tax authorities will be focused on proving that the ratio is equal to or greater than 2 (e.g. by trying to disallow deduction of some costs). Therefore, it is advised that investors use careful tax planning to minimize risk of disputes with tax authorities. Moreover, such planning should commence right now for potentially deductible costs (i.e. incurred or to be incurred in period 2010-2015). In the long run the proposed solution may deter entrepreneurs from investing in Polish shale gas. In our view, the government should reconsider the introduction of SHT in its current form or replace it with a more investor-friendly concept (e.g. higher CIT rate for ring-fenced activity).
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BANG THE RIGHT DOOR Upcoming Changes
Body Responsible
NOKE
Ministry of Environment
Exploitation Fee
Ministry of Environment
Licensing system (concessions)
Ministry of Environment
Special Hydrocarbons Tax
Ministry of Finance
Royalty Tax
Ministry of Finance
While the geology law remains in the hands of the Ministry of Environment, changes to the tax regime remain under the competencies of the Ministry of Finance. Both legislative initiatives will impact the final government take and should be considered together.
order to prop up support when elections come around. Economically, however, the trick is to gain as much as possible, while also not stifling a nascent sector. Operators seem to think that stifling is just the right word to describe what’s cooking in the office of Jan Vincent Rostowski, the finance minister who has made it clear that if there’s shale gas in Poland, the first beneficiary should be the state budget. This runs counter to the idea, once fostered by ministry of environment, of shale gas revenue strengthening the finances of local governments. According to PKN Orlen, the mother company of shale gas operator Orlen Upstream, the full government take would significantly exceed the 40 percent level and could amount to anywhere from 60 to 130 percent if calculated with discounted cash flows (when cash is devalued over time with the cost of capital, such as lending rates, prime rates and opportunity cost). The company also claims that 36 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
introducing a cash-flow tax in combination with a royalty regime is going to complicate the accounting of oil and gas operations. Bill Marble, chief operating officer of Wisent, agrees. “It would be better to focus on creating an understandable regulation. It shouldn’t take a team of accountants and bureaucrats arguing in court for years over what tax rates you should have paid,” he said. “Depending on the tax regime, it will determine how we move forward,” said John Buggenhagen, exploration director of San Leon Energy, the largest net shale acreage holder in Poland. NOKE’D DOWN? The regulatory changes facing operators are not just fiscal. In the future regime, potential operators would acquire concessions through tenders, where they would offer a stake in the business to a state body called NOKE. Besides taxes, the oil and gas industry would therefore be
additionally contributing to the Polish budget through income streams derived from gas sales. The government sees NOKE as a way of controlling shale gas development, while marketing the entity as a financial backer for independent operators with smaller cash reserves. It would also diversify risk and de-risk JVs to potential capital investors, according to the government. But some independents aren’t buying it. “I think that independents are independent for a reason. The ability to be more flexible is more important [than NOKE’s backing],” said Wisent’s Bill Marble. “There is not a single shale field in the world discovered or proved by the governments or a major. It’s all been done by independents,” he added. Another question mark is that NOKE would also have a five percent cap on its own capital expenditures in the joint venture, which means that there could be a potential disproportion in investment vs. stake. Although NOKE and the tax proposals are independent solutions, the effects of both would have an impact on the government’s final take. DO YOU SPEAK MY LANGUAGE? With ministries and other government bodies still at odds about the final shape of some of the regulations, the legislative process is lengthy and still in its early stages. For example, the ministry of environment insists on the capping of total government take at no more than 40 percent, while the ministry of economy is questioning a combined royalty and cash-flow tax system. Once the ministries agree to language they can all support, the final drafts
TAXES
“[Operators] would sooner accept higher taxes in a stable environment than lower taxes in an unstable one”
WIKIPEDIA CC
Krzysztof Kłosowski, member of parliament
Taxing shale, it’s in their hands now
will be put forward to parliament, where committee work will take over. “Poland needs to come up with a stable legislative framework for unconventionals to ensure stability and thus attract capital that it doesn’t have. We need at least a hundred wells to draw any conclusions about shale gas in Poland. We won’t do those exploratory wells without attracting capital here and now,” said Krzysztof Kłosowski, deputy chair of the parliamentary energy subcommittee. “[Operators] would sooner accept higher taxes in a stable environment than
lower taxes in an unstable one,” he added. Kłosowski’s logic doesn’t appeal to San Leon’s Buggenhagen, who thinks that the law is coming too soon in the game. “This is not Norway. We haven’t found anything yet in terms of commercial hydrocarbons. And my mind is still trying to get around why the Polish government is looking at increasing taxes as opposed to saying that this is the most tax and royalty friendly environment and encouraging investment,” Mr. Buggenhagen said.
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FLIKR CC
Most of the UKâ&#x20AC;&#x2122;s shale deposits will be confirmed to be in north west England, the so-called Bowland Basin in Lancashire
38 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
UK’S DASH FOR GAS
UK’s
U K U P D AT E
The
shale future
As a new estimate of British shale gas resources is expected to reach stratospheric levels, the government is using the momentum to give shale E&P a strong push in a strategy to make the unconventional resource a key future fuel in the UK. BY PAUL G ARRETT IN LONDON
THE MOOD AROUND shale gas in
Britain has switched from moderate to enthusiastic. Data leaks from the upcoming British Geological Survey (BGS) report suggest that there might be 1,300-1,700 trillion cubic feet of gas locked in England, Scotland, and Wales, as well as offshore in the North and Irish Seas. This would be a dramatic upward revision of the currently going estimate five trillion cubic feet that BGS came up with in 2010. The BGS report is expected to prove the catalyst to further shale exploitation in Britain and provide a necessary impetus to overcome geological, planning and ownership issues in the UK that are very much different to North America.
In North America, the shale gas boom has cut carbon emissions, lowered energy costs and boosted industrial growth. Such an impact is still only a future possibility in the UK but what may help is that other ways of energy generation are not well positioned to become fundamental for the British energy mix. Generation costs of offshore wind power are stubbornly high at £140 per MW hour against a target of £100, which is expected to become reality no earlier than 5 to 10 years from now. This is also just about the same time when the first production gas from the UK shales is expected to flow. Talks with EDF about getting work started on proposed new nuclear
power stations at Hinkley Point in Somerset and Sizewell in Suffolk remain stalled over the fixing of a guaranteed price for electricity generated in the power stations. In other words, political hopes for Britain’s low carbon cleantech energy policy are now firmly locked to finding and extracting shale gas. FRACK ON... In the recent government budget, Chancellor of the Exchequer (finance minister) George Osborne promised tax breaks and cash incentives for companies undertaking test drilling and for communities which consent to drilling in their areas.
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DEEP THICK SHALES The question that will inevitably follow is, however, how much of the resource can actually be extracted. Leaked information from the upcoming BGS report suggests that most of the UK’s shale deposits will be confirmed to be in north west England, the so-called Bowland Basin. Further reserves are going to be confirmed in southern England, specifically Sussex and Kent, south Wales, the Midlands and southern Scotland. These potential shale plays are located significantly deeper than those found and now being exploited in the US and Canada. But in all likelihood they’re also even several times thicker, making the extra effort to get to them worthwhile. For example, the Bowland Basin’s shale is nearly 4,000 meters thick, dwarfing the US Barnett’s maximum thickness of just 600 meters. The leading British shale gas exploration company Cuadrilla Resources, led by Francis Egan, is already concentrating its drilling activities, which are now permitted again after a government moratorium was recently lifted, in Lancashire’s Bowland Basin, where it is planning to sink 10 wells. More companies, like Tamboran Resources or Dart Energy, are also in the game (see chart). 40 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
COMPANIES PROSPECTING FOR UK SHALE G AS Companies prospecting for UK shale gas
Company
Location
Estimated shale gas resources (trillion cubic feet)
Cuadrilla Resources Tamboran Resources Dart Energy I-Gas Eden / UK Methane / Coastal Egdon / eCorp / Greenpark
Lancashire, Kimmeridge Clay, Weald Basin (England)
200 tcf
Lough Allen Basin (Ireland) Central Scotland
no data 66 tcf
NE Wales, South Lancashire (England)
10 tcf
South Wales, Mendips, Kent (England) Giansborough Trough, East Midlands (England)
12.8 tcf no data
Source : IOD (Institute of Directors)
Source : IOD (Institute of Directors)
“Ongoing technical analysis of the data we have gathered from our exploration of the Bowland Basin Shale in Lancashire has confirmed our assessment that the 1200 square km licence area holds at least 200 trillion cubic feet of gas,” Cuadrilla Resources’ office in London told the Shale Gas Investment Guide. Given the potential size of the resource, Cuadrilla is going to strengthen its exploration programme by adding a number of additional temporary exploration sites during 2013 and 2014 to assess gas flow rates. FRACK OFF! Industry insiders do warn, though, that only about one third of shale gas deposits identified under mainland Britain will be exploitable. “There is significant potential in the UK for shale gas, but the exact scale of the economically recoverable reserves is currently subject to considerable uncertainty,” said Jayesh Parmer, a senior analyst at energy consultancy Baringa Partners. Geology aside, the inevitable spectre of environmental protests looms large in Britain. Many people seem instinctively opposed to nuclear power on safety grounds and wind power on aesthetic grounds, but as shale gas emerges as an interim, lower car-
FLIKR CC
“I want Britain to tap into new sources of low cost energy like shale gas. So I am introducing a generous new tax regime, including a shale gas field allowance, to promote early investment. And by the summer, new planning guidance will be available alongside specific proposals to allow local communities to benefit,” Mr. Osborne told the UK Parliament in March. More a statement of intent than a developed policy proposal at this stage, the shale gas sector in the UK is waiting for particulars, reportedly to leave Mr. Osborne’s office shortly.
UK’S DASH FOR GAS
bon solution to Britain’s looming energy gap, opponents are mobilising against this too. Predictably, issue-specific campaigners such as “Frack Off ” are being supported by wider environmental groups. Greenpeace UK campaigner Lawrence Carter was quoted earlier this month as saying that “[Chancellor] George Osborne needs to back the shift to carbon free energy which will create jobs and be cleaner, safer and cheaper over time”.
His point hints at a strategic issue which is perhaps more pertinent than tactical concerns about the water table, vehicle movements to well sites, and minor earthquakes. It is about whether a dash for shale gas to facilitate a short term energy fix ends up locking the British economy into a fossil fuel future which will be to the detriment of alternatives such as renewables. This argument suggests that once shale is found and drilled and power stations are built to generate electricity
“I want Britain to tap into new sources of low cost energy like shale gas”
George Osborne, UK’s Chancellor of the Exchequer
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BUSINESS OPINION IN THE UK ON SHALE GAS Business in the shaleimpact gas on UK businesses of extensive “ Whatopinion is your view on UK the on potential
“ What is your view potential impact on UK”businesses of extensive development of the UK’s shale gas reserves? ” development of on thethe UK’s shale gas reserves?
50
46%
25
22% 13%
0
very positive
6% positive
neutral pos nor neg
negative
1% very negative
don’t know
Source: Institute of Directors (IOD) poll(IOD) of 1,095 IODofmembers in 2012 Source: Institute of Directors poll 1,095 IOD members in 2012
from it, a gas based generation strategy would then be in place for 30-40 years. With nuclear and offshore wind already struggling to be financially competitive as economic alternatives to any kind of gas, a financially supported gas strategy could prove the death-knell for other low-carbon generating options, shale’s opponents suggest. MAKE IT HAPPEN “Europe, and Britain, are different to the US in significant ways. Europe has the wrong rocks – its shale gas is in a deeper, clay-rich strata. The regula- 42 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
“Technical analysis of the data we have gathered from our exploration of the Bowland Basin shale in Lancashire has confirmed our assessment that the 1200 square km licence area holds at least 200 trillion cubic feet of gas” Cuadrilla Resources
CUADRILLA RESOURCES
12%
UK’S DASH FOR GAS
P O L I S H P I CT U R E
Aerial view of Cuadrilla Resources’ well pad in Preese Hall, Lancashire
tory framework is different. There is a lack of a services industry to support activities at scale and there are environmental and public acceptance issues,” said Professor Paul Stevens, a senior research fellow at Chatham House in London, at the recent 2013 Clerk Maxwell Lecture at the Institution of Engineering and technology. “The UK’s dash for gas assumes a shale gas revolution across Europe and ignores the wider role of gas in producing greenhouse gas emissions. There is certainly plenty of shale gas – and oil – available in Europe. But we might
not be able to retrieve it for institutional reasons. And for greenhouse gas emissions reasons we probably shouldn’t,” he added. Another issue is how the arrival of domestic shale gas to the market will alter the pricing. A recent report from the Carbon Connect group, a consultancy on climate change and energy policy, suggests that shale gas may not prove the bonanza many predict. “Despite the support for UK shale gas announced in the Chancellor’s budget, there remains a great uncertainty
At a recent unconventional gas conference in London, lawyer David DeBenedetti, a partner at Warsaw-based law firm DeBenedettiMajewski Szczesniak, spoke about how he thought that Poland’s enthusiasm for shale gas had waned over the past year but that the market was now awaiting new environmental legislation and new resource estimates. “Investment in shale gas, in Poland or anywhere else, is based on unknown resourceS you can’t see. Poland is planning a new taxation system for shale gas and we need to see the implications of that,” Mr. DeBenedetti said. The new taxation system could be a stimulus, he suggested. He also said that it was likely that under the current draft legislation, a state owned company, known by its Polish abbreviation, NOKE, is to become a shareholder of unknown amounts in companies which receive newly issued permits. Other important moves affecting the Polish market were the fact that a new draft law on geology and mining would require environmental impact assessments for drilling sites, but not for whole concessions. “The regime planned in Poland has been based on those effectively adopted in the Netherlands and Denmark,” Mr. DeBenedetti said.
around the size of the prize and developments in the industry, which could take a decade and are unlikely to give the UK cheap gas,” the report read. This could be because shale gas drilled in Britain could be exported to continental Europe, where prices are higher. Still Mr. Osborne appears poised to make the UK a leader in shale gas development in Europe as the issue of the price of energy that industries and households are paying is growing hot economically and politically. “Shale gas is part of the future. And we will make it happen,” said Mr. Osborne.
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44 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
PROFILE
PROFILE
River
Runner Funds have lost confidence and Polish shale basins are struggling to attract investment. “Which is great for me,” John Buggenhagen says. “There’s nothing like a little irrational panic to create opportunity.” BY PARKER SNYDER
“We’re working with the government behind closed doors during the consultation period for them to understand the economics and operational realities of shale gas exploration and production”
PHOTOGRAPHY BY SZYMON SZCZESNIAK
JOHN BUGGENHAGEN, a geo-
physicist, likes to river raft down the Colorado River between the walls of the Grand Canyon, America’s monument to rocks. For the last ten years, he’s led private trips. Although he can’t call himself a “river guide” for commercial reasons, he’s one of the canyon’s most stalwart enthusiasts. And he likes to go rafting in winter, when the crowds give way to the austere beauty of the wilderness. When at the end of 2012, San Leon Energy announced the buyout of Aurelian Oil, it largely fell to John to merge the two companies. At that time, he couldn’t have been busier, although he still went rafting, while keeping a close eye on San Leon. ROCK LOVER John is the Exploration Director for San Leon Energy, an upstream explorer for oil and gas, who has a PhD in Geophysics from the University of
Wyoming and who fell in love with the Grand Canyon while an undergraduate student at the University of Arizona. “When I was very young, my father died suddenly. The Grand Canyon was where I found myself. It’s why I became a geologist. It’s a kind of a religion for me,” John said in a recent interview. The fact that John Buggenhagen is allowed to leave at all is a testament to the relationship he enjoys with the his Chairman, Oisín Fanning, a bond which has deepened over the years since San Leon in Poland was just two guys operating out of the Marriott Hotel. “Oisín is the visionary entrepreneur, businessman, and myself, I am more of a visionary, entrepreneur, technical person. And together we bring confidence,” John says. Of John, Mr. Fanning says, “In this business, over time, you can become friends or mortal enemies. We’ve become strong friends. We challenge each other and keep each other on track.”
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John Buggenhagen: overseeing Europe’s biggest unconventional acreage position
Talk to them, and you’ll realize these two are corner pieces to a jigsaw puzzle that is San Leon Energy, an upstream explorer whose acreage stretches from Spain to Albania, from Morocco to Poland, and covers an area of some 17.5 million acres (close to 70,000 square kilometers). San Leon Energy, in contrast to other independents with land positions, has built up a large in-country staff. John says the reason for this was simple - he aims to explore - and he needs bright 46 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
minds to do it. His chairman concurs. “We took our cash and we invested in a technical team. Most companies don’t take that risk. But institutions like to see you’re driven by the science,” Mr. Fanning says. STRAIGHT SHOOTER If John has one person in Poland he is trying to guide, it’s Piotr Woźniak, chief geologist and deputy minister of environment. They like to talk, and it’s not always pleasant.
“The day before,” John says, “I had a meeting with Mr. Woźniak, during which I tried to be very upfront and challenge the Ministry to be proactive. At the same time, we as operators have to speak out, although in some respects, it’s created an adversarial relationship, where the industry has been perceived as a bunch of complainers. This is a difficult situation for everybody. My goal is to press the regulators to understand our requirements to explore and prove a commercial play.”
PROFILE
“When I was very young, my father died suddenly. The Grand Canyon was where I found myself. It’s why I became a geologist. It’s a kind of a religion for me”
John is referring to ongoing discussions he’s had with Mr. Wozniak, the government’s representative, who has the job of selling the proposed mining and geology law to members of industry. The government has also proposed a new tax and royalty regime which could impose a 40 percent take on net profits from production, although by some estimates it could be higher. The draft law contemplates obliging operators to enter into a production agreement with NOKE, a new proposed government entity. John’s not happy about this. “We’re working with the government during the consultation period to help them understand the economics of shale gas,” John says, while talking over the production plan San Leon Energy has developed. He’s even field-scouted sites that are suitable for drilling wells, building facilities and laying pipelines. But the government has stalled progress by making it too complicated to drill exploration wells. Fewer wells have been drilled to date than the legal minimum obliging explorers. JOHN AND GEORGE John has a measure to track his progress. He calls it his “emotional index” and correlates it with the highs and lows of what’s been going on in Poland. Last year, he says, his emotional index was way down, off its peak. So was the SLE stock price, which was trading down 85%. What’s it take to drill a shale play? “Drill, drill, drill” John says. To do that,
he’s going to have to mobilize his investor base, some of whom have lost confidence in Polish shale. “These plays have always been three to five years,” John says, and he views San Leon Energy as in year two. Others are less patient. Several large investments funds have significant exposure to shale gas plays in Poland. These include George Soros’ Quantum Fund and Blackrock Investments who form the investor base for San Leon. There are other funds who have significant exposure in the basin, such as Jefferies Capital, who see the falling investor confidence as hard to budge. According to Laura Loppacher, a Jefferies analyst, “in some ways there is loss of confidence and frustration for investors,” she says in reference to Baltic basin. “It’s not quite clear what the catalyst is going to be,” Ms. Loppacher says. John Buggenhagen is undeterred. He and his chairman have made a bet on 5 million net acres in Poland alone, and are looking for an IOC to fund their exploration program. “You might have seen the other day the Chairman of Shell came out and said we need to look inward at the resources we have in Europe. This year, we expect to see a new round of dealmaking. We’ll see new interest from new players as well as realignment of existing players as the companies begin to define the sweet spots in the play,” John says. As for the blisters, compared to the pains he’s endured running his business in Poland, they seem almost a pleasure. A sign of a river he’s still rafting.
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Scan the QR code to see an animation of the Pavilion
To get your company into the Cleantech Pavilion call: (ENG) Keith Luke (+48) 694 478 075 Keith@cleantechpoland.com (POL) Maja Sobieszczak (+48) 606 798 678 Maja@cleantechpoland.com
48 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
Exhibit at the
Cleantech Pavilion
NOVEMBER 27-28, 2013
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TOP 5
TECHNOLOGY
Cleantech opportunities in shale The U.S. has reduced emissions 12 percent thanks to production of gas from shales. The low-carbon potential of shale could be boosted even further by the use of technologies that mitigate environmental impact - water, waste and emissions from flaring. This section highlights five technologies, some are ready to use today. BY WOJ C I E C H KO S C I L LU S T R AT I O N S BY M A G D A L E N A H E L I A S Z
THE PARADOX OF unconven-
tional gas E&P is that the publicâ&#x20AC;&#x2122;s concern about environmental safety is about parts of the process that have largely been put under control, like avoiding water pollution while fracking (although there are ways to improve it further, see page 53 in this feature). Water is still a big issue and Poland will be no exception. Sourcing water in Poland is perhaps easy, although not recycling flowback water constitutes a poor use of resources. Not just from point of view of concerned environmentalists, but also in the context of EU resource policy. 50 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
There are attempts to bring to the market a technology that would do away with water while fracking and replace it with an alternative best left in the ground. Carbon dioxide could be used instead, pushing natural gas up and remaining trapped inside the rock (a way to get rid of this potent greenhouse gas). Another issue is flaring gas at well pads. Methane is harmful when vented to the atmosphere, so its often burned. However the combusted gases contain polynuclear aromatic hydrocarbons (PAHs), powerful air pollutants. This section presents what we think are top solutions to environmental issues that the oil and gas industry is still to tackle. ď&#x201A;&#x201E;
TECHNOLOGY
Wastewater that comes from fracking needs to be cleansed of chemicals and rock debris by way of putting it through filtration units
1. H A N D L I N G WAT E R : R E U S E A N D R E C YC L E
PERMITTING FOR WATER recycling
is difficult, and one industry source said 3Legs Resources wanted to deploy a Krevox filtration solution but instead had to haul the water to an incinerator in Gdańsk, at a huge cost. Although in Poland there’s only been a small number of wells drilled and a small number of frack jobs completed, as elsewhere in Europe, parts of the country are water-stressed and could see regulations requiring reuse and recycling. Until now, operators have been trucking and disposing. Benchmark data comes from the U.S., where in the Marcellus in 2008 fracking accounted for 650 million US gallons
(2,500,000 cubic meters) of water usage per year. An average well requires 3 to 8 million US gallons (11,000 to 30,000 cubic meters) of water over its lifetime. It’s likely, however, that bigger volumes of fracturing fluids will be required in Europe, where the shale depths are 1.5 times greater on average than in America. Add stringent EU-wide policies for resource efficiency and you will be presented with a huge opportunity to sell water treatment and recycling technologies to operators across the continent that’s not even much arid. Operators should seek companies offering technologies to recycle and then reuse water used for fracking. In short,
wastewater that comes from fracking needs to be cleansed of chemicals and rock debris by way of putting it through filtration units. On-site water treatment technologies spare operators having to organize truck hauling of wastewater to injection wells or waste treatment facilities. TECHNOLOGY AVAILABILITY:
ready to use from a number of suppliers, including Krevox, Veolia, Hydrozonix (also see Services Directory page 129).
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Waste gas combustion in incinerators helps get rid of problems like release into air of pollutants 2. REDUCTION OF AIR POLLUTION
THE FLARES BURNING in the Bakken
are visible from space, and illuminate the night sky as bright as the distant city of Minneapolis. That’s because operators burn gas and bring oil to market. Those emissions are yet not much of an issue in Poland, with 44 wells drilled and no unconventional gas production at the moment, but the bigger the scale, the more acute the problem. This year is the European Year of Air Quality. It won’t make much difference here and now but it will result in more stringent air pollution controls. Waste gas combustion in incinerators helps get rid of problems like waste gases escaping unburned, avoiding re52 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
lease into air of pollutants like polynuclear aromatic hydrocarbons or volatile organic compounds like benzene or toluene, as well as sulfur compounds. If not handled properly, burning of waste gases at a well pad is a cause for several concerns that, even they might not be regulated, could become a public acceptance issue. Therefore, once and if production in Europe will scale, waste gas incinerators could be a hot service. TECHNOLOGY AVAILABILITY:
ready to use from a number of suppliers, including Questor Technology, TCI, Global Industrial Dynamics (also see Services Directory page 129).
TECHNOLOGY
Some recent research suggests that using carbon dioxide can also result in a better network of fractures, making it easier to extract the fuel
CO2
3. WAT E R L E S S FRACKING
ENDORSED BY THE MIT Technology
Review and being worked on in several scientific centers globally (including Poland’s Military University of Technology), fracking that uses no water could one day render this list’s top technology useless. Instead of water, this technology proposes to use carbon dioxide (CO2) to push gas up from shales. “When carbon dioxide is used instead of water, most of it comes back out of the well (where it can be captured and used again). This in turn allows natural gas to flow out more freely. Some recent research suggests that using carbon dioxide can also result in a better network of fractures, making it easier to extract the
fuel. And once infrastructure is in place to deliver carbon dioxide, it can be used to enhance production later in the life of a well,” MIT Technology Review reported in April 2013. There are two main incentives to use waterless fracking. One is that it eliminates the use of water and the need to water handling services. The other is that once a well reaches the end of its lifetime, carbon dioxide could remain there, a carbon capture and storage solution to help mitigate climate change. There are shortcomings: it’s harder to pressurize CO2 to levels needed to fracture shale, and CO2 needs to be separated from gas before gas entering the
transmission system, and more trucks will be needed to get CO2 to your well pad than you would need for water. Poland’s Military University of Technology is proposing that liquid CO2 be used that would convert into a gas several thousand meters below surface. TECHNOLOGY AVAILABILITY:
at least a decade.
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4. R E A L -T I M E CONTROL OF F R E S H WAT E R CASING AND METHANE M I G R AT I O N
5. LIMITING RELEASE OF SAND DUST INTO AIR WHILE S T I M U L AT I N G WELLS
ANOTHER TECHNOLOGY to do with
MILLIONS OF TONNES of sand that’s
water, only this has to do with water we all drink. Despite tens of thousands of wells drilled in North America, few polluted groundwater aquifers have been reported, because casing programs are typically adequate. It doesn’t mean, however, that casing programs cannot be improved, nor that casing shouldn’t monitored for leakage. A US company HydroConfidence has developed a technology of monitoring the aquifer underlying a well pad to detect methane migration as well as monitoring the freshwater casing for cement integrity via microseismic. A report from the Polish Institute of Geology concluded in 2012 that if done properly, drilling and fracking should pose no threat to aquifers. However, real-time control of the impact of exploration on freshwater could be an ultimate proof that your activity is harmless and protect you against liability. TECHNOLOGY AVAILABILITY:
soon to be available commercially.
54 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
used as proppant need to be loaded/ unloaded and blended for the well stimulation process. Sand isn’t easily handled and sand dust is quickly airborne by winds, causing wear of the equipment as well as long term negative impact on human health, lungs in particular. Currently, the industry has hardly any ways to control release of sand dust into air. Handling sand in closed environment with a built in central dust collection manifold could reduce sand dust release to close to zero. TECHNOLOGY AVAILABILITY:
soon to be available commercially.
EXPERT OPINION
Not the Promised “El Dorado” One of the key elements in the draft law prepared by the Polish Ministry of Finance is the special hydrocarbons tax (SHT). How the SHT is going to function is hardly straightforward. BY PIOTR SPACZYNSKI, PARTNER, AT TORNEY AT LAW, S SW LAW FIRM ANNA PIOTROWSK A, AS SOCIATE, S SW LAW FIRM
es Operator (NOKE), meaning that NOKE will be a mandatory participant in such concessions. WORK SCHEDULE A controversial provision is a novel element to the concession decision - a ‘work schedule’. Concession holders shall be obliged to provide mandatory quarterly and annual reports on the progress and results of the concession works. They are also obligated to communicate the results of geological works to the concession authority, along with the interpretation of such data, which is often regarded
succession or other ownership changes within the structure of the concession holder, such as division, merger and acquisition of a bankrupt company, will only be possible following the approval of the concession authority. Moreover, the entities holding concessions shall be transformed into joint stock companies (Spółka Akcyjna). Such an obligation results from another Act referring to hydrocarbons i.e. the Act on special tax on hydrocarbons. No doubt that the current GML shall be reconsidered, but the presented Amendment together with the planned
ADVERTORIAL
I
n February, the Ministry of the Environment published a draft amendment to the Geological and Mining Law (“Amendment”). The intended objectives of the proposed amendments were the modernization and improvement of the system for managing concessions, leading to faster development of unconventional gas exploration and production in Poland. Our analysis of the proposed solutions leads, however, to the opposite conclusion: the amendment will rather stop investment. A number of new features are being introduced, including a procedure for assessing competing concession applications (the ‘settlement procedure’). Although the idea is good, its implementation is not reasonably thought out and causes a lot of doubts. Another twostep concession procedure relates to hydrocarbon concessions (granted jointly for exploration and production) which envisages a prequalification mechanism for entities interested in participating in the bidding procedure, which itself is merely the second stage. A need for such a tendering procedure was underlined by entrepreneurs many times since the current provisions do not foresee any competitive procedure. It may seem like a good solution except the fact that the selected winner shall be obliged to enter into a cooperation agreement with the National Energy Resourc-
Non-compliance within time limits specified in the work schedule and failure to abide by reporting obligations shall constitute new reasons for revoking a concession. as the know-how of a given company. Non-compliance within time limits specified in the work schedule and failure to abide by reporting obligations shall constitute new reasons for revoking a concession. If any amendments to the work program are planned, such changes could be done only once. Another obstruction is that any concession transfers, including universal
new tax on hydrocarbons will for sure not pave the Polish way to the promised “shale gas Eldorado”. SSW law firm coordinated public consultations process to improve the concession system. The comments were submitted to the Ministry of Environment in March and can be made available on request from Maja Tobiasz at maja.tobiasz@ssw.pl
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GEOLOGY
Waiting for a
good flow Polish Geological Institute is where the size of Poland’s unconventional resources won’t be glossed over just to make investors happy. The Institute’s director, Jerzy Nawrocki, believes in nothing but hard data. BY WOJCIECH KOSC PHOTOGRAPHY BY SZYMON SZCZESNIAK
THESE ARE EXCITING TIMES for
Polish geology. The push from operators to prove shale gas in Poland will redraw the map of the country’s geology, no matter if there actually is gas in Polish shales or not. Professor Jerzy Nawrocki is about to begin another term as the head of the Polish Geological Institute. He’s rather cautious when it comes to assessing Poland’s chances of becoming a leader in Europe’s attempts to emulate the US shale gas boom. In fact, he was among the first in Poland to pour a bucket of cold water on the shale gas hot heads that were beside themselves about the more than five trillion cubic meters of gas projected to be trapped in Polish shales. The original staggering estimate came from the US Energy Information Ad56 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
ministration in 2010. It launched euphoric fantasies about how Poland would not only be self-sufficient for natural gas but could also transform into a regional gas exporter, elbowing its way to a position second only to Russia. STILL WORTH IT? No wonder then that the Institute’s Museum of Geology, normally a tranquil place, was buzzing with journalists and experts in early 2012, when Mr. Nawrocki led a conference on the Institute’s own estimate of shale gas deposits in Poland. The research suggested that, most likely, there are between 346 and 768 billion cubic meters of shale gas in Poland. In the best scenario, this would be just over two trillion cubic meters, Mr. Nawrocki said at the time.
“The Polish shales are simply difficult for E&P. On the other hand, there have been much bigger problems that the oil and gas people have managed to solve” Professor Jerzy Nawrocki
Jerzy Nawrocki: even with revised estimates, shale gas is still worth going for in Poland
This estimate is a long way from the numbers the EIA presented. According to Mr. Nawrocki, the unsophisticated methodology used by the EIA led to an overestimation, which is not a fact most people seem to recognize. “The EIA estimate was based on shale rock sampling that took place in 1960s and 70s and our subsequent analysis of those samples in terms of organic content or rock maturity. But the EIA took into account areas like, for example, the central Lublin basin, where shale rock is too deep and where one cannot expect exploitation to take place,” Mr. Nawrocki told the Shale Gas Investment Guide. “The Americans also applied very optimistic assumptions regarding producibility, which they put at 20-25 percent, while the best US basins are
GEOLOGY
“The Polish shales are simply difficult for E&P. On the other hand, there have been much bigger problems that the oil and gas people have managed to solve” Professor Jerzy Nawrocki at 15 percent on average. As a result, we had what we had [5.3 tcm], and I wish it were true but it’s not going to be true. The first public results that came from Lane Energy showed producibility of just a few percent,” Mr. Nawrocki said. THE NEW REPORT Today, he’s busy overseeing work on a new estimate on the Polish unconventionals that will be far more exact. The report is due early in 2014. “A more comprehensive and precise report will require the best possible data, including flow testing, that operators will hopefully feed to us so that we can determine the expanse and thickness of shale formations,” Mr. Nawrocki said. Normally the data in question is subject to procedures involving the Ministry of Environment as the body responsible for granting exploration concessions, but Mr. Nawrocki is trying to save time by talking directly to the operators. “We’re working with some operators to sign agreements about data sharing,” he said. But operators’ activity is rather lowkey at the moment. “I wish operators were drilling on a larger scale because the more they drill the more data we will have to base our estimate on,” Mr. Nawrocki said. WHERE ARE THE SWEET SPOTS? “I think what’s key for the entire Polish shale gas project is getting gas to flow in commercial quantities even from a single well so that we have some basis to consider when production could begin,” Mr. Nawrocki said.
Polish Geological Institute will issue a new shale gas report in early 2014
He continues by saying that geological resources of gas is one thing, while it’s producibility is another. “Producibility of just a few percent shouldn’t be basis for production concession. This would be a waste of the resource because, in time, we may have better ways of getting this gas out than hydraulic fracturing,” Mr. Nawrocki said. Even by today’s industry standards, however, if producibility is below 10 percent, it’s going to be difficult to pull off the shale gas project in Poland, he adds. “At the moment, what seems to be suggested by the exploration done so far is that sweet spots could be located very unevenly and it’s going to be very difficult to come across shale plays where all the necessary parameters meet,” he said. “Very cautiously, I can say that the best organic content and the biggest
number of relatively concentrated sweet spots is in northern Poland, in the Pomerania [Gdansk region], but there’s a hang up there as well: these promising formations are merely up to 20 meters thick and therefore difficult to drill horizontally,” Mr. Nawrocki said. Generally, Mr. Nawrocki surmises that the problem with Polish shales is that shale formations in the north could be rich in gas but difficult to operate because the thickness isn’t there. Going south east, the thickness is there so it’s easier to access shales but the organic content is lacking. “The Polish shales are simply difficult for E&P. On the other hand, there have been much bigger problems that the oil and gas people have managed to solve,” Mr. Nawrocki said.
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DRILLING RIGS
Old
Fleets The departure of MND and KCA Deutag from the Polish market restored some balance between supply and demand, amid the consolidation of PGNiG’s service companies into Exalo. BY WOJCIECH KOSC
IN POLAND, DRILLING activity
has declined, prompting companies to send their rigs elsewhere, both within Europe and beyond. Those who remain believe the market will turn around for the better. The Canadian company Ensign imported a rig, as did the equity-backed startup United Oilfield Services, on order from National Oilwell Varco. The UOS rig, arriving in June 2013, will be one of the most technically advanced on the market. Kris White, fracturing manager for UOS, is bullish about the rig’s chances, saying his company’s rig will be tied up in work contracts. This remains in contrast to the experiences of companies such as Ensign and MND. They made their decisions to enter the market back in 2009 and the effects of their decisions didn’t start to add up until 2011. 58 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
DEMAND ROLLER COASTER Unfortunately, for these companies who spent a great deal to bring rigs to Poland, by 2012 the market was oversupplied. That’s because, since 2009, the number of exploration wells in Poland has grown, but the growth rate hasn’t been fast enough to keep up with the arrival of new equipment, prompting even the successful companies like MND and KCA Deutag to change their plans. The MND rig went to Serbia, and will stay there for the time being, but Radovan Jedlicka is far from writing Poland off. “We’re still in two tenders for contracts in Poland and if we win, we will be back,” Mr. Jedlicka said. For MND, Poland is already a market where they’ve become a name operators will keep in their notepads but the sluggish pace of activity in
DRILLING RIGS
“At the moment, companies like Orlen Upstream will keep rigs busy in Poland. Demand from others should come later I believe” Guido van den Bos, National Oilwell Varco
WIKIPEDIA CC
Poland has a decent rig availability but the quality and age of these rigs is not up to par
Poland’s shale plays has allowed the company to gain a foothold in Serbia. “What we need to do now is to commission a mid-range rig that will be best suited for Serbia and ship the big rig back to Poland when needed,” Mr. Jedlicka said. The Ensign rig is on its way to Kurdistan in Iraq. Ensign’s Poland manager Dean Hills is being reassigned to another market. Even the Polish service company Exalo has sent their brand new walking rig to do work abroad, perhaps as far as Pakistan. Other companies, such as Phoenix, who have a presence in other markets in Europe and Russia, and wanted to enter the market, have reconsidered their plans. GETTING BY According to Guido van den Bos, business development director Europe
for National Oilwell Varco, oilfield service and equipment company, the market can still get by, somehow, with the rig fleet available now. In sheer numbers there’s enough rigs in Poland to cover the current demand but there’s a caveat to that, according to Mr. van den Bos. “Poland has a decent rig availability but the quality and age of these rigs is not up to par. The Polish fleet needs upgraded, particularly now, after KCA Deutag and Ensign left the market,” said Mr. van den Bos. Apart from UOS, the only other remaining important player is Exalo, a PGNiG-owned entity made of several PGNiG subsidiaries that were previously working independently. International players may not be as busy in Poland these days as they were couple years ago, Mr. van den Bos
observes, but he attributes that to secondary issues like bureaucracy rather than any fundamental problem with the market. “At the moment, it’s companies like Orlen Upstream that will keep rigs busy in Poland. Demand from others should come later I believe,” he said. As for the much hyped flood of US rigs coming to international markets, Mr. van den Bos says that its size is unlikely to be dramatic, leaving some space for competition from non-US companies. “First of all, some of the US rigs are too old for even trying to upgrade them to, say, EU standards. Secondly, rig companies will simply cold stock some rigs that they don’t need. Only a part of the dormant fleet is, or will be, shipped to other markets,” Mr. van den Bos said.
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EXPERT'S CORNER
Pro Euro Energy Services VP Eric Bollard on Well Pads
In snow, rain and sunshine, Eric Bollard and his business partner Kris Sylwanowicz have built well pads across Poland. Here’s what they’ve learned. INTERVIEW WITH PRO EURO ENERGY SERVICES
Kris and Eric worked through the night to deliver a well pad for Chevron on time
You’ve built well pads in Poland. What lessons have you learned?
How is building well pads in poland different from North America?
For Chevron, we worked in the worst two months of the year - early spring - and part of the well pad, we did in sub-zero conditions. If it rained or snowed and the sub-base was exposed you could get into a costly mess. At times, we were just inundated with mud, spinning tires and zero productivity. We brainstormed, acted quickly, brought our duramat team in on the access road to assure material was delivered, and then leased two dump trucks mounted on tracks to increase efficiency. You got to know how to work with the weather.
Our approach in Poland is based on three principles: safety, quality and community. We want to keep our crew safe. We want to keep the public safe and we want to keep the environment safe. Lastly we want to leave our neighbors hoping that we’ll return to do maintenance or build additional pads. In the U.S., these principles are important too, but after spending a few weeks this past fall on well pads in Pennsylvania I could see the thrill was gone: the sites were sloppy sites, the garbage was flying, and there were cigarette butts on the street.
60 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
On quality and health and safety, how seriously do you take those things?
On the environmental side, we have recycling bins and designated smoking areas. Everything is taped off and the safety rules are posted everywhere, so there’s zero possibility for confusion. Also the crew understands the importance of safety, and there are severe consequences for breakdowns in safety procedures. We are very strict. We have to be. You have spotted an opportunity with Pro Euro. Can you tell me how you got started?
What do your customers need to know about the quality and timeliness of your work product? Right now, I feel like Pro Euro is in the best position to offer well pad construction in Poland. That comes from the fact that we’ve built three locations. All three locations have been completely different. We’ve built and succeeded in all seasons. We’ve been working with different companies. So we know how and where to go to build what they need when they need it.
What’s Pro Euro’s advantage? Our team is an easy choice because we’re bringing HSE standards in from America. We have Polish connections and we’re mobile. We can mobilize tomorrow wherever you need us. Two days notice for mobilization and it takes us 23 days to complete substantial works. We hire 20 to 30 percent of the crew from the local community. A picnic every weekend with the locals. We had local welders build a grill on site. And a perfect health and safety rating. How can customers get in touch with you to build their well pads? The best way is to call Kris (+48) 601 301 966 or Eric (+48) 503 861 695 and we can schedule a meeting. We have an office in Warsaw and a kit storage facility outside of Warsaw. The three of us are always looking for a reason to visit u kucharzy and grab a table in the kitchen.
ADVERTORIAL
I was brought in to work for Pro Euro when WAG SA was working on the Marathon site. The owners of WAG appreciated the work that I had done and asked me if I would like to split off and take on a new project with them that was dedicated to energy services in Poland.
That was exactly what I was looking for, after our success with Apex Contracting. Bogdan and Kris, my partners, are very well respected in the Polish business world, so it was a perfect situation to get in with two guys who had the resources already and knew who was the best of the best in each different area of construction.
Pro Euro’s knowledge of health and safety was transferred to Poland from North America
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PROPPANT
Keeping
Pores Open The global market for proppant has enjoyed 25 percent average annual growth over the last decade, attracting private equity and luring in startups. Whatâ&#x20AC;&#x2122;s in store for Europe? Much will depend on the geology.
UNITED OILFIELD SERVICES
BY HUNTER DIAMOND
Varying geological parameters determine which type of proppant is used
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P R O P PA N T
PROPPANTS KEEP PORES open,
enabling oil and gas to flow from tight rocks. The cheapest and most common proppant is sand, which gets chemically treated and sieved. If the proppant tends to crush downhole, a more expensive and durable option is a man-made ceramic product, either resin coated sand or ceramic proppant. Both types get graded, and are typically
formation, where total well costs range from $3-6 million (€2.3-4.5 million). Today, where the number of average horizontal stages may number 20 or more, an operator might consume 3 to 5 million pounds (1.4-2.3 million tonnes) of proppant per well. The logistics involved is considerable. To move the upper range of 5 million pounds of proppant per well,
Proppant production (1990-2010) Y- axis: million tonnes, range 0 - 2 million tons X- axis: years, range 1990 - 2010 CAGR is compound annual growth rate
2,0 1,6 1,2 0,8 0,4 0
CAGR*: 11.6 % 1990 - 2002
% 3,3 R: 2- 2010 G CA 003 2
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
million tonnes *compound annual growth rate
manufactured with an approximate spherical shape to maximize pore space to allow oil and gas to flow optimally. According to the Journal of Petroleum Technology, the number of proppant suppliers has increased globally in the last decade from just a handful to well over 50. According to research done by Prop Tester and Kelrik, a consultancy, the market for proppant has grown in volume tenfold from the 3 billion pounds (1.4 million tonnes) in 2000. According to Markets and Markets, a Dallas based company, the global market for proppant reached some €4.5 billion in 2012. Proppant makes up about 5 percent of the total well cost in the Bakken
SOURCE:JOURNAL OF PETROLIUM TECHNOLOGY
GLOBAL PROPPANT PRODUCTION (1990-2010)
as many as 20 rail “hopper” cars are needed. In places where no rail line is present, or to reach the well site from the rail yard, the proppant is delivered by truck. As many as 5 trucks are needed to haul the payload of a rail car, making the total truck trips 100 or more for a typical deep well with hydraulic fracturing. POLAND PROPS In Poland, there have only been a handful of horizontal wells drilled to date, so the operators’ requirement for proppant has been limited. If the country scales the number of exploratory wells drilled, and Poland moves to production as early as 2015, proppant
will be increasing in demand. What size and what type? According to Piotr Woźniak, of Baltic Ceramics, a Poland-based proppant manufacturer, it is difficult to say. The type and size of the proppant will depend on geological parameters, and since the prospective basins are highly variable, operators are not yet certain what type of proppant, nor which type of frack to use. A gel, foam or slickwater solution - with slick-water being the most common - partly determines which type of proppant to use. Mr. Woźniak is positioning his company for the proppant market, having signed an import agreement with a Chinese manufacturer. Baltic Ceramics was awarded a PLN 5.9 million (€1.4 million) grant through the Blue Gas - Polski Gaz Łupkowy (Polish Shale Gas) program for research and development. If all goes as planned, a production facility could be operational by 2014. Until then, they’ll source it from eastern Asia. Global proppant manufacturers, Saint-Gobain and CARBO, are certain to recognize emerging unconventional markets in Europe as hot spots for growth. Other sources of proppants are likely to emerge from R&D efforts coming out of universities centered around shale basins. Houston based Oxane emerged from research done at Rice University in Texas. Nittany Extraction Technologies, NETCo, is based on research done at Penn State University into the feasibility of using waste material such as glass, mine tailings, fly ash and slag. Whether global giants snap up market share, or whether a Polish startup can claim the space, the players in this foot race have only begun to approach the starting line.
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25 TOP
CREATIVE COMMONS
PEOPLE
64 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
PEOPLE
most influential people in Polish shale gas It’s been four years since the first shale gas concessions were granted in Poland in the quiet halls of the ministries. The market isn’t up to full speed yet but it has grown enough to identify its movers and shakers. Here are our picks. BY SHALE GAS INVESTMENT GUIDE
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1/George
Soros George Soros is an investor, and like all investors, he likes to make money. He’s also an activist, and like all activists, he likes things done his way.
NO CAUSE, PERHAPS, is more
dear to Mr. Soros than promoting the values of an open society by strengthening democratic institutions. Creatively, he sees shale as a way to do both. Mr. Soros comes from a well-educated family that suffered under Nazi occupation in Hungary for their Jewish roots. He was only 13 years old when forced by Nazis to hand out deportation notices to Jewish lawyers in the in Hungarian capital Budapest - ultimately they were orders for transport to Auschwitz. Later, he made a fortune in 1997 betting against the Bank of England, and in support of various causes, he’s given away at least €7 billion of his wealth, including an endowment to the Central European University in Budapest worth €400 million. Mr. Soros sees shale as a means for Central European states - Poland, Lithuania, Ukraine, Romania and Bulgaria among them - to strengthen their democracies by improving their energy independence. Liberty aside - if Europe’s resource base is proven up as in North America - his investments could bring large returns to his hedge fund. “It’s very important, the 66 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
revival of shale gas and shale oil, as a cheap source of energy which has made manufacturing more competitive,” Mr. Soros told CNN in 2011. Through Soros Fund Management (SFM), a hedge fund with some €25 billion under management, he’s placed upstream bets in several explorers. Although his specific positions are unknown, he’s invested in San Leon Energy, via its 2011 purchase of Realm Energy, and increased his position as the explorer grew to be the largest acreage holder in Europe. Along with Blackrock, Soros has pushed funds to take on exploration risk, telling governments that a more energy-independent Europe is more secure from outside influence (read: Russia). How’s he doing? Since making an early bet on shale, the value of his investment portfolio has taken a hit, prompting the SFM to dismiss two of its managers who were overseeing his European oil and gas portfolio. But don’t count Mr. Soros out. He’s been ahead of the growth curve in other sectors before. According to at least one explorer, Mr. Soros isn’t yet second guessing the bets he made.
Mr. Soros has been ahead of the growth curve in other sectors before. According to at least one explorer, he isn’t yet second guessing the bets he made on shale gas
PAP /EPA LAURENT GILLIERON
PEOPLE
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2/John
Buggenhagen Outspoken at a time when other operators keep quiet, John Buggenhagen, a bullish American with a pioneering spirit and a cosmopolitan leaning, is a towering figure in the Polish shale gas industry.
IF THERE’S ANYONE with a plan,
it’s John Buggenhagen, exploration director for San Leon Energy. In a recent interview, Mr. Buggenhagen opened up his laptop to show a production plan covering northern Poland. He and his team have field scouted sites suitable for drilling wells, building facilities and laying pipelines. With the support of investors like Blackrock Investments and George Soros’ Quantum Fund, Mr. Buggenhagen’s company stands a chance of commercializing their Polish acreage.
The asset purchase of Realm Energy and last year’s merger with Aurelian Oil along with a handful of other joint ventures including one with Talisman Energy - have given the London-listed explorer a huge footprint, totaling some 17 million net acres (close to 69,000 square kilometers) throughout Europe and North Africa. San Leon Energy - which began as two guys operating out of the Marriott Hotel - is now the big guy on campus with a staff of some 50 employees and the clout of an explorer
“San Leon Energy - which began as two guys operating out of the Marriott Hotel - is now the big guy on campus with 50 employees and the clout of an explorer hungry to make things happen” It wasn’t always that way. As recent as 2010, San Leon Energy was a paper explorer with scattered assets and no real capital to fund their exploration. 68 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
that is hungry to make things happen. Mr. Buggenhagen makes our list of the top 25 most influential people for having been outspoken at a time when
other operators want to stay under the radar. A bullish American with a pioneering spirit and a cosmopolitan leaning - he lived also in Budapest - he is a self-described “conservationist” who loves nature and river rafting (see profile on page 44). On the future of shale in Europe, Mr. Buggenhagen thinks the NOCs will begin to look inward. “Bottom line, a lot of companies are struggling to find places to invest their money. I really believe the majors forgot how to explore and they rely on companies like San Leon to bring projects to them at a more mature level. And I’ve heard from senior management from many companies who say they are happy to pay to get involved if there’s something there to chase,” he said. That’s business, though, something that Mr. Buggenhagen has been an old hand at. In Poland, he also needs to take care to influence the shaping of the regulatory regime the operators’ way. Right now, there’s hardly anything that Mr. Buggenhagen likes about the upcoming new shale gas laws. “As in any negotiation both sides are going to have to find an amicable solution in the end,” he said.
SZYMON SZCZESNIAK
PEOPLE
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3/Donald
Tusk
First he hyped shale gas, now he seems to be decimating the ranks of people involved in executing his plan. What does Prime Minister Donald Tusk really think?
PRIME MINISTER Donald Tusk’s
third place on this list owes to the power he wields in the highly politicized affair that shale gas is in Poland. He’s also been influential in a negative way. Some have been rather disappointed in how he has handled shale gas so far. In this issue, we’ve often referred to the chain of events that led Mr. Tusk to dismissing the treasury minister Mikołaj Budzanowski, the man who engineered the collaboration of statecontrolled companies to explore for shale in the Baltic Basin. According to Mr. Tusk, the minister should have watched more closely PGNiG’s dealings with Gazprom. Some say Mr. Tusk made a mistake, and gave in to the age-old idea that if Russia’s involved in anything, it cannot end well for Warsaw. To cut speculations that he’s a powerless subject to the games Russian president Vladimir Putin plays, Mr. Tusk struck a strongman’s pose and got rid of an important minister, which had the effect of undermining Poland’s shale gas ambitions. That, of course, is just one of the theories. Another less likely one is that 70 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
Mr. Tusk no longer believes in Polish shale gas. Getting rid of Mr. Budzanowski will make it easier for him to depart from providing conditions for its development, the energy source Mr. Tusk once said “all Poles were waiting for.”
idea that you just need to stick a straw in an orange, it’s rather a time-consuming and expensive process that doesn’t always yield success. Unlike conventionals, the production of gas from shales is rather like manufacturing. Operators must drill one well after
Once the country’s most powerful figure thinks that the dream is over, it can end for real In 2011, Mr. Tusk was everywhere, delivering keynote speeches at conferences and hyping shale gas beyond what made sense to industry observers. The high point of the optimistic rhetoric came at PGNiG’s well pad in Lubocino, where Mr. Tusk said that shale gas would flow as early as in 2015. There’s not much to suggest that will happen. Most likely Mr. Tusk simply doesn’t understand the effort it takes to kick off production. Far from the everyman’s
another in a routine, mechanized way, rather than producing from a reservoir. Flow rates decline quickly too. That’s why the lack of progress in Polish shale gas doesn’t necessarily mean the dream is over. What’s more problematic is that if the country’s most powerful figure thinks the dream is over, it can end for real. If the will to pass legislation changes, the government’s energy policy will goe in a different direction. Lignite coal, anyone?
PAP/ADAM WARŻAWA
PEOPLE
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4/ Prugar Wiesław
“We’re planning to drill six wells by 2013,” Mr. Prugar told this magazine in 2011. Poland’s most effective shale gas manager is right on plan.
recently as April 2013, Orlen Upstream, led by Wiesław Prugar, is one of the leaders in shale gas exploration in Poland to date. Orlen Upstream is not to be confused with its mother company, the state-controlled PKN Orlen. No, this Orlen is totally dedicated to unconventionals and doesn’t have to concern itself with a particular political ideology. Freed from having to check in with the ministries every time he needs to do anything, Mr. Prugar has put his energy to rolling out an exploration program on the company’s concessions. Their most recent well drilled was Stręczyn-OU 1, the third well drilled on their Wierzbica concession. Mr. Prugar is also moving to frack the SyczynOU2K well in the same concession and Berejów-OU2K well on the Lubartów concession later in 2013. Not only is Orlen Upstream’s exploration program going forward as planned, but the company is growing its acreage as well. The departure of ExxonMobil from Poland gave ground to a lot of speculation that Polish shale gas was not much more than an unimportant episode in the global unconventional frenzy; a classic ‘could-have-been’. For Orlen Upstream, it was an opportunity to expand and take over new acreage. The 72 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
first well on one of the two newly acquired concessions is likely to be drilled before the end of the year, the company said in February. In other words, if there are any companies in the Polish shale gas market that could be considered to be making decisive steps towards production, Orlen Upstream belongs in the leading trio, alongside ConocoPhillips and San Leon Energy. Mr. Prugar’s progress toward a position in unconventionals went along a classic road seen in many Polishborn oil and gas executives. A gradu-
ate of the Kraków University of Science and Technology (better known as AGH), he also completed postgraduate studies on power market management at the Gliwice University of Technology (another top hub for Poland managers and engineers in the power industry) and company finance at the Warsaw School of Economics. Before he went to PKN Orlen to build a team of oil and gas E&P specialists, Mr. Prugar worked in Kraków-based Institute of Oil and Gas and at the Polish Oil and Gas Company (PGNiG).
Led by Wiesław Prugar, Orlen Upstream’s exploration program is one of few on track
PAP
WITH THEIR SIXTH well drilled as
EUROPEAN COMMISION
PEOPLE
Mr. Potocnik will have a hard time juggling the interests of all involved in shale gas: from environmentalists to oil and gas majors
Janez Potocnik: having the last laugh?
Janez
5/ Potocnik A remote figure as he may seem to many in the oil and gas community in Poland, Janez Potocnik’s influence must be reckoned with. JANEZ POTOCNIK, European
Commissioner for the Environment, could give Europe’s shale gas ambitions a boost or lay it in the grave. Late last year, the European Parliament passed a resolution that rejected an EU-wide fracking ban but still called for the development of robust rules to ensure safety in unconventional hydrocarbon extraction. This came despite earlier reports that the rules currently in place suffice to exercise control over fracking. Many in the shale gas sector are afraid that the “robust rules” impossible to follow and therefore will ground the industry before it has had
a chance to take off. Mr Potočnik is overseeing what solutions could be applied. “We have initiated work to propose before the end of 2013 an adequate risk management framework for unconventional fossil fuels, in particular shale gas developments, in Europe. We are currently assessing what form such a framework should take,” Mr. Potočnik said in November last year. In late March, the Commission finished lengthy consultations on the issue, the results of which are expected to be made available this summer at an invitation-only stakeholders’ event will be organized by the Directorate-General Environment in early
June in Brussels. Mr. Potočnik will have a hard time juggling the interests of some environmental groups opposing fracking altogether, countries with moratoria and others, like Poland, who are investing large sums to make shale gas a viable energy source for decades to come. Whatever the outcome, the Commissioner will definitely influence the direction in which the discussions will unfold, which way the regulation will lean, and in consequence, what regulatory environment there will be for shale gas E&P in the EU.
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Ms. Aubin has the challenge of proving up the resource in an area of the country with the most promising geology, and some of the most engaged local communities
Laurie
6/ St. Aubin Former VP of ConocoPhillips’ exploration and development in Australia is now one of the most active explorer in the otherwise sluggish Polish market. LAURIE ST. AUBIN, president of
ConocoPhillips in Poland, heads the international oil company’s Polish operations, centered in the Baltic basin. This spring, ConocoPhillips will begin operations on several wells in the basin. Ms. Aubin has the challenge of proving up the resource in an area of the country with the most promising geology, and some of the most engaged local communities. After ConocoPhillips exercised their option to take a 70 percent interest in a joint venture with independent explorer 3Legs Resources, Ms. St. Aubin assumed the role as the most active explorer in a market that has seen drilling activity slow in recent months. ConocoPhillips has global reach, and Ms. St. Aubin has worked as far afield as Australia as the VP of exploration 74 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
and development. In Poland she has taken a pragmatic, boots-on-theground approach, even going herself to the north to speak with residents. In one such meeting, Ms. St. Aubin met personally with residents in the municipality of Strzeszewo in the local community of Wicko. There, Ms. Aubin was asked many questions, some coming from residents who were skeptical that her company’s operations would be done safely and quietly. The biggest concern was that drinking water could be fouled. Ms. Aubin addressed concerns by saying that her company supports the disclosure of fracking fluids, and emphasized that ConocoPhillips has many years of experience exploring for oil and gas. Residents also pressed the joint venture to pay a half million złoty
(€120,000) deposit to the account of a local NGO as a security for the protection of the environment. “If you make too much noise, then you won’t get your deposit back,” one member of the organization suggested. Understandably, ConocoPhillips doesn’t pay deposits as security measures, but the company, as elsewhere, will be under constant supervision by local residents, and skeptics are certain to pounce on the company’s missteps. So far, 3Legs Resources has done rather well engaging the local community. It’s up to Ms. Aubin to take the lead from the independent explorer, and understand the local community’s concerns. How she does in Poland could set the dominant tone for further developments in years to come.
PEOPLE
7/
Włodzimierz
Karpinski
He been in office for just a few weeks, so the new treasury minister’s influence on shale gas is a mystery. It will take until end of 2013 to see how Mr. Karpinski is doing. NOT THAT MR. KARPINSKI’S is
Włodzimierz Karpiński: iron-fisted?
MINISTRY OD TREASURY
taking forever to get started. When he was handed the ministerial nomination in late April 2013, he said he would carry out a “review” of the executive leadership in the Polish Oil and Gas Company (PGNiG). This ended with the company’s board axing the CEO Grażyna Piotrowska-Oliwa and the chief commercial officer Radosław Dudziński. Now, Mr. Karpiński says, he’s going to run an audit in the ministry to know what he’s gotten himself into. Even without the audit, however, he can be sure that the treasury is one of the ministries in Poland where working is like walking on very thin ice. A full or controlling owner of several big and strategic companies, Mr. Karpiński will somehow have to get those companies’ business strategies and Poland’s policy goals to meet. They don’t always dovetail. Earlier in 2013, the Polish government had to stomach utility Polska Grupa Energetyczna’s decision not to invest in new power generation capacity, amidst political fears that Poland is soon facing power shortages. At the nomination ceremony again, Prime Minister Donald Tusk made his expectations of Mr. Karpiński very clear. “I’m expecting him to make iron
hard decisions that are necessary so as to not put Poland’s energy security at risk,” Mr. Tusk said. Given the cause of recent changes at PGNiG, Mr. Karpiński could be reading Prime Minister’s words as guidance not to let PGNiG do any business with Russia other than the current supply contract, which some say, Poland hopes to review if and when shale gas is found. But it’s not just PGNiG in Mr. Karpiński’s portfolio. There are energy utilities that might not be all-to-happy
co-financing shale gas exploration. Poland’s current energy policy is all about quick, cheap energy, and a strong continued investment portfolio will take some negotiating. Shale gas production in Poland is, if anything, a long term goal, which politicians don’t always care for, preferring short term actions that are more immediately beneficial in political terms. We haven’t had enough time to accurately tell how Mr. Karpiński will do but we’ll all know soon enough.
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8/Objector It’s no wonder that operators, experts, and authorities are constantly talking about public acceptance for shale gas operations. Without popular support, or at least indifference, the exploration effort is doomed to fail.
PAP/WOJCIECH PACEWICZ
Concerned? Yes. Hostile? Not necessarily. Reasonable? Very often
POLISH PEOPLE MAY NOT have
an individual right to natural resources - the government does - but drilling still takes place on someone’s property where permission for access must be obtained from the owner. This has often proven difficult in Poland because of several misconceptions surrounding shale gas exploration, fracking in particular. That fracking causes water pollution is perhaps the most powerful and overstated objection used to frighten people. If it’s feared, regardless of factuality, it does remain a legitimate concern that the operators and anyone working in the oilfield should address. Other than that, in a country that is far more densely populated than Texas, 76 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
shale gas operations do cause problems and local residents have every right to exercise pressure on operators to reduce the impact of, say, trucking to and from well pads. Operators, in turn, should be pro-active and pre-empt concerns, sometimes even hostility, by reaching out to communities, for example via meetings or organizing open days on well pads. There are numerous operators who have done just that with good results, but there are also examples of those who have disregarded concerns of local communities for no good reason. Operators need to be aware that objectors, even if sometimes misinformed about the technicalities of shale gas operations, can be acting genuinely out of concern.
Operators need to be aware that objectors, even if sometimes misinformed about the technicalities of shale gas operations, can be acting genuine out of concern In what perhaps has been the most positive development in Poland in the last 20 years or so, Poles have learned to take care of their immediate environs: associations, spontaneous groups and other forms of grass roots activity have made impact everywhere. Opposing change is part and parcel of this revival of citizens’ awareness. This is something that should be remembered when people assemble to protest or simply voice their concerns. That many of these individuals are an active part of local society and aren’t necessarily acting on some ignorant impulse legitimizes some kind of response from the companies moving into their local communities.
EIA
PEOPLE
Energy 9/
Information Agency
The shale gas revolution started in North America, but it was the report by the EIA that ushered in a global push for shale and launched Polandâ&#x20AC;&#x2122;s unconventional gas fever.
THE ENERGY INFORMATION
Agency is a part of the U.S. Department of Energy and is tasked with producing and disseminating information covering all aspects of the energy market. Their 2011 report estimated the technically recoverable shale gas reserves for 48 basins in 32 countries. This report acted as a catalyst, pushing what was previously a North American phenomenon into a global discussion about unconventional hydrocarbons. While there was some activity happening in Poland before the report, the publication of a reserve estimate of 5.3 trillion cubic metres, enough to cover domestic demand for 300 years, kickstarted a truly national discussion on shale gas. It also heralded in a new era
of investment as companies rushed to get to the market. This estimate, however, was not based on enough information to provide an accurate assessment for Poland and the Polish Geological Institute dropped the estimate to between 346 billion and 768 billion cubic meters. The EIA continues to revise and correct their estimates relating to different nationsâ&#x20AC;&#x2122; shale gas potential. They are the source of much of the original content that is used by governments and media to assess the development of shale gas and have the ability to encourage and bolster support for nations seeking development in their unconventional gas industries.
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Wozniak
Piotr Wozniak is overseeing work on the new concession regime that will determine a lot of conditions for shale gas E&P in Poland. FOLLOWING THE DISMISSAL of the trea-
sury minister (ranked 25 on this list), Mr. Woźniak is currently the highest-ranking politician dealing directly with shale gas in Poland. He’s deputy minister of environment and Poland’s chief geologist who’s tasked with overseeing the concession process as well as the wholly new geology and mining law. The law, currently in the works in various ministries of the government as well as going through a public consultation process, will re-shape the concessions landscape. The new law will introduce a state-owned operator entity, known as NOKE, that the newcoming operators will be obliged to team up with on concessions. It’s a solution that the government hopes will make it easier for operators to raise equity but operators themselves seems to have nothing but serious doubts about it. “Shale gas is the state’s asset and we want it to be managed well,” Mr. Woźniak said. 78 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
11/Bogusław Sonik
A Polish member of the European Parliament who made shale gas advocacy the leitmotif of his activity. BOGUSŁAW SONIK IS ubiquitous at shale
gas events and debates. His political views on shale gas could be summed up as follows: each EU member state has the exclusive right to decide their energy mix and the production of shale gas in the EU could be an interim step towards the decarbonized economy that the EU strives for. These may not be revolutionary views but, in Brussels, they still require a lot of work to defend in the constant battle of the numerous lobbies trying to influence the EU’s energy and environmental policies. Mr. Sonik is also active on EU fora trying to deconstruct the oft-occurring association between hydraulic fracturing and environmental hazards. This is the hard part, he says. “The strategy of shale gas opponents is to scare. It’s so easy to get people scared by saying that the drinking water will be fouled. We should be showing facts behind shale gas production,” he said.
SZYMON SZCZESNIAK
SZYMON SZCZESNIAK
10/Piotr
RAFAŁ ŚWIDERSKI
SZYMON SZCZESNIAK
PEOPLE
12/ Mark
Swift
Mark Swift is the country manager for Halliburton, one of “big four” service firms seeing opportunity in Poland’s unconventional gas basins. IN 2011, HALLIBURTON made a large com-
mitment to the Polish market, moving their Continental Europe management team to Warsaw and developing an infrastructure in the country to accommodate the emerging unconventional market. “Our primary investment is in people. Getting them trained all over the world including North America, The Middle East and Asia. We’ve invested in infrastructure and put up a base in Teresin, which is one of our key bases in Europe and will provide support across the continent,” Mr. Swift said. In addition to personnel and infrastructure Halliburton invests by spending locally and has developed relationships with 170 vendors in the country according to Mr. Swift. “Halliburton remains committed to Poland and the East European unconventional markets – we are in this for the long haul,” Mr. Swift said.
13/Oisin
Fanning If Oisin Fanning is right about Polish and European shale gas, he may well take his place among the foresighted explorers of the early 21st century.
OISIN FANNING IS PRAISED by some as a
“Celtic tiger” entrepreneur, an Irishman who knows when to take risks, and who knows what sectors promise growth. By any measure, he’s good at making a pitch, and has been successful selling his ideas to people who are well positioned to fund them. “I believe that Europe will be a new center for shale gas and tight oil that has never been seen before. There’s 70 bloody rigs in Europe, look at the shift, the change. Major companies had not been looking inward at their own countries. All of a sudden, shale gas has changed that,” Mr. Fanning told the Shale Gas Investment Guide. In the last four years, he’s amassed an enormous - some 17 million net acres, or 69,000 square kilometers - land position in Europe. In 2011, George Soros’ hedge fund took out a large position in San Leon Energy, which valued Mr. Fanning’s shares at some €23 million when the company was floated on the London’s Alternative Investment Market. At the moment, San Leon Energy is far from having its entire portfolio trading at a premium to the nominal value of the permits they own, but even if the Baltic basin takes off, a valuation in the billions should be expected.
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SZYMON SZCZESNIAK PAP/EPA
14/Alexey Miller
The man behind the company providing the incentive for Poland to start fracking.
HAVING BEEN BORN in Saint Petersburg and
served under Vladimir Putin in the Saint Petersburg Mayor’s Office, Mr. Miller rose in power to become one of key figures of the current power centers of Russian energy politics, and is now CEO of Gazprom - chief supplier of natural gas to Poland. Gazprom is one dominant catalyst behind Poland’s push for shale. For both economic and political reasons, it has become a priority to diversify the country’s energy mix away from reliance on the Russian supplier. Warsaw has always been rather clear about what it thinks Gazprom’s goals are: first to tie markets like Poland to supplies of Russian gas so that the Kremlin can apply pressure more and more easily by threatening to shut down the gas tap. And it is Mr. Miller with his hand on the tap. 80 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
15/Jerzy
Nawrocki The director of the State Geological Institute provides a needed sobriety to whatever politicians and companies are doing to hype shale gas in Poland.
AS THE CONFIDENCE in the Polish market
weakens, it’s Jerzy Nawrocki who is turning out to have been right about the Polish shale gas from the start: Polish shale was not going to be a quick and easy success. It may not even be any success at all. Mr. Nawrocki has consistently said that it will take a lot of additional drilling before any more solid estimates about the Polish shale gas reserves can be made. “I think what’s key for the entire Polish shale gas project is getting gas to flow in commercial quantities, even from a single well, so that we have some basis to consider when production could begin,” Mr. Nawrocki told the Shale Gas Investment Guide (see page 56). This notion, however, seems to be escaping the Polish government, Mr. Nawrocki also suggested, in a March 2013 interview for the Rzeczpospolita newspaper. “I understand that the treasury and the government as a whole would like to know fast how much shale gas can be produced (...) but the companies care more for effectiveness and the economics of exploration, not necessarily its pace,” he said.
SZYMON SZCZESNIAK
SZYMON SZCZESNIAK
PEOPLE
16/Enrique 17/ Paweł Schindelheim
If there’s anyone who can bring the shale gas industry together for two days filled with market buzz, it’s Terrapinn’s commercial director.
Poprawa
The geologist that has been patiently explaining to the general public what shales, the Rotliegend, and the Carboniferous are.
SPENDING BUDGETS of oil and gas com-
panies are tight as ever, with almost exclusive focus on activity in the field. Undeterred, Enrique Schindelheim usually finds a way to sell the shale gas conferences and events that Londonbased Terrapinn is organizing worldwide. The Argentinian’s success means not only that he’s a convincing personality (which he is) but also that such events are needed as fora to exchange views, ideas, present new technologies, find staff, and - last but not least - do business. In Poland, Mr. Schindelheim has been behind the annual Shale Gas World: Europe two-day event that this year has grown to a full-fledged trade fair considered a must to attend. Taking place in late November, the event is now broadening to cover markets like Lithuania and Ukraine as well. This shift reflects what Mr. Schindelheim seems to know: shale gas is becoming a thing to talk about beyond just Poland.
NOW WITH THE THINK TANK, Institute
of Energy Studies, Mr. Poprawa was previously a member of scientific staff at the State Geological Institute (PGI), where he patiently endured journalists’ pilgrimaging to his small room crammed with rock specimens in order to ask lay questions about Poland’s new national interest, geology. The interest in shale gas in Poland owes a great deal to Mr. Poprawa’s matter-of-fact explanations and, often, debunking common misconceptions based on ignorance. On the scientific side, Mr. Poprawa was also an important member of PGI who worked on the March 2012 report on Poland’s shale gas potential. The report cooled what was clearly unrealistic fantasies about how much shale gas there is and restored a healthy balance to the unconventionals debate in Poland.
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Parmar Kulczyk A minor player in shale gas right now, Jan Kulczyk is keeping his options open via a stake in San Leon Energy and declared interested in unconventionals. JAN KULCZYK TODAY is a player
on the market of conventional oil and gas, and can be seen in both Africa and Ukraine. Mr. Kulczyk’s exposure to shale gas is limited to a 4.73 percent stake in San Leon Energy. So shale isn’t exactly his primary focus just yet, but it is something he is watching. Investors, in turn, are keeping an eye on what Mr. Kulczyk is up to because of the capital he has as well as his sixth sense for business. The combination of the two could change the shale gas game once and if he chooses to engage more. He also has the kit and crew. Kulczyk Oil Ventures, which is a conventional gas E&P company in Ukraine, can carry out hydraulic fracturing and could do so for the Polish unconventional plays as well. 82 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
The former country manager and current CEO of 3 Legs Resources, presided over the first horizontal well drilled in Poland, Łebien LE-2H.
Kublik
The leading economics and resources reporter for Poland’s biggest quality daily newspaper, Gazeta Wyborcza, has a role in shaping the public’s view on shale gas.
WORD QUICKLY SURFACED of
the well results: a meager 2 million cubic feet per day which quickly tailed off to 200,000 cubic feet per day. This set the somewhat negative tone for the Polish exploration market, even if based on only one well. Mr. Parmar was promoted last year, to replace Peter Clutterbuck. In March 2013, Mr. Parmar bought into the company with stock, which is trading at just 10 percent of its mid 2011 peak. Although Mr. Parmar exercised more influence over Polish shale when his company was operator over their Baltic concessions (now operated by ConocoPhillips), he’s still making a difference by participating in outreach events, having won the confidence of local communities. With a likable demeanor and a candor that has won him the trust of longtime business partners, Mr. Parmar is optimistic about the future of Polish shale, despite the difficulties.
THE IMPACT OF print media
might be waning, but it is not dead yet and Andrzej Kublik’s reporting on the development of the shale gas market still is what many executives are reading in the morning. Mr. Kublik, as pretty much everyone at the time, jumped on the bandwagon of the early enthusiasm about shale gas in Poland but he has tempered the tone of his reporting somewhat since. He says that at this moment in time, the keys to unlocking Poland’s shale potential (“If there is any,” he added) remain wholly with the government. “There’s not much in it at the moment and the market won’t progress until the Polish government has solved several complex problems, the new geology law and taxation of shale gas operations in the first place,” Mr. Kublik told the Shale Gas Investment Guide.
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SZYMON SZCZESNIAK
PAP/MACIEJ KULCZYŃSKI
18/Jan
19/Kamlesh 20/Andrzej
SZYMON SZCZESNIAK QUADRILLA RESOURCES
GAZ SYSTEM
Chadam 22/Francis Egan If shale gas is ever found in Poland, the subsequent transformation of the Polish energy mix will largely depend on how effective the gas transmission system will be.
23/Nick
Grealy
The London blogger and others like him are sustaining As the Polish shale gas effort much of the buzz around slows, Poland-based operators unconventionals through will be looking to how the CEO rapid updates and increased of Cuadrilla Resources is faring dialogue. in the UK.
JAN CHADAM is the CEO of GAZ-
SYSTEM, the operator of the gas transmission network in Poland. The company will have to carry out several investment projects in order for the Polish network to be technically capable of handling gas from shales. But, these investments will be needed even if shale gas ultimately fails to be produced in production volumes Poland. Between 2014 and 2018, it is planned for the majority of the 1,000 kilometers of new transmission pipelines to be completed, at a total cost of approximately PLN 5 billion (USD 1.6 billion). Gaz-System is also looking into building infrastructure to connect with neighboring countries, Slovakia and the Czech Republic in particular. With all of this investment into infrastructure, when Poland sees the shift from exploration to production of unconventional gas, Mr. Chadam is sure to be a name to know.
PEOPLE
21/Jan
FRANCIS EGAN HEADS Cuadrilla
Resources, a UK company operating in the Bowland Basin in Lancashire, the scene of likely the richest shale gas play in the UK. He staved off a public relations crisis after Cuadrilla reported minor tremors on a location where it drilled and fracked by instituting control system, and coming out to the public on details of the operations. The UK government has since lifted its ban on fracking and, as new, more optimistic estimates put the UK shale gas reserves at some 1,300-1,700 trillion cubic feet, it may be Cuadrilla in the UK, not any of the Polish operators, that will be the first to start commercial production. During the Unconventional Oil and Gas Summit this June, Mr. Egan is likely to be sought after by a lot of people.
OVER THE LAST FIVE years, Nick
Grealy, a blogger, has stayed positive and upbeat about the benefits of shale gas, in a Europe whose citizens are still skeptical of its environmental impact. The BBC, Bloomberg, Sky News, and Financial Times have cited Mr. Grealy’s analyses, published at www.nohotair. co.uk. He appeared before the UK parliament’s energy and climate change committee in 2011 to express his support for exploration. Mr. Grealy calls himself a consultant on “above the ground issues,” choosing to focus on the environmental impact and public acceptance. “It’s not worth any money if gas stays in the ground, and a lot of the reason it stays in the ground is public acceptance. The industry hasn’t been proactive enough in pushing the benefits,” Mr. Grealy.
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84 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
BIO NAME: Izabela Kawczynski POSITION: Your HR Partner BIRTH DATE: March 6, 1978 BIRTHPLACE: Chicago, IL CURRENT CITY: Warsaw, Poland HEIGHT: 5' 4" (5' 7" in heels) WEIGHT: 125 lbs TURN-ONS: positivity, muscle cars and making people smile TURN-OFFS: freezing rain and whining FAVORITE MOVIES: all the Alien movies (I'm a huge fan of sci-fi) I DREAM OF: world peace FAVORITE INTERVIEW QUESTION TO ASK A POTENTIAL CANDIDATE: If you were me, what question would you ask yourself? FAVORITE QUOTE: "You miss 100% of the shots you don't take." -Wayne Gretzky THREE WORDS THAT BEST DESCRIBE ME: but first, coffee ;)
PAP PGNIG
24/Grazyna
PiotrowskaOliwa The high heeled former CEO of PGNiG misstepped, snagging her gown on a red carpet laid out by Putin. UNTIL SHE WAS FIRED in April,
Ms. Grażyna Piotrowska-Oliwa (see profile, page 24) was the centerpiece of the government’s plan to produce gas from shales. She’s friends with the former treasury minister Mikołaj Budzanowski, now just behind her at the bottom of this list. She brought a measure of glamour and sophistication to the oilfield. But it wasn’t to last. The news of a feasibility study for a new Yamal pipeline (see page 27) cost her one of the top executive positions in Poland. Although this mishap will prove a minor footnote in the long run, the mistake was enough to get the classically trained and ambitious lady relegated to the ranks of executives who didn’t see through the political implications of the energy sector in Poland. 86 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
25/Mikołaj
Budzanowski
Formerly a top political figure in the context of shale gas in Poland, former Treasury Minister Mikołaj Budzanowski was dismissed by Prime Minister Donald Tusk in early April. MIKOŁAJ BUDZANOWSKI shaped
the Polish shale gas sector a great deal during his 18 month tenure. Mr. Budzanowski pushed for stateowned energy companies to earmark some PLN 10 billion (USD 3.2 billion) for shale gas exploration, and shale subsequently made its way into the strategies of utility companies planning gas-fired power plants and chemical companies using gas to produce fertilizers. In early April, just days before Mr. Tusk - now number 3 in this list - dismissed him (see page 27), Mr. Budzanowski assured that production of gas from shales would be “absolutely possible” in 2015. As long as Polish Oil and Gas Company (PGNiG) ups the tempo of exploration, he added. With the dismissal of both Mr. Budzanowski and PGNiG’s CEO Grażyna Piotrowska-Oliwa (see profile page 24), expect some change to occur across the Polish side of the industry.
PEOPLE
1. George Soros
2. John Buggenhagen
3. Donald Tusk
4. Wiesław Prugar
5. Janez Potocnik
6. Laurie St. Aubin
7. Włodzimierz Karpinski
8. Objector
9. EIA
10. Piotr Wozniak
11. Bogusław Sonik
12. Mark Swift
13. Oisin Flanning
14. Alexey Miller
15. Jerzy Nawrocki
16. Enrique Schindelheim
17. Paweł Poprawa
18. Jan Kulczyk
19. Kamlesh Parmar
20. Andrzej Kublik
21. Jan Chadam
22. Francis Egan
23. Nick Grealy
25. Grazyna Oliwa-Piotrowska
25. Mikołaj Budzanowski
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p. 99
p. 101 p. 92 p. 96
p. 103 p. 98
p. 100 p. 106 p. 105
p. 107
p. 104
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GLOBAL UPDATE
SHALE
GOING INCREDIBLY
GLOBAL p. 102
Unconventional gas continues to shake up the global energy status quo, with the first shipments of gas from the US shales to hit overseas markets before long. These exports may have operators in Europe or South America ask themselves questions about how competitive they will able to be.
p. 106
90
G L O B A L M A R K E T STILL US AFFAIR
1 0 2 U S A REVOLUTION REDUX
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1 0 3 E U UNEXPECTED IMPACTS
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U K SHALE GAS: A MUST FOR EUROPE
1 0 4 A U S T R A L I A CHEVRON ENJOYS AUSSIE BEACH TIME
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U K R A I N E HAPPY START?
1 0 5 C H I N A THE SICHUAN CHALLANGE
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U K R A I N E THE USURPERS
1 0 5 A R G E N T I N A YPF AND DOW
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F R A N C E / G E R M A N Y EUROPE’S NAYSAYERS
1 0 6 B R A Z I L ANOTHER STEP FORWARD
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R U S S I A PUTIN’S WISH, GAZPROM’S ORDER
1 0 6 H U N G A R Y HUNGRY FOR GAS
1 0 0 R O M A N I A ABOUT-FACE IN BUCHAREST
p. 105
1 0 7 S P A I N TRYING TO BREAK OUT
1 0 1 L I T H U A N I A CHEVRON ADVANCES IN LITHUANIA
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GLOBAL MARKET
GLOBAL GAS PUSH STILL US AFFAIR As of today, there’s little to indicate that unconventional gas will become a highly traded international commodity. In some early markets, speculation is that US exports will foul domestic E&P efforts. BY WOJCIECH KOSC
THERE’S SOMETHING ABOUT
unconventionals that has everyone talking global geopolitics. It’s true that the production of unconventional gas in the US and Canada has inspired several other countries to take a look into their own resources. It’s also perhaps true to say that any conclusive statements about the export of unconventional gas stem from a poor understanding of unconventionals. Countries that are actively prospecting for shale gas have only had a few years to do so. The North American oilmen have had decades. That’s why in the last couple of years no country has started production, except for Australia, even if the unconventional gas E&P know-how is readily available worldwide. Much has been said about the problems that China, Poland, the UK or Argentina are facing in order to pull 90 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
off their respective shale gas programs. These problems are bureaucratic regimes (Poland, China), environmentalists (Europe), access to water (China, Australia, Argentina), undulated terrain (China), and finally, geology (everywhere). DRILL, BABY, DRILL Still, one can be certain that as these countries provide conditions for operators to drill, gas will flow. Cuadrilla Resources in the UK is likely to produce gas from some of the world’s thickest shales (see page 38). The exploration program in the Argentinian play Vaca Muerta is also going forward (see page 105), as one service company told SGIG that Argentina is a favorite destination of U.S. companies. In Poland, 3Legs Resources and BNK had gas shows in their wells, now
RETO STÖCKLI, NAZMI EL SALEOUS, MARIT JENTOFT-NILSEN, NASA GSFC
GLOBAL UPDATE
they’re working to up their assets to a commercial level. Elsewhere in CEE, the lure of limiting imports from Russia is paving the way for early exploration (see page 101). Demonstrated sustained commercial hydrocarbon flow rates is what operators are after. As US president Barack Obama greenlighted gas exports from the US, a question appears, however, whether the influx of competitively-priced American resource will disincentivize operators globally. Of all international unconventional markets, the suggestion that it will, came from Poland. It’s a paradox because the Polish unconventionals market, despite getting some negative press recently, is still one of the most active. Apparently, Polish decision makers find the prospect of securing gas supplies from the US more attrac-
tive than long term investment in the unconventionals industry that would boost energy security, let alone create a lot of new jobs. Robin Mills, oil and gas market analyst, says that more gas into Europe from any source would obviously compete with European unconventional gas (see also page 103). At the moment, it’s generally forecasted that US gas delivered to Europe would cost at least least $10/MMBtu. This provides ground for Europe operators to think through the economics of their effort, but it would seem that they could be competitive. Similar calculations need to be done for non-European markets as well. Before long, national efforts to bring the gas out will be taking place in the new context of the North American gas leaving US coasts, world-bound.
Before long, national efforts to bring gas out will be taking place in the context of North American gas leaving US coasts, world-bound
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AT A GLANCE: • Major UK gas supplier, Centrica, has signed a deal with US company Cheniere to buy American gas to heat British homes. The deal is worth $10 billion. •Britain’s gas reserves are estimated to decline rather rapidly until 2020; so are gas’ net production levels
UNITED KINGDOM
WHOLE LOTTA (CHEAP) GAS BY NICHOLAS NEWMAN IN LONDON
BRITAIN’S CENTRICA, supplier
of gas to over eleven million UK homes, announced a deal in late March to begin importing American shale gas, in yet another development confirming the North America’s sole leading role in shale gas industry. The $10 billion ten year contract, renewable for a further decade, will see the arrival of 1.75 million metric tons (mmt) of gas from US shales to Britain on an annual basis from 2018. The resource will arrive in the form of liquefied natural gas (LNG) via Houston based Cheniere Energy Partners from its soon to be built fifth LNG export train (liquefaction and purification facility) at Sabine Pass port in Louisiana. Cheniere has plans to construct six trains, each with a nominal processing capacity of approximately 4.5 mmt annually. The fifth and sixth trains were awaiting approval from federal regulators, as at the end of March. Cheniere, in anticipation of final federal approval, 92 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
CC
It might seem that the European market will be flooded by super-competitive gas from US shales long before local production is launched.
has signed a number of gas export deals with overseas companies, including BP, British Gas, and Total for the British market. The first LNG gas exports from America are expected in 2015. PLUG THE SUPPLY HOLE The Centrica deal comes amidst falling supply levels of gas in the UK. British energy companies have been seeking new gas supplies in order to meet the future needs of planned gas power stations and to compensate for rapidly declining supplies of gas from the North Sea. At the moment, they’re importing gas via the interconnector gas pipelines that link Britain with Norway and Holland. Also, LNG imports from further afield have been shipped by LNG tankers from sources such as Qatar. The arrival of US shale gas is going to change the picture. “It is likely to offset existing gas supplies and help diversify existing deliveries of gas to Britain,” said
Centrica will pay the prevailing US Henry Hub price for the imported gas plus a premium of 15 percent on each cargo. Currently, the UK hub gas price is three times that of the Henry Hub.
GLOBAL UPDATE
Forecast
2500 2000 1500 1000 500 o
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Net Production Range
Reserves:
Possible
Probable
Probable Possible
Source: National Grid, Ten Year Statement, p.25
Historic
120 100 80 60 40 20 0
120 100 80 60 40 20 0
Production bcm/a
William Blyth, CEO of Oxford Energy Associates, an energy and climate change policy consultancy. Current imports of gas meet 49 per cent of Britain’s needs in winter, according to The Carbon Brief, a website dedicated to climate change. Reliance on imports and lack of storage capacity combine to make Britain’s energy companies and consumers vulnerable to price spikes. Apart from production shortages that need to be covered by increased imports, Britain has also suffered from insufficient gas storage capacity, notes Howard Rogers, head of the gas programme at Oxford Institute for Energy Studies. The existing data shows the UK has the capacity to store enough gas to meet its need for a mere 13 days. “This is minor compared to what can be found in Germany and France at around 99 and 122 days, respectively,” said Monica Giulietti, an energy professor at Warwick Business School.
Production bcm/a
could help plug the supply hole.
Pages from Gas SoS Report
Pages from Gasdecline SoS Report Britain faces of gas reserves and falling production. Importing US gas
Reserves:
IN NEED OF MORE GAS
Reserves (bcm) Net Production Range
o
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
500
1000
1500
2000
Historic
Forecast
2500
Reserves (bcm)
Britain needs more gas to keep the economy going while energy saving measures are largely absent
Proven
Centrica will pay the prevailing US Henry Hub price for the imported gas plus a premium of 15 percent on each cargo. In addition, there will be a surcharge of three dollars per million British thermal units of gas. Currently, the UK hub gas price is three times that of the Henry Hub gas price. If this deal was in place today, it would place Centrica in a super-favorable position relative to its competitors. All told, Centrica would be paying just 60 percent of the equivalent British price for the same of volume of gas, according
Proven
Source: National Grid, Ten Year Statement, p.25
CHEAPER THAN YOU THINK The recent deals to import cheap American shale gas to Britain signify efforts to diversify supplies of gas at a lower price point and to secure sufficient supplies to meet the increase in demand in the absence of substantial energy saving measures by the growing number of Britain’s households. England alone will need 2.2 million more homes by 2021 according to figures from the Office of National Statistics. This is due to trends in immigration and the need to solve the housing shortage in the country.
to data available from British Petroleum. Gas produced from US shales will be coming to a market that its bracing itself for proving large quantities of domestic shale gas resources. But the impact that US shale gas prices on the competitiveness of Britain’s domestic shale gas company, Cuadrilla, with its anticipated higher drilling costs, can currently only be guessed. UK shale gas exploration is still in its infancy and, even if it were successful, will not contribute significantly to Britain’s energy security for at least a decade, which is good news for Centrica.
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UNITED KINGDOM
SHALE GAS: A MUST FOR EUROPE It’s the UK now that has taken the lead in pushing Europe to take advantage of indigenous shale gas resources. Shale gas could help the EU’s climate policies back on their feet, London says. BY PAUL G ARRETT IN LONDON
pushing North American coal to regions with huge decarbonization ambitions, like Europe, it’s dawning on the European governments that taking advantage of local shale gas resources may not be a bad idea. The UK government figures and experts are voicing it with an increasing volume. THE THREE ISSUES Unlike several other member states, the UK has long been a faithful follower of the EU environmental policy. One effect of that is, for example, the upcoming shutdown of many coal fired power plants, a result of the implementation of the EU-enforced Large Combustion Plant Directive. With the future of nuclear power unclear as well, the UK is moving toward phasing in shale gas in place of coal and nuclear power. Shale gas should jump to top of the agenda all over Europe, the UK politicians and experts say. “Without shale gas Europe could become the only industrially developed 94 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
region in the world without own energy resources. We need to support gas development in Europe and to do that we need a coal transformation policy and to suppress coal on environmental grounds,” said Professor Alan Riley of City University in London. Angus Miller, a senior energy advisor at Britain’s Foreign and Commonwealth Office, believes that European governments cannot have failed to see what has happened to the US economy and its energy security as a result of shale gas over the past decade. “The three issues for Europe to address are geology, governance and technology,” he said. But European governments and industry must address environmental and social issues around shale which are more pronounced in Europe than in the United States,” Mr. Miller told the Shale Gas Investment Guide. Philip Lowe, director general of energy at the European Commission, agrees. “The main constraint to shale gas development in Europe is public perception,” he said.
UK could overtake Poland in leading Europe’s push for shale gas
ISTOCKPHOTO.COM
AS THE US SHALE GAS BOOM is
GLOBAL UPDATE
“Without shale gas Europe could become the only industrially developed region in the world without its own energy resources” Professor Alan Riley of City University in London. REVIVE DECARBONIZATION Professor Riley agrees that public opposition to shale may in the end make replicating the US shale gas boom in countries like Britain and Poland difficult. “For a start there is entrenched opposition to shale gas by established energy industries such as coal, nuclear and wind power,” Mr. Riley said. “There are also well-organised non-governmental organisations and climate change lobbyists which instinctively oppose any energy policy which perpetuates the use of fossil fuels. There are also the so-called “not in my backyard”
arguments, planning, and bureaucracy issues to be overcome,” he added. These obstacles to shale gas, however, need to be seen in context. It’s becoming clear that Europe’s high energy price strategy to reduce emissions is failing on two counts. First, it’s making industry uncompetitive compared to the US. Secondly, it’s failing to reduce carbon emissions, charges Mr. Riley. Present energy policy may even be driving Europe towards an energy mix which becomes dominated by expensive and intermittent wind and emissions-intensive coal, much of it
cheap imports from the US. This is hardly what policymakers originally envisaged when they set Europe’s 2020 carbon and energy targets. But shale gas could help revive the waning decarbonization effort. According to Mr. Miller the new approach to shale gas in the UK, as well as in Europe as a whole, should not be concentrating on the question whether to go for shale gas or not. Instead, governments need to think: “Can energyimport dependent Europe not afford to develop its unconventional gas reserves?” Mr. Miller said.
AT A GLANCE: • It’s the UK now that has taken the lead in pushing Europe to take advantage of indigenous shale gas resources. •The rise of unconventional gas production in the US has led to cutting CO2 emissions, while Europe’s climate action policy has been struggling. Shale gas could revive the EU’s decarbonization effort.
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UKRAINE
HAPPY START? Shell gets going in Ukraine with a multi-billion deal to prospect a shale play that holds an estimated 2 trillion cubic meters of gas. BY G R A H A M S TA C K I N K I E V
for shale gas is finally about to start in Ukraine with international giant Shell announcing on April 17 that it has drilled its first exploratory well in the eastern Ukrainian village of Veseloe. The village’s name means “Happy”, but the happy note belies a new sobriety about the deal. Signing of the production sharing agreement between Ukraine and Shell in January 2013 was an unusual PR highlight for Ukraine: the ceremony took place under the glare of the world’s press at the Davos economic summit in Switzerland. Ukraine Prime Minister Mykola Azarov
Poland $433 and the Czech Republic $500, while Ukraine paid $420. Ukraine argues that its gas should cost less because the transport distance is shorter. Other measures in the gas price PR campaign by Ukraine were less successful. The most notable has been the much-hyped ceremony in November 2012 where a plan was signed to construct a liquid natural gas terminal for Ukraine with investment from Spain’s Gas Natural Fenosa. This turned into a fiasco when Fenosa denied any knowledge of either the agreement or the man who claimed to represent them. UKRAINIAN GOVERMENT
THE TALK IS OVER. Exploration
Ukraine’s Davos signing ceremony with Shell had a minor shadow too: the price tag of $10 billion stuck to the deal by Ukraine’s government and universally reported by international media at the time. Apparently, the figure is much more modest. “The figure [of $10 billion] came from a Ukrainian minister, not Shell,” says Shell’s press officer in Ukraine, Anna Dumanska. Instead, the production sharing agreement, as subsequently leaked to media, envisages a minimum investment by Shell of $3.75 billion, if initial exploration is successful. THE BIG IF The jury is still out on how big an “if ” that really is. “There has been a huge range in the estimates for shale gas in Ukraine. We will only really know what is in the ground after having drilled the wells,” says Serhiy Stovba, scientific director of SPK Geoservis, a local partner of Shell in the project. The Ukrainian geological service estimates the Yuzivska structure where Shell will explore at having 2 trillion cubic metres, with a total of 3.5 trillion cubic metres in Ukraine. This is considerably more than the 1.2 trillion cubic metres of reserves estimated for the country by the U.S. Energy Information Administration a few years ago. Shell will invest a minimum of $200 million in the initial exploration phase, drilling a second exploratory well this year followed by a further 13 wells. Exploration will take between three and five years, Shell says. So for now, Ukraine is in for a long wait before any gas actually starts to flow.
CHEVRON UKRAINE PLANS STILL SNAGGED PR PRESSURE However, the PR was arguably not so much about future prospects as pressuring Russia over the prices Ukraine currently pays for gas by a threat of developing home-grown alternatives. Averaged for 2012, Germany paid Russia $353 per thousand cubic metres, 96 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
International energy giant Chevron’s plans to find shale gas in Ukraine are still snagged on fierce opposition from nationalist local councils, worried about the ecological impact of hydraulic fracturing technology. In May 2012 Chevron won a government tender to explore and develop the Olesska field in western Ukraine, estimated by Ukraine’s state geological service to hold a total of between 0.8 to 1.5 trillion cubic meters. But, local opposition has prevented the conclusion of a production sharing agreement with the government for which consent of local councils is required by law. Chevron has launched a charm offensive in the region, and is hoping to woo the nationalists with the promise that shale gas will reduce Ukraine’s dependence on Russian gas.
GLOBAL UPDATE
UKRAINE
THE USURPERS If unconventionals are a heralded game changer in Poland, what’s there to say about Ukraine? BY WOJCIECH KOSC
case of unconventional gas in Ukraine has acquired new speed. The business activites have caught up a bit with the political rhetoric in Kiev after Dutch major Shell signed a production sharing agreement with the Ukrainian government to prospect a shale play with an estimated 2 trillion cubic meters of gas.
Moscow has been putting stronger pressure on Ukraine and has intensified efforts to gain tighter control of Ukraine’s gas pipeline network The signing spurred even more political rhetoric that reached its most recent heights in early May. “The point of no return has been crossed,” said Volodymyr Ignashchenko, adviser at the Ministry of Ecology & Natural Resources of Ukraine. Mr. Ignashchenko went on to say that, apart from Shell, also US major Chevron and Italy’s ENI have obtained licenses to prospect for unconventional gas. He forecasted that Ukraine will become a net exporter of gas in the 2020s. Should Mr. Ignashchenko’s visions become reality, Ukraine would be in
nothing short of another revolution with a huge economic and geopolitical aftermath. Ukraine’s ability to become an exporter of gas is thanks to production of the resource from unconventional sources, which could cross the 40 billion cubic meter mark in early 2020s and reach the high point of over 70 billion cubic meters in the 2030s. It would also
efforts to establish a common management of the Ukrainian gas pipeline system, or at least to ensure that it’s leased to Gazprom, without the EU being involved. “If this scenario is realized, control over gas pipelines will also mean control of the gas they carry and Gazprom being able to block supplies from its competitors, including also Ukrainian gas from
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Poland has been through this: super high estimates of unconventional gas production. Will forecasts pan out for Ukraine?
drastically change a great many things in the country and Europe. First of all, it would end Ukraine’s role as transit country for Gazprom. Once it’s looming for real, it’s bound to cause Russian reaction, according to a late April analysis by the Warsaw-based Center of Eastern Studies (OSW). Gazprom would step in despite frequent disagreements between Moscow and Kiev over pricing and lax control of the gas flow on the Ukrainian side. According to OSW, Moscow has been putting stronger pressure on Ukraine of late and has intensified its
CENTER FOR EASTERN STUDIES
IN THE FIRST HALF OF 2013, the
unconventional sources in the future,” an April 2013 analysis from OSW said. The (perhaps) rosy future that unconventionals will give Ukraine is then obscured by an immediate dilemma. The Kiev government has the choice of relinquishing control of the gas pipeline network in exchange for cheap gas from Russia, putting the future of unconventional gas production in Ukraine at stake, or give up attempts to strike a deal with Russia and gain prospects for the development of a strategic branch of the economy, OSW suggests.
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FRANCE/GERMANY
EUROPE’S NAYSAYERS The two core EU states could give shale gas E&P a big boost if they decided to let companies drill and frack. There’s rationale for doing so, but Berlin and Paris are negative towards the idea. BY WOJCIECH KOSC
means an issue of who drills where to what effect. The EU member states have varying different political importance and thus their internal decisions on shale gas could weigh upon the resource’s future in the bloc as a whole.
Anti-fracking protest in Marseille, France
the technology, conducted by the ministry of environment. In short, the law, now going through the lower house of the German parliament, proposes a ban on fracking near drinking water reservoirs and mineral springs. The draft law would also require operators to carry out extensive environmen-
MARCOVDZ
SHALE GAS IN THE EU is by no
Worsening economic indicators could lead Mr. Hollande to soften his position on fracking France and Germany are two countries that pretty much define the direction the EU is going, so Berlin and Paris’ continuing negative position on shale gas is not only keeping those markets closed for oil and gas firms, but may result in difficulties for enthusiastic countries, like Poland. Germany has moved further towards ever-tighter controls on fracking by tabling a law where the main assumptions are drawn from a 2012 study on 98 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
tal impact studies for exploration sites. In a rift between the conservative German government, however, the ministry of environment would like to see the law as effectively blocking the use of fracking in the country, while the ministry of economy welcomes the tight controls as paving way to the use of fracking in a way that won’t create controversies. Right now, the momentum is with the environment minister Peter Altmeier whose views that the law should effectively
discourage fracking have been backed by Chancellor Angela Merkel. Germany has an estimated 2.3 trillion cubic meters of shale gas, according to German Federal Institute for Geosciences and Natural Resources. Getting this gas from shales would alleviate at least some of Germany’s energy worries, like the hike in energy price brought about by Berlin’s uncompromising policy to favor renewable energy. Germany’s closest partner in the EU, France, still entertains a blanket ban on fracking despite calls from the industry to lift it. French president Francois Hollande sticks to his 2012 declaration that fracking won’t see a green light in France during his term (which ends in 2017). However, worsening economic indicators could lead Mr. Hollande to soften his position. “Possibly the biggest shale gas reserves in Western Europe, cooling ardor for nuclear, rumblings of dissent from his industry minister and pro-shale pleas from bosses and unions alike, keen for more jobs, will combine to erode his resolve,” Reuters wrote in a 2012. According to a report commissioned by the French government from Lois Gallois, former head of aerospace group EADS, if the French industry is to retain competitiveness, the ban on fracking should be lifted and exploration allowed to prove whether the estimated 5 trillion cubic meters of shale gas is a reality. The report also said that France and Germany should propose a shale research programme at a European level, ENDS Europe newswire reported in November 2012. The government has left these findings without a comment thus far.
ARTEM PHOTOGRAPHY
GLOBAL UPDATE
Russia and Gazprom, one and the same?
RUSSIA
PUTIN’S WISH, GAZPROM’S ORDER Gazprom may have been skeptical about shale gas but following Vladimir Putin’s suggestions, the company is likely to change its course. BY KEITH LUKE
AS OPPOSED TO the dismissive
comments by Gazprom CEO Alexey Miller, President Vladimir Putin considers shale gas something worth paying attention to. “I don’t think we overslept anything, but we should monitor [shale gas] with utmost care,” Putin said in a televised live phone-in conference in April. “Whether Gazprom slept through the shale revolution or not, it’s a difficult question. There is no answer to it yet,” Mr. Putin added. The Russian president’s statement should give something to think about for Mr. Miller who earlier this year derided the economic sense of shale gas. “We don’t know a single project where production of shale gas at the upstream stage yields a profit, absolutely all wells are loss-making. There is an opinion that it is just a bubble that will burst
“I don’t think we overslept anything, but we should monitor [shale gas] with utmost care” Vladimir Putin, Russian president soon,” Mr Miller said in an interview on TV station Rossiya in March. By Mr. Miller’s standards, however, Russia is about to join several other countries that have been working in the past years to blow the “bubble”. In February, the Russian Natural Resources and Environment Ministry announced it would conduct an analysis of
the resources and reserves of unconventional gas deposits. With potential reserves that could be in contention with the largest shale plays in the world, the Bazhenov field in Siberia is just one of the areas that should become added to the list of major fields to develop. Because Russia was not included in the IEA report outlining shale gas reserves around the world, the numbers are oft overlooked in popular discussions about unconventionals globally. Estimates for the shale gas reserves in the Bazhenov field are hard to come by but analysts from Bank of America Merrill Lynch and Wood Mackenzie say the hydrocarbons there could produce 500,000 barrels of oil equivalent a day with an overall 2 trillion barrels of oil in place. While analysts agree that there is shale gas in the Bazhenov, further work is needed to determine the resource’s amount. The Bazhenov field, if proven, would dwarf the numbers seen in the United States and could potentially bring in billions of dollars in taxes as well as export. Using the Bazhenov field to offset declining production in conventional fields should also enforce investments in oil and gas E&P infrastructure in order to maintain the status-quo upon which President Putin has built and subsequently consolidated his power in Russia. The International Energy Agency estimates that Russia’s gas producers need to invest $730 billion by 2035 just to maintain a current production of 655 billion cubic metres a year. Either way, Mr. Miller and President Putin should sit down and figure out how Russia should go about joining the unconventional revolution. A better question still would be to ask if they could afford not to.
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ISTOCKPHOTO.COM
Lifting the moratorium was the easy part; much bigger difficulties lie ahead
ROMANIA
ABOUT-FACE IN BUCHAREST Romania follows the UK by lifting restrictions on shale gas exploration, but the exploration’s progress is likely to stall. BY KEITH LUKE
ROMANIA IS ONLY the second
European country after the UK to go from a negative position on shale to one allowing for exploration to take place. The government in Bucharest hopes to prove acreage, cash-in on shale gas reserves and further diminish the Russian position in gas supplies.
But a successful program of unconventional gas production combined with conventional supplies could give Romania a complete self-sufficiency for energy sources. This provides an impetus for government officials in Bucharest to figure out exactly how much gas is present and
“If these potential resources are not used, I wonder from where will we find resources for development?” Liviu Dragnea, Vice Prime Minister of Romania There isn’t a significant public pressure in Romania to end buying the Russian gas because, unlike Poland, Ukraine, or Lithuania, the southern Balkan state receives only about a quarter of its gas from Russia. 100 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
encourage participation of operators. “We have information that underground there are these natural resources [shale gas] in sufficiently large quantities so that to help the areas where they will be extracted as well as
the national economy. If these potential resources are not used, I wonder from where will we find resources for development?” said Vice Prime Minister of Romania, Liviu Dragnea, during a debate in Vaslui County, where Chevron holds an exploration license. The local government in Vaslui granted Chevron a license to begin exploration at the end of January. Chevron also holds 6,350 square kilometers in the eastern Barland region along with 2,700 square kilometers across 3 concessions in the Dobrouja region. Chevron is not the only operator interested in Romanian shale gas. Ten other companies including majority stateowned national oil and gas major Romgaz, MOL (another state company, from Hungary), East-West Petroleum and Zeta Petroleum, either hold concessions or are planning on entering the market. Now that they’re past their enthusiasm about the government lifting the moratorium, Romania-operating explorers are wary that more difficult problems lie ahead. The regulatory regime is considered to be insufficiently transparent and unstable. The government has further complicated matters by creating additional taxes for the energy industry at the beginning of February, including a 60 per cent tax on the extra revenue generated by gas following a deregulation of the market. A review of the conditions governing exploration and extraction licenses is under way, causing further uncertainty among investors.
GLOBAL UPDATE
LITHUANIA
CHEVRON ADVANCES IN LITHUANIA Despite doubts, Chevron gets a nod from the Lithuanian parliament for shale gas E&P. BY LINAS JEGELEVICIUS IN VILNIUS
THE LITHUANIAN Prime Minister
The [Chevron] license was approved despite earlier recommendations to halt licenses for shale gas exploration and production Chevron was the only firm to bid on the the 1,800 square kilometer SilutesTaurages field. The license was approved despite earlier recommendations by the parliamentary Committees of Economics and Environmental Protection to halt licenses for shale gas exploration and production in the country until proper legislation can be passed regarding extraction. It is expected that the first viable production scenario will occur in four to five years, Lithuanian ministry of economy is hoping. Should a production market happen in Lithuania it would certainly affect
LITHUANIAN GOVERMENT
Algirdas Butkevičius has confirmed Chevron’s license to explore for unconventional energy assets in western Lithuania.
Chevron is the only company so far to bid on Lithuania’s unconventionals
Gazprom’s activities in the nation as the Russian-based firm currently supplies all of Lithuania’s natural gas, 3 bcm annually. “With shale gas, Lithuania would significantly reduce its energy dependency on Russia, but then necessity of the Visaginas Nuclear Power Plant would also come into question,” said Gitanas Nauseda, an analyst with SEB Bank. The State Geological Service estimates that Lithuania’s geological formations hold up to 585 billion cubic meters (bcm) of gas, with an estimated extraction percentage of 10 to 15 percent, or about 60-90 bcm.
“With the Government’s decision to proceed, the MPs are expected to pass seven new bills, two for exploration activities and five for the extraction operations. In total, 33 different legislative acts will have to be passed or amended,” Remigijus Zemaitaitis MP and chairman of the Parliament’s Committee of Economics, told the Shale Gas Investment Guide. All told, this is a step forward for the country that KPMG, a consultancy, ranks as the fourth most prospective shale gas area in Europe in terms of estimated resources, production costs, and public acceptance.
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U N I T E D S TAT E S
REVOLUTION REDUX
Will the US gas flood Europe, discouraging European’s effort in unconventionals? Not really, as the US exporters will utilize the recent nod from the federal administration to cash in on big margins in Asia.
POLSKIE LNG
BY KEITH LUKE
FIRST THEY REVOLUTIONIZED
US industry. Now they’re on to do the same to global gas trade. US unconventional gas resources will reach offshore markets sooner rather than later. This isn’t good news for some USbased energy-intensive manufacturers that have teamed up in order to counteract the flurry of export licenses being granted for prospective gas exporters. They see the US rolling out LNG exports resulting in domestic gas prices climbing back up. Unfortunately for them, the Department of Energy and President Barack Obama are weighing in on the side of the granting of export licenses. This won’t happen unconditionally, according to Robin Mills, oil and gas market analyst. “It does seem that it would be possible for the US to limit gas export quantities, most likely by not approving specific projects - particularly for exports to nonFree Trade Agreement countries. I doubt there would be a blanket policy or cap on exports, which would seem to invite WTO challenge,” Mr. Mills said. The poster child for this new industry can be found in Cheniere Energy. Their Sabine Pass Liquefaction terminal in Louisiana was approved by the Department of Energy in January, and Cheniere has wasted no time in lining up contracts with various countries. Excelerate Energy was also one of the first to get a license and there are at last count seven other facilities waiting for approval. 102 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
“US LNG projects will struggle - allowing for some increase in Henry Hub prices - if they only sell to Europe. The main direction will have to be high-priced Asian markets” Robin Mills, analyst As recently as 2008, facilities were being considered for the import of LNG rather than its export. However, the success of unconventionals has turned the tide so dramatically that price differences are as much as a third cheaper than European prices and a fifth of the cost of gas in Asia. Of course, the current cost of gas in the United States cannot simply be ported to another market. The available technology for processing gas for LNG transport via ship inflates the cost of the gas significantly. But, if the current price of gas holds
($3.75 per mmcl) even with the added costs of processing, it will still be a highly competitive resource, particularly in Asia. “US LNG projects will struggle - allowing for some increase in Henry Hub gas prices - if they only sell to Europe. The main market will have to be high-priced Asian markets. Given that, US LNG exports do appear competitive to Asia against oil-parity pricing, for example from Australia. There is also an interest in Japan in diversifying pricing away from sole reliance on the oil link, and having a link to Henry Hub,” Mr. Mills said.
GLOBAL UPDATE
EUROPEAN UNION
UNEXPECTED IMPACTS
Shale gas could make a big difference for France (shale opponents) and no real difference for the UK (shale supporters).
BY S O N J A VA N R E N S S E N I N B R U S S E LS
IT MAY COME as a surprise to
– is that the economic prospects for shale gas are intimately bound up with those for conventional gas. The vision of Polish self-sufficiency and French import dependence down by over 40 percent is part of a high gas demand scenario. In a low demand scenario, the impact of shale gas becomes “negligible” as conventional supplies from Norway and Russia take over.
many, but the European country most insistent in its opposition to shale gas, is one of two that could benefit most from it. France, along with the more accepting Poland, could massively reduce their import dependency through shale gas development, calculate researchers from the Energy Research Centre (ECN) in the Netherlands. In contrast, shale gas is unlikely to be a game-changer in Germany or the UK. The latter has recently trumpeted the new era in the search of unconventionals by tabling proposal of tax breaks for operators to get them drilling on a big scale as soon as possible (see page 38).
KANCELARIA PREZYDENTA RP
WHAT IF These are the first results from a “what if ” modeling exercise that attempts to map out the market potential of shale gas, independent of moratoria, public acceptance debates etc. “Policymakers have to know what the economic impact could be,” says Jeroen de Joode, who is leading the work at ECN. That said, a 2012 report for the French government that urged Paris to lift moratorium on fracking and pointed to shale gas as a strong remedy to address France’s current economic woes, have gone largely unnoticed by the government. Because it’s a model, there are assumptions and one of the other most interesting findings – if less unexpected
REDUCE DEPENDENCY In either case, the EU as a whole remains largely import dependent, even if this import dependency is reduced. This fits with the overall conclusion of the European Commission’s own security of supply report on shale gas published last September. The ECN’s study estimates that some 200 billion cubic meters of gas from shales per year will hit the market in 2050, over half of that from
Poland and France, followed by Norway. The cost is assumed to be €0.070.12 per cubic meter, about 3-4 times higher than conventional production. These are “optimistic but not unrealistic” assumptions, claims ECN. Shale gas would also have the biggest impact in countries that are not currently gas producers. In the high demand scenario moreover, French shale gas would be partly exported to Italy, Belgium and the Netherlands, while Polish shale gas would replace Russian imports in its neighbours. A big consequence of this is very different infrastructure investment requirements, as Algerian and LNG imports, and East-West and Southeast-Centre transit routes become less important. But beware again the importance of demand: in a low demand scenario shale gas is predominantly consumed within national borders. France and Poland could massively reduce their import dependency through shale gas, while the resource is unlikely to be a game-changer in Germany or the UK.
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AUSTRALIA
CHEVRON ENJOYS AUSSIE BEACH TIME Chevron has made its first shale gas investment in Australia, buying into one of Australia’s most developed shale assets in the central Cooper basin. BY ANDREW HOBBS* IN PERTH
lion to acquire an initial 18 percent working interest in Authority to Prospect 855 (ATP 855) in the state of Queensland and a 30 percent interest in the Permian section of Petroleum Exploration Licence 218 (PEL 218) in the state of South Australia, while also agreeing to a $95 million carry over that block.
flow testing the first well in ATP 855. The blocks are also located close to the Moomba central processing plant, allowing gas generated from the project to be sent through existing pipelines to Sydney or the South Australian capital of Adelaide. Beach holds a 20.2 percent stake in the plant which is operated by Austra-
Chevron is not the only major foreign company to make a play for Australian shale assets, with ConocoPhillips and Mitsubishi both farming-in to shale gas explorers in 2012
The US company may double its stake in the adjacent blocks, which cover a combined 327,000 hectares, and may pay up to $349 million for the stakes. Both blocks are operated by Australian independent Beach Energy, which has previously drilled one horizontal and five vertical wells in PEL 218, and is currently 104 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
BEACH ENERGY
CHEVRON WILL SPEND $95 mil-
lian company Santos, which is coowner, through South Australian Cooper Basin Joint Venture, as well as operator of Australia’s first commercially viable shale well, Moomba 191, which started production in 2012. The well was flowing at at about 2.4 million cubic feet per day in December
2012, according to Santos, its operator. Beach managing director Reg Nelson estimated the two blocks had a reserve of between 300 trillion and 600 trillion cubic feet of gas, while the Moomba processing plant had to this stage produced 6 TCF over its 43 year lifespan to date. The plant has historically taken conventional gas, and recently coal seam gas. “We have always realised that commercialisation is going to require significant capital, and welcome additional technical expertise, and most importantly the ability to procure equipment worldwide at short notice,” he said following the announcement. “Having a big brother with that capability is very important, and of course our strategy is to continue to participate in the ultimate commercialisation and development, but derisk it through transactions of this nature,” Mr. Nelson said. Chevron Australia managing director Roy Krzywosinski said the deal gave Chevron the chance to explore a new prospective basin. “The Cooper basin is an established petroleum producing basin and provides the opportunity to leverage our expertise in tight gas,” he said. Chevron is not the only major foreign company to make a play for Australian shale assets, with ConocoPhillips and Mitsubishi both farming-in to shale gas explorers in 2012. But those projects are in the Canning basin, onshore in north-west Western Australia - located far from both processing facilities and domestic markets. Chevron has not indicated whether it would seek to market gas from the project domestically or to international markets, although domestic gas supplies in Eastern Australia are low. “We just see these emerging opportunities in Australia both domestically and to supplement LNG export in the midst of coal seam gas,” Mr Nelson said. “Clearly if we are successful and open up the possibility of a huge resource there are numerous options, but first we have got a lot of work to do to get there,” he said. *Andrew Hobbs is a journalist with Oil and Gas Australia.
GLOBAL UPDATE
CHINA
THE SICHUAN CHALLENGE Companies that won shale gas exploration rights pledged USD 2 billion to develop shale plays in the Sichuan region whose difficult conditions are likely to spur further innovation in the industry. BY KEITH LUKE
OVER USD 2 BILLION in three
years. This is the amount of investment pledged by the sixteen firms that were successful in China’s second round of auctions for shale gas exploration rights. All told, 57 firms are now in possession of the rights to explore 26 concessions put up for tender by the Ministry of Land Resources (MLR). As estimated by China, 25.08 trillion cubic meters is trapped in what looks to be some of the most difficult geology for drilling. The difficulties could be overridden, however, by an insatiable and growing energy appetite that could inspire incentives to innovate.
China’s vertically integrated political and economic system is being brought to bear on getting E&P for shale gas up and running as soon as possible. China’s vertically integrated political and economic system is being brought to bear on getting E&P for shale gas up and running as soon as possible. A quick
turnaround will be necessary if China is to meet the government’s goal of 6.5 billion cubic meters a year by 2015. Optimism is a good thing but there are real challenges to be overcome. China’s Sichuan province is estimated to hold a large portion of China’s shale gas. Unlike the flat terrain found in America, it’s a rugged mountainous area with challenging geology that will increase the difficulty of drilling economically viable wells. According to a MLR official, the ministry will closely follow the activities of the firms and will “punish firms that fail to carry out work as promised.”
ARGENTINA
YPF AND DOW TO LEAD SHALE GAS PROJECT IN VACA MUERTA The international uproar about the renationalization of YPF has done little harm to company’s plans: YPF has now signed Dow to work on Argentina’s first shale gas project. BY JUDE WEBBER IN BUENOS AIRES
Within a few months of the first anniversary of its return to state hands, YPF is confident that it will have a pilot shale gas project up and running in the vast Vaca Muerta formation. While the most advanced of a slew of preliminary deals it has signed in the past year is actually for a shale oil pilot, YPF’s planned partner in that venture, the US oil major Chevron, is facing an asset freeze stemming from an environmental ruling in Ecuador that is casting doubt on its ability to forge ahead on Argentine shale. There are no such concerns for the deal with the Argentine unit of Dow, which was only signed in March but which YPF
insiders already see as the most advanced after the Chevron talks. And it’s a deal which chimes handily with Argentina’s most pressing energy need: gas. YPF insiders say the deal is a no brainer for Dow: the company needs gas for its operations and it has to reinvest its profits in Argentina as currency restrictions make it hard to for companies to repatriate earnings. It is also interested in growing in upstream activity, according to a source close to the deal. Under the preliminary deal, YPF, whose return to state hands was rubber-stamped by Congress in May 2012, said it would cede to Dow half its El Orejano block in the western province
of Neuquén, where most of Vaca Muerta lies. Dow’s financial commitment was not spelled out. That deal is expected to be the first step in YPF’s planned shale gas pilot project. But the company is painfully aware that its efforts alone will not turn around the country’s expensive dependence on foreign imports. Analysts expect Argentina to have to spend up to $15 billion on liquefied natural gas shipments this year. Other players, like Americas Petrogas in JV with ExxonMobil, are also stepping up their plans, encouraged by Argentina’s near doubling last year of the wellhead price for natural gas.
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BRAZIL
ANOTHER STEP FORWARD Brazil is following up on last year’s statements of intent to prospect for shale gas by scheduling the first auction of shale gas exploration blocks for October. BY JUDE WEBBER IN BUENOS AIRES
BRAZIL IS MOVING AHEAD with
its shale gas plans, announcing that the first auction to award shale exploration areas will happen on October 30 and 31. The blocks up for grabs include those in three exploration basins – Parnaíba, São Francisco and Paraná – where the indications of shale gas are very strong, sector specialists say. The tender’s other targets are the Parecis, Recôncavo, Acre basins. They’re spread throughout the country, mainly in the west, east and southeast states of the world’s fifth largest country. If successful, shale gas could significantly boost the country’s proven gas reserves. Brazil’s maximum shale gas
reserves could be some 500 trillion cubic feet (14 trillion cubic meters) – nearly double the proven reserves to date, Magda Chambriard, head of the Oil, Gas and Biofuels Agency (ANP), said. Local companies including Petra, HRT, Orteng and Cemig, as well as Petrobras, the national oil company,
“We are going to have an exciting 2013,” Magda Chambriard, head of Brazil’s Oil, Gas and Biofuels Agency
have already expressed interest in shale gas exploration. “We are going to have an exciting 2013,” Ms. Chambriard said earlier this year, referring to the fact that three energy sector tenders are slated for 2013, though only one is for shale gas. Shale gas could help Brazil meet demand that is outstripping the supply of hydroelectric dams, which supply nearly three-quarters of Brazil’s power. It was not immediately clear whether foreign companies would also be bidding in the tender, though experts have said that environmental and legal concerns are still a brake on a massive shale revolution in Brazil, as has been seen in the United States.
HUNGARY
HUNGRY FOR GAS Friendly royalty regime, positive government and developed infrastructure - Hungary has what it takes to roll out a shale gas industry once acreage is proved. BY KEITH LUKE
THE PANNONIAN BASIN that
spans Romania, Hungary and Bulgaria contains an estimated 538 billion cubic meters of unconventional gas. Hungary, along with Romania (see page 100), is at the forefront of an exploration process that could lead to tapping into the basin’s assets. Primary areas of exploration by Hungary’s national oil and gas company MOL and TXM/Falcon centers around the Makó Trough and Békés Basin in southeastern Hungary. These plays are mostly recognized as containing tight gas but nonetheless some attempts to 106 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
find shale gas have taken place too. The area keeps growing in activity as Ascent Resources, Delquadra, and Aspect/HHE have joined the exploration market in Hungary. The pro-unconventionals discourse coming from the government implies that we won’t be seeing a ban in Hungary any time soon, as seen in neighboring Czech Republic and Bulgaria. A rather positive royalty regime that falls around 12 per cent for unconventionals shows encouraging policy by the government in order to stimulate exploratory drilling programs.
About 70 per cent of Hungary’s gas consumption is covered by imports, mostly from Russia. However, the Russian supplies went through a series of disruptions caused by disputes between Ukraine and Russia over transit fees. Recognizing the potential instability of the Russia-dependent supply structure, Hungary could benefit from unconventional gas as part of a more diversified energy mix. The country also has a serious advantage over many of its CEE neighbors, which is a well developed pipeline system that would easily bring production volumes to market.
GLOBAL UPDATE
SPAIN
TRYING TO BREAK OUT Spain could be one of the richest shale gas countries outside of North America. But a locally imposed ban on fracking has made the road toward production very bumpy.
Will the Spanish Prime Minister try to override local opposition to fracking in Cantabria?
BY KEITH LUKE
from the Cantabrian Basin in northern Spain by the Spanish Council of Mining Engineers suggests that as much as 1.4 trillion cubic meters of shale gas reserves might be held by some of the thickest - but also deepest - shales in the world. These numbers are still unproven, and any early excitement is tempered with the memory of the drastic reduction of Poland’s early estimates. With this in mind, exploration permits have been granted nonetheless to a number of companies, including Shesa, Oil & Gas Skills, Trofagas, and BNK. Also R2 Energy, Hidrocarburos de Euskadi, Heyco Energy Group and San Leon Energy are looking to explore Spain’s unconventional hydrocarbons assets. Their plans may never pan out, however. The northern region of Cantabria recently voted to ban hydraulic fracking. Cantabria holds the largest portion of Spain’s estimated reserves and if the ban stands, the exclusion of this area will effectively halt any plans for largescale exploration. The ban can still be challenged nationally. The ruling Partido Popular, led by Mariano Rajoy has repeatedly supported unconventionals and fracking.
PPCYL - PARTIDO POPULAR DE CASTILLA Y LEÓN
GEOLOGICAL DATA produced
The ruling Partido Popular, led by Mariano Rajoy has repeatedly supported unconventionals and fracking.
With shale gas, the Spanish government could attempt to alleviate some of the country’s energy issues, such as reliance on imports to meet as much as 76 percent of energy demand and a stubbornly unyielding so called tariff deficit in the power sector, in spite of policy changes and spending cuts. The deficit - USD 38 billion at the moment - is an effect of keeping the high cost of renewables from affecting end user prices. This cost compounds an already difficult economic situation in Spain. Unconventionals could help if the government can manage to jump start the drilling.
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108 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
WHOâ&#x20AC;&#x2122;S WHO
SHALE GAS
investment
GUIDE
OPERATORS l l l l l l l l l l l l l
3Legs Resources BNK Petroleum CalEnergy Chevron CNOOC ConocoPhillips Cuadrilla Resources Dart Energy DPV Service Eni ExxonMobil Hutton Energy LNG Energy
p.110 p.110 p.111 p.111 p.112 p.112 p.113 p.113 p.114 p.114 p.115 p.115 p.116
l l l l l l l l l l l l l
LOTOS Mac Oil Marathon Oil Mitsui PKN Orlen Petrolinvest PGNiG RAG San Leon Energy Sorgenia Stena Total Wisent Oil & Gas
p.116 p.117 p.117 p.118 p.118 p.119 p.119 p.120 p.120 p.121 p.121 p.122 p.122
The Whoâ&#x20AC;&#x2122;s Who section is dedicated to unconventional resource exploration companies and their unconventional concessions exclusively. According to Polish law only one entity may be a concession holder. This is why especially in cases of JVs, dedicated holding companies are formed. We list companies as having stake in those dedicated holding companies rather than concessions themselves. Holding companies in Poland are typically limited liability companies (sp. z o.o.)
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CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Kamlesh Parmar CEO
Lane Energy Exploration Lane Resources Poland
Kamlesh Parmar Clive Needham Paul Quirk
ul. Chmielna 13A 00-021 Warsaw (+48) 22 505 91 77 www.3legsresources.com
CONCESSIONS HELD Name Acreage Wells (km2)
S TA K E I N Concession Interest Concession Name (%) Holder
Cedry Wielkie Stegna Godkowo Glinica-Psary Bytom-Gliwice
904
-
Damnica Lębork Karwia
1,038
-
584
-
809
1
625
-
30
ConocoPhillips
30
ConocoPhillips
30
ConocoPhillips
CONCESSION AREA RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Kraków
Katowice Zone of interest Concession area
Rzeszów
SLOVAKIA
COMMENT: “The 2013 exploration and appraisal programme agreed with ConocoPhillips and now under way, [includes] a programme of testing of the Strzeszewo LE-1 vertical well, plus the drilling and testing of a further two or more vertical wells on the Group’s western Baltic Basin concessions.” - 2012 Corporate Annual Report
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Troy Wagner General Manager
Indiana Investments Saponis Investments
Wolf Regener Martin Robert
ul. Wiktorska 63 02-587 Warsaw (+48) 22 540 17 50 www.bnkpetroleum.com
CONCESSIONS HELD Name Starogard Słupsk Sławno Darłowo Bytów Trzebielino
Acreage (km2)
Wells
878
1
919
1
1,154
1
1,152
-
1,169
1
1,167
1
CONCESSION AREA
“BNK is very excited by its drilling results to date and looks forward to accelerating its investments in Poland” Troy T. Wagner General Manager
RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Katowice Zone of interest Concession area
Kraków
Rzeszów
SLOVAKIA
COMMENT: “BNK is awaiting the environmental impact assessment and concession modification to drill a horizontal lateral out of their Gapowo well on the Bytów concession.” - April 2013 Corporate Overview
110 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
HOLDING COMPANIES
BOARD MEMBERS
Peter Youngs Managing Director
CalEnergy Resources Poland
Peter Youngs Michael Sparks Robert Youngs Thomas Fielden
Al. Wilanowska 206 /19 02-765 Warsaw (+48) 22 853 01 76 www.calenergy.com S TA K E I N Concession Interest Concession Name (%) Holder Gaz Północ
49%
Lotos
“I am very pleased to have completed this transaction and looked forward to working closely with LOTOS to develop the full potential of the assets” Peter Youngs Managing Director
WHO’S WHO
CONTACT INFO
CONCESSION AREA Zone of interest Concession area
RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Kraków
Katowice
Rzeszów
COMMENT: Despite having farmed in to a concession in the shale gas potential zone, CalEnergy representatives informed the Shale Gas Investment Guide of not being interested in exploring for unconventional resources. - Cleantech Poland
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
John Claussen Country Manager
Chevron Polska Energy Resources
David Jones Marian Sewerski John Claussen George Psefteas Derek Magness
Aleja Wyścigowa 6 02-681 Warsaw (+48) 22 460 10 00 www.chevron.com
CONCESSION AREA
CONCESSIONS HELD Name Acreage Wells (km2) Zwierzyniec Kraśnik Frampol Grabowiec
824
1
1,194
-
1,178
1
1,195
1
RUSSIA
Gdańsk
“Continued exploration drilling is planned for 2013” Supplement to the Annual Report
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Katowice Zone of interest Concession area
Kraków
Rzeszów
SLOVAKIA
COMMENT: “The drilling of the first well in the Grabowiec concession was completed in March 2012, followed by a diagnostic
fracture integrity test conducted in December 2012. As of early 2013, the results of the well are under evaluation. A first well was also drilled in the Frampol concession during 2012. Drilling of a well in the Zwierzyniec concession commenced in December 2012.” - Supplement to the 2012 Annual Report
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CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Jarosław Raczyński General Manager
Nexen Petroleum Poland
Lewis Harvey Karen Burgess Andrew Quarles Van Ufford Jari Niemi
ul. Wiejska 17/5 00-480 Warsaw (+1) 403 470 9184 www.nexeninc.com
S TA K E I N Concession Interest Concession Name (%) Holder Kwidzyń Brodnica Orzechów Płońsk S Rypin Lidzbark Ciechanów Sokołów Pod. Siedlce
40
Marathon
40
Marathon
40
Marathon
40
Marathon
40
Marathon
40
Marathon
40
Marathon
40
Marathon
40
Marathon
“The Company is delighted to acquire a leading international platform through the acquisition of Nexen” Wang Yilin, Chairman of CNOOC Limited
CONCESSION AREA RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Lublin
Wrocław
CZECH REPUBLIC
Kraków
Katowice Zone of interest Concession area
Rzeszów
SLOVAKIA
COMMENT: “We strongly believe that this acquisition is a good strategic fit for us and will create long-term value for our shareholders.”- Wang Yilin, Chairman of CNOOC Limited
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Laurie St Aubin Country Manager
ConocoPhillips E&P Poland ConocoPhillips Poland BV Lane Energy Poland
Laurie St Aubin Ad Van Der Zanden Lawrence Archibald
Rondo ONZ 1 00-124 Warsaw (+48) 22 209 04 00 www.conocophillips.com
CONCESSIONS HELD Name Damnica Lębork Karwia
Acreage (km2)
Wells
784
1
1,062
3
209
-
“We are hopeful that this will turn into an attractive unconventional development opportunity” Matt Fox, EVP, Exploration and Production
CONCESSION AREA RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Katowice Zone of interest Concession area
Kraków
Rzeszów
SLOVAKIA
COMMENT:“We are focused now on this Baltic region. We’ve drilled there several wells already. We think that this play really
could work. We’ve got one horizontal drilling, we’re learning things about how to optimize the completion, we’ve got more drilling planned in 2013 to test how this shale thickens as we move to the north.” - Matt Fox, EVP, Exploration and Production
112 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
HOLDING COMPANIES
BOARD MEMBERS
Marek Madeja Country Manager
Cuadrilla Poland
Francis Egan Marek Madeja
ul. Syrokomli 5C 03-335, Warsaw (+48) 22 818 97 95 www.cuadrillaresources.com
CONCESSION AREA
CONCESSIONS HELD Name Międzyrzec P. Łuków Pionki
Acreage (km2)
Wells
1,174
-
628
-
827
-
WHO’S WHO
CONTACT INFO
“The Pionki licence in Poland will complement our ongoing exploration activities in the UK, Holland, and Hungary”
RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Lublin
Wrocław
CZECH REPUBLIC
Kraków
Katowice
Francis Egan, CEO
Zone of interest Concession area
Rzeszów
SLOVAKIA
COMMENT:“Cuadrilla will, in the first instance, be undertaking a 150 km 2D seismic program which is expected to be completed in the first quarter of 2013 [on the Pionki concession].”- Corporate Website
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Zbigniew Żuk Country Manager
Milejów LLP
Eytan Uliel Douglas Bain
Aleje Jerozolimskie 56C 00-803 Warsaw (+48) 22 630 22 90 www.dartenergy.com.au
CONCESSIONS HELD Name Acreage Wells (km2) Milejów
372
-
“... with the 2013 planned work programme now focusing primarily on the UK, existing funds will meet the company’s needs for the next 12 months” Nick Davies, Chairman
CONCESSION AREA RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Katowice Zone of interest Concession area
Kraków
Rzeszów
SLOVAKIA
COMMENT: “Other operations (India, continental Europe, certain assets in Indonesia and China) are considered non-core, and will be scaled back substantially, with a view to partnering, farming-out, selling, or exiting, in a manner that best maximises the return to the Company. Additional capital will not be deployed to these non-core operations.”- Press Release, April 2, 2013
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CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Dmitry Kuznetsov President
DPV Service
Dmitry Kuznetsov
Nowogrodzka 50 lok. 515 00-540 Warsaw (+48) 511 490 073 www.dpvservice.pl
CONCESSIONS HELD Name Acreage Wells (km2) Białobrzegi-R. Korczmin Lipsko Radom Opole Lub.
774
-
629
-
1,192
-
895
-
388
-
“We are currently realizing concession obligations - gathering 2D seismic data with the help of Geofizyka Torun and Acoustic Geofizika“ Company Website
CONCESSION AREA RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Kraków
Katowice Zone of interest Concession area
Rzeszów
SLOVAKIA
COMMENT: “Based on information provided in their concessions, DPV should have had two wells completed by Q1 2013, one on Białobrzegi-Rusinów and one on Opole Lubelskie concessions.” - Cleantech Poland
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Sergio Laura Senior VP, Managing Director eni Polska
Eni Polska
Giuseppe Tannoia Roberto Castriota Sergio Laura
Al. Armii Ludowej 26 00-609 Warsaw (+48) 22 35 17 200 www.eni.com
CONCESSIONS HELD Name Malbork Elbląg Młynary
Acreage (km2)
Wells
999
1
574
2
395
-
“We have drilled and extensively cored three wells, one of those has been fracked having gas at surface” Marino Astorri Regional Liaison Manager Polonia
CONCESSION AREA RUSSIA
Gdańsk
Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Katowice
Kraków
Zone of interest Concession area
COMMENT: “Cores and test results are currently extensively analyzed in our lab by our dedicated team to draw a comprehensive picture of the results gathered so far.” - Marino Astorri, Regional Liaison Manager Polonia
114 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
LITHUANIA
Olsztyn
SLOVAKIA
Rzeszów
1,162
BOARD MEMBERS
Adam Kopyść Public & Govt Affairs Advisor
ExxonMobil Exploration and Production Poland Energia Chełm
James Johnston Erik Oswald Ville Ylosjoki
Ul. Chmielna 85/87 00-805 Warsaw (+48) 22 586 18 00 www.exxonmobil.com
CONCESSIONS HELD Name Acreage Wells (km2) Chełm
HOLDING COMPANIES
1
WHO’S WHO
EXXONMOBIL
CONTACT INFO
CONCESSION AREA
“It is too early to comment on the future of the Chełm concession in the Lublin Basin” Adam Kopysc
RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Kraków
Katowice Zone of interest Concession area
Rzeszów
SLOVAKIA
COMMENT: “ExxonMobil confirms that the Ministry of Environment has approved ExxonMobil’s relinquishment applications
regarding two exploration concessions in the Podlasie Basin (Legionowo and Mińsk Mazowiecki) and one, together with its partner (Total E&P Poland), in the Lublin Basin (Werbkowice).” - Adam Kopyść
CONTACT INFO
HOLDING COMPANIES
Pawel Żuk Country Manager
Strzelecki Energia David Messina Strzelecki Energia Warszawa Charles Morgan Strzelecki Energia Mazowiecka Strzelecki Energia Łukowska Strzelecki Energia Wołomin Strzelecki Prabuty Południowe
Aleje Jerozolimskie 81 02-001 Warsaw (+48) 22 695 02 70 www.huttonenergy.com
CONCESSIONS HELD Name Acreage Wells (km2) Prabuty Poł. Koło Poddębice Łódź Zachód Oleśnica Wieluń
481
-
1,172
-
645
-
809
-
1,161
-
888
-
“We are very excited about our Jurassic prospects and awaiting approvals on the three EIAs that we have lodged with the regional environmental offices” Anna Maio
BOARD MEMBERS
CONCESSION AREA RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Katowice Zone of interest Concession area
Kraków
Rzeszów
SLOVAKIA
COMMENT: “We are currently waiting on license modification approval from the MoE, which will enable us to continue our work programme with San Leon on the South Prabuty license in the Baltic, Wieluń and Oleśnica licenses in the Carboniferous.” - Anna Maio, Corporate Communications Manager
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CONTACT INFO David Nelson CEO
HOLDING COMPANIES
BOARD MEMBERS
LNG Energy Limited
Dave Afseth Robert Gayton Paul Larkin Richard Green David Cohen
ul. Bagno 2/225 00-112 Warsaw (+1) 778 373 0103 www.lngenergyltd.com
S TA K E I N Concession Interest Concession Name (%) Holder Starogard
20
BNK
Słupsk
20
BNK
Sławno
20
BNK
Węgrów
50
San Leon
Iława
50
San Leon
CONCESSION AREA
“The Company is considering various alternatives to remedy its existing liquidity shortfall ...” Consolidated Financial Statement
RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Kraków
Katowice Zone of interest Concession area
Rzeszów
SLOVAKIA
COMMENT:” The Węgrów concession terms also include the requirement to drill a well to a depth of 2,750 m by December 2013. In June 2012, the Company filed and received a renewal for the Iława concession extending the term to maximum of 5 years. This extension carries a commitment to commence drilling a well in Iława before June 2014.” - 2012 Consolidated Financial Statement
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Piotr Dąbek Strategy and Development Director
LOTOS Petrobaltic Baltic Gas
Zbigniew Paszkowicz Dariusz Wojdyński Krzysztof Sułecki
Stary Dwór 9 80-958 Gdańsk (+48) 58 301 30 61 www.lotos.pl
CONCESSIONS HELD Name Gotlandia Gaz Północ Różewie Łeba Gaz Południe Sambia W Sambia E
Acreage (km2)
Wells
881
-
1,075
-
1,172
-
1,154
-
887
-
888
-
1,092
-
CONCESSION AREA
In reference to the PGNiG deal: “... we don’t know yet how big Lotos’ stake will be in specific concessions” LOTOS Board
(Parkiet , 2012-10-18)
Zone of interest Concession area
RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Katowice
Kraków
Rzeszów
COMMENT: “With these types of projects [partnership with PGNiG], the investment cycle is counted in years rather than months. [2013] will be just the preparatory phase which will include additional seismic research and analysis. These costs will be in the area of tens of millions of zlotys; they won’t have a significant impact on our budget.” - LOTOS Board (Parkiet, October 18, 2012)
116 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
253
BOARD MEMBERS
Mac Oil (Poland)
James Fitzsimmons Christian Ceppi
ul. Domaniewska 35A / 40 02-672 Warsaw
CONCESSIONS HELD Name Acreage Wells (km2) Gdynia
HOLDING COMPANIES
James Fitzsimmons CEO
-
WHO’S WHO
MAC OIL
CONTACT INFO
CONCESSION AREA
Mac Oil has one shale gas concession in Poland, covering one of the country’s Bydgoszcz most important agglomerations: Poznań the Tri-city
RUSSIA
Gdańsk
RUSSIA
Gdańsk
Olsztyn
LITHUANIA
LITHUANIA
Szczecin Bydgoszcz
Olsztyn
Poznań
BELARUS
WARSZAWA Łódź
GERMANY
BELARUS
CZECH REPUBLIC
Cleantech Poland
Lublin
Wrocław
WARSZAWA Katowice
Łódź Zone of interest Concession area
Kraków
Rzeszów
LublinSLOVAKIA
COMMENT: According to concession documentation, Mac Oil by now should have completed reprocessing of available
geological data. By November 2014 100 km of 2D seismic should be shot and analyzed. This is almost half the size of the concession - Cleantech Poland
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
John Porretto External Communications
Marathon Oil (Area A - J)
Carl R. Hubacher Jr.
ul. Złota 59 00-120 Warsaw (+48) 22 379 94 40 www.marathonoil.com
CONCESSIONS HELD Name Acreage Wells (km2) Kwidzyń Brodnica Orzechów Płońsk S Płońsk SE Rypin Lidzbark Ciechanów Sokołów Pod.
1,197
1
1,088
1
1,008
1
360
-
245
-
670
1
1,046
-
1,186
-
834
1
CONCESSION AREA Name Siedlce Parczew
Acreage (km2)
Wells
740
1
1,003
-
RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Wrocław
Lublin
CZECH REPUBLIC
Katowice Zone of interest Concession area
Kraków
Rzeszów
SLOVAKIA
COMMENT: “After an extensive evaluation of the Company’s exploration activities in Poland and unsuccessful attempts to find commercial levels of hydrocarbons, Marathon Oil has elected to conclude operations in the country. The Company is evaluating disposition options for its concessions, which had a net book value at March 31, 2013, of $12 million.” - Press Release, April 2013
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CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Oishi Yasuhiro General Manager
Mitsui & Co. Deutschland GMBH
Katsuya Okano
Aleje Jerozolimskie 65/79 00-697 Warsaw (+48) 22 630 60 19 www.mitsui.com
S TA K E I N Concession Interest Concession Name (%) Holder Kwidzyń Brodnica Orzechów Płońsk S Rypin Lidzbark Ciechanów Sokołów Pod. Siedlce
9
Marathon
9
Marathon
9
Marathon
9
Marathon
9
Marathon
9
Marathon
9
Marathon
9
Marathon
9
Marathon
“Exploration activities are progressing according to plan, wells are being drilled one after the other”
CONCESSION AREA RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Lublin
Wrocław
CZECH REPUBLIC
Rzeszów
Kraków
Katowice
Anna SoszynskaKalisiewicz, Mitsui
Zone of interest Concession area
SLOVAKIA
COMMENT: Mitsui is the first and only Japanese investor in Polish shale exploration activities. They have a track record from participation in the Marcellus play in Pennsylvania. - Cleantech Poland
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Dominika Mackiewicz Senior PR Coordinator
ORLEN Upstream
Wiesław Prugar Paweł Martynek
ul. Przyokopowa 31 01-208 Warsaw (+48) 22 778 02 00 www.orlenupstream.pl
CONCESSIONS HELD Name Acreage Wells (km2) Garwolin Lubartów Bełżyce Lublin Wierzbica Hrubieszów Sieradz Wołomin Wodynie-Łuk. Łódź
884
1
1,147
2
1,019
-
967
-
652
3
415
-
917
-
1,181
-
1,191
-
CONCESSION AREA
“The results of our preliminary geological surveys proved very promising, and so we decided to start a new exploratory well [on the Wierzbica license]” Wiesław Prugar, CEO
RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Lublin
Wrocław
CZECH REPUBLIC
Katowice Zone of interest Concession area
Kraków
Rzeszów
SLOVAKIA
691 -
COMMENT: ” This year, PKN ORLEN is planning to drill a number of exploratory wells, and two new locations for vertical drilling are being prepared. Further, in the first half of 2013 the Company intends to perform two hydraulic fracturing treatments in the Wierzbica and Lubartów licence areas.” - Company Website, February 22, 2013
118 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
HOLDING COMPANIES
Tomasz Tarnowski Communications
Silurian ECO Energy 2010
BOARD MEMBERS Bertrand Le Guern Franciszek Krok Roman Niewiadomski Maciej Wantke Marek Pietruszewski
Aleje Jerozolimskie 65/79 00-697 Warsaw (+48) 22 553 85 14 www.petrolinvest.pl
CONCESSIONS HELD Name Acreage Wells (km2) Częstochowa Repki Siemiatycze Grudziądz Maków Maz. Chodel Opole Głubczyce Kędzierzyn K.
750
-
882
-
892
-
699
-
699
-
189
-
1,044
-
1,156
-
994
-
S TA K E I N Concession Interest Concession Name (%) Holder Lidzbark War. Węgorzewo Gołdap Kętrzyn
31.67
Wisent
31.67
Wisent
31.67
Wisent
31.67
Wisent
WHO’S WHO
CONTACT INFO
CONCESSION AREA RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Lublin
Wrocław
CZECH REPUBLIC
Rzeszów
Kraków
Katowice Zone of interest Concession area
SLOVAKIA
COMMENT: “Wisent Oil and Gas, in which Petrolinvest SA has a 31,67% stake, informed the Company of the commencement of
the drilling program including two wells on the two Baltic basin concessions in north-eastern Poland. All other exploration activities where Petrolinvest has interest are progressing in accordance with concession obligations.” - Tomasz Tarnowski
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Piotr Gliniak Head of Exploration
Polskie Górnictwo Naftowe i Gazownictwo
Mirosław Szkałuba Jacek Murawski
ul. Kasprzaka 25 01-224 Warsaw (+48) 22 691 79 67 www.pgnig.pl
CONCESSIONS HELD Name Acreage Wells (km2)
CONCESSIONS HELD Name Acreage Wells (km2)
Wejherowo Kartuzy-Sz. Stara Kiszewa “172” “173” “192” “193” Warka-Urs. Ryki-Żyrzyn
Kock-Tarkawica Pionki-Kaz. Wiszniów-Tar. Tomaszów L. Bartoszyce Górowo Ił.
731
4
783
-
1,178
1
937
-
937
-
922
-
942
-
734
-
426
-
1,028
-
530
1
1,106
-
741
1
670
-
1,094
-
CONCESSION AREA RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Lublin
Wrocław
CZECH REPUBLIC
Katowice Zone of interest Concession area
Kraków
Rzeszów
SLOVAKIA
COMMENT: “ In terms of unconventional deposit exploration (shale gas) 13 wells are planned to be drilled (with an investment
cost of about 500 mln PLN).” - PGNiG Press Office “The Company is proceeding towards the next step of the program: stimulating and flow testing the [Lubocino-2H] well.” - Joanna Zakrzewska, Press Officer
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CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS Markus Mitteregger Kurt Sonnleitner Michael Längle
Elisabeth Kolm Communications Schwarzenbergplatz 16 A 1015 Vienna (+43) 50724 5448 www.rag-austria.at
S TA K E I N Concession Interest Concession Name (%) Holder Starogard Słupsk Sławno
26.3
BNK
26.3
BNK
26.3
BNK
CONCESSION AREA
“Producing and using European mineral resources will reduce import dependence and generate economic growth in the EU”
RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Lublin
Wrocław
CZECH REPUBLIC
Kurt Sonnleitner, CTO
Rzeszów
Kraków
Katowice Zone of interest Concession area
SLOVAKIA
COMMENT: “A secure supply of affordable, environmentally friendly energy is crucial to maintaining industrial employment. Without secure energy supplies domestic industry has no long-term future.“ - Kurt Sonnleitner, Chief Technical Officer
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
John Buggenhagen Exploration Director
Aurelian Oil and Gas Poland, Gora Energy, Helland Energy, Joyce Investments, Liesa Energy, Maryani Investments, San Leon Rawicz, San Leon Praszka, San Leon Wschowa, San Leon Czersk, Talisman Energy Polska, Oculis Energy, Wieluń LLP, Oleśnica LLP, South Prabuty LLP
Oisin Fanning Paul Sullivan John Buggenhagen Ray King Daniel Martin Jeremy Boak
ul. Mokotowska 1 00-640 Warsaw (+48) 22 378 97 00 www.sanleonenergy.com
CONCESSIONS HELD Name Acreage Wells (km2)
CONCESSIONS HELD Name Acreage Wells (km2)
Gniew Iława Węgrów Nowa Sól Wschowa Rawicz Góra Czersk Praszka
Prusice Kotlarka Gdańska W Braniewo S Szczawno Prabuty Płd. Oleśnica Wieluń
1,191
-
746
-
711
-
1,166
2
1,078
-
742
-
706
1
702
-
1,199
-
758
-
213
-
894
1
1,043
1
603
1
481
-
888 1,161 -
CONCESSION AREA RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Lublin
Wrocław
CZECH REPUBLIC
Katowice Zone of interest Concession area
Kraków
Rzeszów
SLOVAKIA
COMMENT: “We are very excited about our evolving relationship with Halliburton which will help us prove the huge resource
potential of the Carboniferous unconventional gas play across our vast acreage position in the SW Carboniferous Basin in Poland.” - Oisin Fanning, Executive Chairman
120 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
HOLDING COMPANIES
Davide Bergamaschi Investor Relations Director
Sorgenia E&P
BOARD MEMBERS
Via Vincenzo Viviani, 12 Mi 20124 Milan (+39) 026 719 911 www.sorgenia.com
S TA K E I N Concession Interest Concession Name (%) Holder Starogard Słupsk Sławno
27
BNK
27
BNK
27
BNK
WHO’S WHO
CONTACT INFO
CONCESSION AREA
“High technological risk but great potential for the development of new forms of gas sourcing”
RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Lublin
Wrocław
CZECH REPUBLIC
Rzeszów
Kraków
Katowice
Company Profile
Zone of interest Concession area
SLOVAKIA
COMMENT: “Partnerships with BNK, RAG and LNG Energy. This collaboration guarantees specific technological know-how,
operating experience/efficiency in the Shale Gas sector and compliance with the strict European standards in terms of safety and the environment. Encouraging results after the initial exploratory drillings.” - Sorgenia Group Company Profile
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Annika Hult Managing Director
Stena International SARL
Peter Claesson* Annika Hult*
26b, Boulevard Royal LU-2449 Luxembourg (+352) 26 48 67 00 www.stena.com
S TA K E I N Concession Interest Concession Name (%) Holder Lidzbark War. Węgorzewo Gołdap Kętrzyn
29.7
Wisent
29.7
Wisent
29.7
Wisent
29.7
Wisent
* Wisent Oil and Gas board members
“Stena (...) has warrants to subscribe for additional shares which, would increase its shareholding in the Company to 35%” NRS, London Stock Exchange
CONCESSION AREA RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Lublin
Wrocław
CZECH REPUBLIC
Katowice Zone of interest Concession area
Kraków
Rzeszów
SLOVAKIA
COMMENT: “The company is pleased to announce that it closed a further private placement of new equity to Stena Investment and to parties related to directors of the company. Funds raised under the placement total £7.25 million before costs.” - NRS, London Stock Exchange
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CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Krzysztof Klinowski Senior Coordinator Shale Gas
Total E&P Poland
Martine Valeix Marcel Mars Bruno Courme
al. Jana Pawla II 80 00-175 Warsaw (+48) 22 481 94 00 www.total.com
S TA K E I N Concession Interest Concession Name (%) Holder Chełm
49
ExxonMobil
“It’s not with two wells that we will know. That’s the problem with non-conventionals. We find reserves almost well by well”
CONCESSION AREA RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Lublin
Wrocław
CZECH REPUBLIC
Rzeszów
Kraków
Katowice
Christophe de Margerie, CEO
Zone of interest Concession area
SLOVAKIA
COMMENT: “The only activity planned in 2013 on Chełm concession is the P&A of well Krupe -1. The process of ExxonMobil withdrawal from Chełm concession is not effective yet. There is therefore no change in the current partnership.” - Bruno Courme, Public Affairs
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
Wes J. Skrobowski CEO William Marble COO
Wisent Oil & Gas
Wes J. Skrobowski William Marble
ul. Chocimska 14 A 00-791 Warsaw (+48) 22 856 10 00 wisentoilandgas.com
CONCESSIONS HELD Name Acreage Wells (km2) Lidzbark War. Węgorzewo Gołdap Kętrzyn
895
1
134
-
621
-
683
1
CONCESSION AREA
“The results of the Rodele No.1 well and the initial results from Babiak No.1 should be known by the second quarter of 2013” Wes J. Skrobowski, CEO
RUSSIA
Gdańsk
LITHUANIA
Olsztyn Szczecin Bydgoszcz
Poznań
BELARUS
WARSZAWA Łódź GERMANY
Lublin
Wrocław
CZECH REPUBLIC
Katowice Zone of interest Concession area
Kraków
Rzeszów
SLOVAKIA
COMMENT: “The Babiak No.1 well has been designed to be drilled to a TD of 2,400 metres and it is planned that, after logging, the well will be sidetracked with a horizontal section of up to 1,200 metres. A frac of between 6 and 8 stages is then planned, depending on the length of the horizontal section.” - Press Release, February 2013
122 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
WHOâ&#x20AC;&#x2122;S WHO
SHALE GAS
investment
GUIDE
OPERATORS l Cuadrilla Resources
p.124
l Egdon
p.125
l Dart Energy
p.124
l IGas
p.125
In this issue of the Shale Gas Investment Guide, we introduce selected four companies prospecting for shale gas in the United Kingdom. Once again it seems to be up to the independent and small enterprises to prove up the acreage before IOCs show major interest in the play. Hydrocarbon exploration concessions in the UK are known as Petroleum Exploration and Development Licences, (PEDL). Older concession types, EXL and AL, are no longer being issued.
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| 123
CONTACT INFO
HOLDING COMPANIES Cuadrilla Resources Holdings Ltd
Francis Egan CEO Cuadrilla House Stowe Court, Stowe Street Lichfield, Staffordshir WS13 6AQ (+44) 1543 266 444 www.cuadrillaresources.com
CONCESSIONS HELD Name Acreage Wells (km2) PEDL165 EXL 269 PEDL 244 EXL 189 EXL 189 PED L247
118 5 1 15 4 1 3 1 54 -
BOARD MEMBERS Lord Browne Haroun Van Hovell John Lancaster Allan Campbell Tony Kelly Roy Franklin Francis Egan Tony Carruthers Andrew Quarles
CONCESSION AREA
“Cuadrilla are determined to spare no effort in meeting our exploration targets in an environmentally and socially sustainable manner” Francis Egan, CEO
Concession area
COMMENT: “During 2013 and 2014 Cuadrilla proposes to broaden and deepen the scope of both community consultation and environment risk assessment by completing a full Environmental Impact Assessment (EIA) for each exploration well site where we seek planning consent for drilling, hydraulic fracturing and flow testing.”- Francis Egan, CEO
CONTACT INFO
HOLDING COMPANIES
BOARD MEMBERS
John McGoldrick CEO
GP Energy Dart Energy (Europe)
Nicholas Davies John McGoldrick Eytan Uliel Martin Cooper Mark Lappin
Laurel Hill Business Park Polmaise Road, Stirling FK7 9JQ (+44) 333 800 2000 www.dartenergy.com.au
CONCESSIONS HELD Name Acreage Wells (km2)
CONCESSIONS HELD Name Acreage Wells (km2)
PEDL 012 PEDL 133 PEDL 139 PEDL 140 PEDL 200 PEDL 207 PEDL 210 EXL 288
PEDL 147 PEDL 185 PEDL 186 PEDL 187 PEDL 189 PEDL 195 PEDL 196 EXL 198 AL 010
50
-
367
-
100
-
150
-
120
-
30
-
10 10
-
90
-
100
-
100
-
70
-
100
-
100
-
CONCESSION AREA
75 75
-
75 -
Concession area
COMMENT: “There have been recent regulatory developments in the U.K. and New South Wales, Australia which provide the regulatory framework necessary to accelerate work towards tapping unconventional gas resources in the respective countries.” - Nicholas Davies, Chairman
124 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
HOLDING COMPANIES
BOARD MEMBERS
Mark Abbott Managing Directors
EGDON RESOURCES U.K.
Mark Abbott Philip Stephens Jerry Field Walter Roberts Ken Ratcliff Andrew Lodge
The Wheat House 98 High Street, Odiham Hampshire, RG29 1LP (+44) 1256 702292
WHO’S WHO
CONTACT INFO
www.egdon-resources.com
S TA K E I N Concession Interest Concession Name (%) Holder PEDL 139 PEDL 140
10
Dart Energy
10
Dart Energy
CONCESSION AREA
“RPS estimates the mean net Egdon total gas in place (“GIIP”) as 1.76 trillion cubic feet of gas (“tcf”) within the Licences” Company Website Concession area
COMMENT: “Egdon intends to evaluate the potential of the Licences through drilling a deep exploration well, which it is hoped will be undertaken during 2014 subject to obtaining all necessary consents and approvals.” - Company Website
CONTACT INFO Andrew Austin CEO
HOLDING COMPANIES
BOARD MEMBERS
Island Gas
Andrew Austin Stephen Bowler John Blaymires
7 Down Street London, W1J 7AJ (+44) 207 993 9899 www.igasplc.com
CONCESSIONS HELD Name Acreage Wells (km2) PEDL 107 PEDL 116 PEDL 145 PEDL 145 N PEDL 184 PEDL 190 PEDL 193
211
-
102
-
102
-
102
-
386
-
386
-
296
CONCESSION AREA
“IGas plans to drill two wells to explore for shale in the North West before the end of 2013” Georgina Gilbert PR & Communications Concession area
COMMENT: “Whilst we do have planning consent for exploratory drilling at our sites at Irlam and Ellesmere Port, we will
complete our geological assessment before any decision is made as to where the proposed shale wells are to be drilled from.” - Georgina Gilbert, PR & Communications
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FINANCIAL
INSTITUTIONS BACKING POLISH SHALE
Zone of interest
BNK Petroleum DartEnergy 3Legs SanLeon LNG Energy SOURCE: CLEANTECH POLAND RESEARCH
126 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
WHOâ&#x20AC;&#x2122;S WHO
PERCENTAGE OF
SHARES HELD BNK Petroleum The worldâ&#x20AC;&#x2122;s largest asset management company with a total of USD $3.792 trillion across its investment portfolios. BlackRock is US based with 10,100 employees and presence in 30 countries.
9,99 % 0,36 %
DartEnergy
10,45 %
3Legs Resources
13,32 %
San Leon Energy 8,7 %
LNG Energy 0%
5%
10 %
15 %
5%
10 %
15 %
5%
10 %
15 %
10 %
15 %
10 %
15 %
BNK Petroleum DartEnergy A global finance protection (insurance) company with USD $1.449 trillion in asset management. Based in France, with 163 thousand employees and presence in 57 countries.
0,03 %
3Legs Resources
3,04 %
San Leon Energy
0,32 %
LNG Energy 0%
BNK Petroleum DartEnergy An investment firm with USD $369 billion in total assets under management. M&G are UK based with over 365,000 investors in their portfolio and broad European presence.
0,74 %
3Legs Resources
1,95 %
San Leon Energy LNG Energy 0%
7,99 %
BNK Petroleum DartEnergy A global investment group with USD $1.147 trillion in managed assets. The Capital Group is US based and are in the top fifteen global asset management firms.
3Legs Resources 1,75 %
Talisman (now SLE)
3,84 %
LNG Energy 0%
5%
BNK Petroleum A US Bank with 260,000 employees, 50 million customers and 102 wholesale branches worldwide. A top nine global asset management company with USD $1.426 trillion under management.
DartEnergy 3Legs Resources
3,62 %
San Leon Energy LNG Energy 0%
5%
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| 127
Having trouble connecting
at the Wellpad? High speed internet Mobile phone Cable television Network set up
Keith Luke Key Account Manager Shale Gas Solutions (+48) 694 478 075
investment SERVICE SPECIALITY
COUNTRY ACTIVITY
ADDRESS
C O N TA C T
SERVICES
SHALE GAS
CO M PA N Y NAME
GUIDE
SERVICES DIRECTORY water, waste, proppant, sand, pipe, gelling agents, biocides logistics, health, safety, environment, seismic, permitting pressure pumping, casing, cementing, coil tubing, drill bits
WWW.CLEANTECHPOLAND.COM
|
CO M PA N Y NAME
SERVICE SPECIALITY
COUNTRY ACTIVITY
UNCONVENTIONAL
ADDRESS
C O N TA C T
OIL & GAS
Seismic
EUROPE Complex Seismic Services
Geology
Acoustic Geophysicial Services, Geofizyka Kraków, Geofizyka Toruń, GeoDynamics Research, Global Geophysical, ION, PBG Geophysical Exploration, United Oilfield Services, Viking
CGGVERITAS, GEO-data, Geokrak, Geo-Microbial, Kidova, NADRA Group, NuTech Energy Alliance, Pangea
Apex Contracting, AE Com, CDM Smith, IP Group
Permetting
Seismic Services
Apex Contracting, Argo Geological Consultants, dGB Earth Sciences, Geokrak, Geomage, Global Geophysical, Kavo Seismic, Microseismic, NovaSeis, Nutech Energy Alliance, PanTerra, Paradigm, SERAFIM Ltd GeoLog, NuTech Energy Alliance, Paradigm
Subsurface Mapping
Apex Contracting, CDM Smith, IP Group
Drilling
Subsurface Mapping
Complex Drilling Services
Abbot Group, Exalo, KCA Deutag, MI-SWACO, MND Drilling, Schlumberger, Superior Energy Services, United Oilfield Services, Weatherford
Casing & Cementing
Baker Hughes, Halliburton, Schlumberger, Weatherford, UOS
Directional Drilling
Baker Hughes, Drill-tech, Exalo, Halliburton, Meehan Drilling Schlumberger, Weatherford, UOS
Drilling Bits, Fluids
Baker Hughes, Halliburton, MI-SWACO, Pruitt Schlumberger, UOS
Drilling Tools & Services
Baker Hughes, Bentec, Drillmec, Drill-tech, JSH Drilling Tool, National Oilwell Varco, Pruitt, Siemens
Engeineering & Modeling
CCS, Core Laboratories (Saybolt), Geolog, ILF, National Oilwell Varco, Wellynx
Hardbanding
Arnco Technology, Hardbanding Solutions
Mudlogging
Baker Hughes, Geolog, Drill-Lab, Exalo, Halliburton, Schlumberger, Weatherford, UOS, GEO-data, Geokrak
MWD & LWD
Baker Hughes, Halliburton, Schlumberger, Weatherford, UOS
Pipe & Procurement
Alchemia SA group, CB&I, JAH Drilling, National Oilwell Varco, Sumitomo Europe, Tenaris, US Steel, Workstrings
Rig Contracting
Discovery Drilling Equipment, Exalo, KCA Deutag, MND Drilling, National Oilwell Varco, UOS, UPET
Solids Control & Waste Management
Ekotech Energy, MI-SWACO, Questor Technology, WSP
Well Pad Construction
CB&I, CDM Smith, NTS Construction, ProEuro Energy Services, World Acoustic Group
130 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
Completions Services
SERVICE SPECIALITY
COUNTRY ACTIVITY
ADDRESS
C O N TA C T
Complex Completions Services
Archer Well, Baker Hughes, Exalo, Halliburton, Schlumberger, PetroFac, United Oilfield Services (UOS), Weatherford
Casing
Baker Hughes, Exalo, Halliburton, Schlumberger, United Oilfield Services (UOS), Weatherford
Cementing
Baker Hughes, Exalo, Halliburton, Schlumberger, United Oilfield Services (UOS), Weatherford
Chemicals
Best Drilling Chem, Brenntag, Champion Technologies, DOW, Dow Corning, Multi-chem, Nete Jacobs, PerekopBromine, Siemens
Coil Tubing
C.A.T., Sumitomo, NOV, Tenaris, TPS-Technitube Rohrenwerke, US Steel, Vallourec
Equipment Supply
C.A.T., Caterpillar, Baker Hughes, Balance Point Control BV, Exalo, Expro, GE Oil & Gas, Halliburton, ITS, Packers Plus, Siemens, Tech-Pomp, URS, UOS, Weatheford
Pressure Pumping
Baker Hughes, Exalo, Halliburton, National Oilwell Varco, Perforator GmbH, Schlumberger, United Oilfield Services, Weatherford
Proppant
Baltic Ceramics, C.A.T., Dow Corning, Weir Oil & Gas Division
Water
Apex Contracting, Baker Corp, GE Oil & Gas, PPEKO, Veolia Water Systems, WSP
Corporate Services
CEE Consulting Group, Hewitt, IP Group, Navigant, Pace Global Energy Services, PwC, STS Consulting Services, Trinity Corporate Services
Consulting
DBM Services, Efir Energy, ESP, GL Nobel Denton, IHSm PFC Energy, Tebodin, Xodus Group
Construction/Design
Environmenal Consulting
Market Representation
Research
Technology
Logistics
SERVICES
CO M PA N Y NAME
Golder Associates, Petrofac
CDM Smith, GeoData, GSE Environmental, Inwatec, Lemitor, Prochem S.A. Shale Gas Solutions
AE Com, DNV, Fugro, INiG(PGNIG), PGI
DNV, Geotrace, SIMCO International Ltd., Spirit Innovative Technologies
C.H. Robinson, AVISHIP, BDP INTL, Fairstar Heavy Transport, Maxi Cargo
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| 131
CO M PA N Y NAME
SERVICE SPECIALITY
COUNTRY ACTIVITY
SE R V I C E S D I R ECTORY* Abbot Group 133 Acoustic Geophysical (Viking) 133 AECom 133 AlMansoori Hilong Petroleum 133 Apex Contracting 133 Archer Well - Allis Chalmers 133 Argo Geological Consultants 133 Arnco 133 AVISHIP 133 Baker Corp 133 Baker Hughes 133 Balance Point Control BV 133 Baltic Ceramics 133 BDP International 133 Bentec 133 Bireta 133 Brenntag 133 C.A.T. 133 Caterpillar 133 C.H. Robinson 134 CB&I 134 CDM Smith 134 CGGVeritas 134 Champion Technologies 134 Continuous Control Sols (CCS) 134 Core Laboratories 134 dGB Earth Sciences 134 Diament (Exalo) 134 Discovery Drilling Equipment 134 DNV 134 DOW 134 DOW Microbial Control 134 Drill-Lab (PGNiG) 134 Drilltech 134 Duon 134 Efir Energy LTd 134 EkoTech Energy 134 Energy Specialists Plat (ESP) 135 Ensign 135 EurMidstream 135 Exalo Drilling 135 Expro 135 Fairstar Heavy Transport 135 Fugro 135 GE Oil & Gas 135 Geo-Microbial Tech (GMT) 135 GEO-Data 135 GeoDynamics Research 135 Geofizyka Kraków (PGNiG) 135 Geofizyka Torun (PGNiG) 135 Geokrak 135 GeoLog 135 Geomage 135 Geotrace Data Int Services 135 132 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
GL Noble Denton Global Geophysical Golder Associates GSE Environmental Halliburton Hardbanding Solutions IHS ILF Consulting Eng Inter Permit Group INiG (PGNiG) Inwatec ION ITS (Int Tubular Serv) Jasło (Exalo) JSH Drilling, Ltd. KCA DEUTAG Kidova Lemitor Maxi Cargo Meehan Drilling MI-SWACO MND Drilling Multi-chem NADRA Group Nafta Piła (Exalo) National Oilwell Varco Navigant Neste Jacobs NovaSeis (San Leon) NTS Construction NuTech Alliance Pace Global Energy Packers Plus PanTerra Geo Paradigm PerekopBromine Perforator Petrofac PFC Energy Pruitt Pro Euro Services Pruitt Tool & Supply PwC Rodelta Pumps Schlumberger SERAFIM SGS Shale Gas Solutions SIMCO Inter Spirit Technologies Sumitomo Europe Superior Energy Services Tata Steel Group Tebodin
ADDRESS
135 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 136 137 137 137 137 137 137 137 137 137 137 137 137 137 137 137 137 137 137 137 137 138 138 138 138 138 138 138 138 138 138 138 138 138 138
C O N TA C T
A N A LY S T ' S V I E W
KEITH LUKE KEY ACCOUNT MANAGER OIL & GAS
How are the service markets? Margins
are squeezed because of a lack of volume. The exit of Marathon and Talisman means the scope of available work in Poland has shrunk in an already tight marketplace for oilfield services. Service companies that invested in facilities and kit in Poland are now using the country as a base of operations for greater regional focus. Drilling companies that had invested in rigs in the country have demobilized and moved those rigs to more active markets. As a reflection of the growth of unconvetionals, this service directory includes companies that participate in the European shale gas services market. If you were not listed and feel you should have been included please contact me today. Keith Luke (+48) 694 478 075 Keith@cleantechpoland.com
TECH-POMP Tenaris TPS - Technitube Röhrenwerke Trinity Corporate Services United Oilfield Services URS US Steel Vallourec Veolia Water Systems Viking Weatherford Weir Oil & Gas Division Wellynx Workstrings World Acoustic Group Xodus Group ZRG Krosno (Exalo) * The companies listed do business in European markets. If your company is not listed, or the information is incorrect, please contact us.
138 138 138 139 139 139 139 139 139 139 139 139 139 139 139 139 139
EUROPE
Abbot Group Acoustic Geophysical (Viking) AECom AlMansoori Hilong Petroleum Pipe Co. Apex Contracting
SERVICE SPECIALITY
COUNTRY ACTIVITY
ADDRESS
C O N TA C T
Construction, Drilling
Global
KCA DEUTAG Drilling GmbH
Seismic services
CEE
Ul. Chłodna 11 lok. 425 00 - 891 Warsaw, Poland
infohouston@ acousticgeo.com
General services
Global
Ul. Emilii Plater 53 Warsaw, Poland
(+48) 228 220 051 don.shosky@aecom.com
Completions Sand Supply
Global
AlMansoori Tower, Salam Street, Abu Dhabi, United Arab Emirates
+971-2-6776335 swang@msehilong.biz
Drilling, Water, Seismic
Poland, Ukraine
Ul. Emilii Plater 53 00 - 113 Warsaw, Poland
(+48) 22 292 85 30
Apex Contracting offers three types of services to the market: water handling, seismic services, and drilling services. Since 2012, the company has worked throughout Poland for several clients, lengthening a list of accomplishments. Having drilled hundreds of up-holes for a seismic services provider, and having permitted hundreds of kilometers of seismic lines, they now turn to water handling in anticipation of the Polish production market.
Archer Well Allis Chalmers
Integrated Oilfield Services
UK, Denmark, Norway - Global
Damsgårdsveien 135 5160 Bergen Norway
(+47) 55 51 15 00
Argo Geological Consultants
Consultant Services
Netherlands
Bachlaan 46 3706 BD Zeist The Netherlands
(+31) 306 959 150
Hardbanding
Global
Aberdeen, UK
(+44) 774 028 0302
Logistics (maritime)
France
Bat D3, 135 Av Pierre Semard 84000 Avignon, France
(+33) 490 480 127
Liquids and sludge storage
North America/Europe
North Lincolnshire, DN20 8UN, UK
(+44) 330 333 2611
General, All integrated well services
Global
Ul. Rondo ONZ 1 00 - 124 Warszawa, Poland
(+44) 203 320 4900 jens.rodiek@bakerhughes. com
Balanced pressure and wireline services
UK, Germany, Netherlands
Karel Doormanstraat 4, 7825 VT Emmen, The Netherlands
(+31) 591 667 687
Proppant
Poland
ul. Reymonta 7 68 - 300 Lubsko, Poland
(+48) 22 654 66 14
Logistics
Global
ul.Osmańska 5 02 - 823 Warsaw, Poland
(+48) 22 544 1721
Rig and drill manufacturer Europe, Middle East
Europe, Middle East
Deilmannstraße 1, 48455 Bad Bentheim, Germany
(+49) 592 272 80
Translation
Poland
Chemical distribution
Global
Ul. Kwasowa 5 95 - 100 Zgierz, Poland
(+48) 61 89 36 510
Oilfield Equipment, Tubing, Proppant
Europe
Celle Vorbruch 6 29227, Germany
(+49) 5141 9895 0
Machine Construction
Global
100 North East Adams Street Peoria, Illinois USA 61629
Arnco AVISHIP Baker Corp Baker Hughes Balance Point Control BV Baltic Ceramics BDP International Bentec Biretta Brenntag C.A.T. Caterpillar
SERVICES
CO M PA N Y NAME
WWW.CLEANTECHPOLAND.COM
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CO M PA N Y NAME
SERVICE SPECIALITY Logistics, Supply Chain Management
C.H. Robinson
COUNTRY ACTIVITY Global
ADDRESS Al. Jana Pawła II 29 Warsaw, Poland
C O N TA C T +48 22 653 6512 Tom Sullivan
C.H. Robinson is one of the world’s largest third party logistics (3PL) providersoffering multimodal transportation services and logistics solutions. In Poland, C.H. Robinson is perfectly placed in order to leverage their global network to fulfill any logistical need of shale gas operators and service companies. Technology, procurement and construction
Global
Oostduinlaan 75 2596 JJ The Hague
(+31) 703 732 010
Consulting, engineering, construction, permitting and operations
Global
Ul. Stawki 40 01- 040 Warsaw, Poland
(+48) 225 519 300
Geophysical services company
Global
10300 Town Park Dr Houston, TX
(+1) 832 351 8300
Champion Technologies
Chemicals
Global
3200 Southwest Freeway Suite 2700 Houston, Texaspian B.V.
(+1) 713 627 3303
Continuous Control Solutions (CCS)
Control Systems & Engineers
Global
11275 Aurora Ave. Des Moines, IA, USA
(+1) 515 278 9655
Core Laboratories
Reservoir description and management, production enhancement
Global
Herengracht 424, 1017 BZ Amsterdam The Netherlands
dGB Earth Sciences
Seismic Analysis
India, Texas, Netherlands
Nijverheidstraat 11-2 7511 JM Enschede The Netherlands
(+31) 53 4315155
Drilling, completions and related oilfield services
CEE
Ul. Naftowa 3 65 - 705 Zielona Góra Poland
(+48) 683 295 555
Drilling Rigs and Equipment
Global
Hanover Square 16 Hanover Square London - W1S 1HT, UK
(+44) 207 408 9494
Consulting: Risk Management
Global
Ul. Skrzetuskiego16A Warsaw, Poland
(+48) 22 543 97 60
Chemicals including lubricants and gelling agents
Global
Domaniewska 50A 02 - 672 Warsaw, Poland
(+48) 228 332 222
DOW Microbial Control
Plastics and chemicals
Global
Domaniewska 50A 02 - 672 Warsaw, Poland
(+48) 228 540 320
Drill-Lab (PGNiG)
Mudlogging equipment and services
CEE
Ul. Krośnienska 7 65 - 958 Zielona Góra Poland
(+48) 683 238 454
Drilling equipment rental
Global
Greenwell Road, East Tullos, Aberdeen, AB12 3AX
(+44) 122 424 9988
Energy Trading
Poland
ul. Serdeczna 8 Wysogotowo k. Poznania 62 - 081 Przeźmierowo
+48 61 664 18 50 ir@duon.pl
CB&I CDM Smith CGGVeritas
Diament (Exalo) Discovery Drilling Equipment DNV DOW
Drilltech
Duon
Efir Energy LTd EkoTech Energy
DUON Capital Group sells and distributes natural gas and trades in electricity. The origins of the Group activities date back to 2000. Currently DUON is one of the leading private providers of natural gas in Poland. Since 2011, it also has been building its position on the market of electricity trading. Consulting and Design
Poland, CEE
ul.Puławska 469 Warsaw, Poland
(+48) 22 395 52 60
Waste management, treatement, effluents
Global
Aleje Jerozolimskie 96 00 - 807 Warsaw, Poland
(+48) 222 755 625
134 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
EUROPE CO M PA N Y NAME
SERVICE SPECIALITY
Energy Specialists Platform (ESP)
General, Independent Consultants
Europe
Klateringerweg 6 9433 TB Zwiggelte The Netherlands
(+31) 593 33 13 30
Drilling, well Services, production and manufacturing
Global
400 - 5th Avenue SW Calgary, Canada
(+1) 403 262 1361
Midstream services
Europe
Chaussée de la Hulpe 120 1000 Brussels
(+32) 266 317 63
Drilling and integrated Well Services
Europe, Africa
Pl. Staszica 9 64 - 920 Piła, Poland
(+48) 67 215 13 00
Well testing, wireline intervention, production systems
Global
Morton Peto Rd, Great Yarmouth, Norfolk NR31 0LT, UK
(+44) 1493 60 0021
Transport (heavy)
Netherlands
Floor 20 3012 CN Rotterdam The Netherlands
(+31) 10 403 5333
Consulting/Analysis
Global
Veurse Achterweg 10 2264 SG Leidschendam the Netherlands
(+31) 70 311 1422
Water treatment, oilfield equipment
Global
Ul. Emilii Plater 53 00 - 113, Warsaw, Poland
(+48) 22 520 53 53
Geochemical Analysis
Global
56 BoulevardSaint Michel 75006 Paris, France
(+33) 148 103 007
Wellsite services, environmental consulting
Europe
Carl-Zeiss-Str. 15 30827 Garbsen, Germany
(+49) 513 146 810
EurMidstream Exalo Drilling Expro Fairstar Heavy Transport Fugro GE Oil & Gas Geo-Microbial Technologies (GMT)
GEO-Data
ADDRESS
C O N TA C T
Services in mudlogging, wellsite geology, laboratory services, and core analytics partner with GeoKrak SP z o.o. as part of an expanded suite of services (surface logging, wellsite geology, cutting & gas sampling, and isotope analytics) for the Polish market.
GeoDynamics Research
Seismic Services
Italy
Via Maioliche, 53 Leno Center - Rovereto Trento, Italy
(+39) 0464 75 00 95
Geofizyka Kraków (PGNiG)
Seismic services, well logging, data interpretation
Poland, Austria, Slovakia
Ul. Łukasiewicza 3 31 - 429 Kraków, Poland
(+48) 122 991 200
Geofizyka Torun (PGNiG)
Seismic services, well logging, data interpretation
Europe, India, Egypt
Ul. Chrobrego 50 87 - 100 Toruń, Poland
(+48) 566 593 101
Geological services
CEE
ul. Mazowiecka 21 30 - 019 Kraków, Poland
(+48) 126 338 110
Geokrak
GeoLog Geomage Geotrace Data Integration Services GL Noble Denton
SERVICES
Ensign
COUNTRY ACTIVITY
Since 1992, providing geological services associated with deep well exploration. It offers a combined suite of services (surface logging, wellsite geology, cutting & gas sampling, and isotope analytics) with their partner firm GeoData Gmbh for the Polish market.
2 Rubislaw Terrace Aberdeen AB10 1XE, Scotland
(+44) 782 156 9280
11011 Richmond Ave. Suite 225, Houston, Texas 77042
(+1) 832 76 75 918
Global
12141 Wickchester Lane, Suite 200 Houston, Texas 77079, USA
(+1) 281 497 8440
Global
Brooktorkai 18 20457 Hamburg Germany
(+49) 403 614 90
Surface Logging
Global, Italy, The Netherlands
Seismic Processing
USA, Europe, Russia
Technology - Data Integration
Technical Service Provider Germany
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CO M PA N Y NAME
SERVICE SPECIALITY
COUNTRY ACTIVITY
ADDRESS
C O N TA C T
Global Geophysical
Seismic services
Global
Ul. Warowna 3/01 02 - 654 Warsaw, Poland
(+48) 224 930 135
Golder Associates
Consulting, design and construction
Global
Al. Solidarności 117/700 00 - 140 Warsaw, Poland
(+48) 226 280 980
GSE Environmental
Lining
Global
Orchideengarten 30 09125 Chemnitz, Germany
(+43) 725 829 201
Integrated oilfield services
Global
53 Ul. Emilii Plater 53 WFC 26th Floor, 00 - 113 Warsaw, Poland
+48 22 47 07 900
Hardbanding, hard facing tool joints
Global
5500 W 164 TH Street, Cleveland, OH 44 142, USA
(+44) 77 474 683 45
Consultant Services
Global
Jaśkowa Dolina 15 Gdańsk, Poland
(+1) 888 906 8566
Engineering Consultancy
Global
Osmańska 12 02 - 823 Warsaw, Poland
(+48) 22 430 26 00 info.waw@ilf.com
Seismic permetting, compensation, human resources
Poland
Ul. Elektryczna 2 00 - 346 Warsaw, Poland
(+48) 604 601 050 Izabela Kawczynski
Halliburton Hardbanding Solutions IHS ILF Consulting Engineers Inter Permit Group
INiG (PGNiG) Inwatec ION ITS (International Tubular Services) Jasło (Exalo) JSH Drilling Tool Co., Ltd. KCA DEUTAG Kidova Lemitor Maxi Cargo Meehan Drilling
IP Group entered the Polish market in 2012 to provide human resources, permitting and compensation services on a government funded seismic contract. The company, under the leadership of Peter Turo, has expanded their human resources offer to the financial and insurance markets, alongside the growing energy markets. IP Group is a competent team of professionals with an emphasis on American-style customer service. State sponsored research institute
Poland
ul. Lubicz 25A 31 - 503 Kraków, Poland
(+48) 12 421 00 33
Environmental Consultancy
Poland, Germany
ul. Fodder 25 02 - 954 Warsaw, Poland
(+48) 22 642 95 66 biuro@inwatec.pl
Europe, North/South America
Geophysical Services, Seismic
2105 CityWest Blvd. Suite 400 Houston TX 77042-2839, USA
(+1) 281 933 3339
Oilfield equipment and services
Global
Takelaarsweg 13 1786 PR Den Helder The Nederlands
(+31) 88 1307 100 europesales@its-energyservices.com
Drilling Contractor
Europe, Asia, Africa
6 Asnyka Street 38 - 200 Jasło, Poland
(+48) 134 462 061
Drill Pipes, Drill Collars
North America, Europe, Asia, Middle East
Drilling, General
Global
Geological Modeling
North America, Europe, Australia
155 avenue Roger Salengro, (+33)1 47 09 09 49 F - 92370 Chaville contact@kidova.com France
Environmental Consultancy
Poland
ul. Długosza 40 51-162 Wrocław, Poland
(+48) 71 325 25 90 biuro@lemitor.com.pl
Logistics
Poland
Os. E. Raczyńskiego 31/13 62 - 020 Swarzędź, Poland
(+48) 61 610 10 26 biuro@maxi-cargo.pl
Drilling
UK
40 Kilmorey Street Newry, Co. Down BT34 2DE
(+353) 28 3025 2678 info@meehandrilling.com
136 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
No.18 Shuguang Industrial Park, Jiangyan City, Jiangsu Province,P. R. China Minto Drive Altens Industrial Estate Aberdeen AB12 3LW Scotland
(+86) 523 868 2188 youqingguo@shuguang. com (+44) 122 429 9600
EUROPE SERVICE SPECIALITY
COUNTRY ACTIVITY
ADDRESS
C O N TA C T
SERVICES
CO M PA N Y NAME
P.O. Box 42842 Houston TX 77242, USA
Drilling Fluids, Completions, Waste Management
Global
Drilling
Czech Republic, Slovakia, Velkomoravská 900/405, Russia, UK, Pakstan, 696 18 Lužice Jemen Czech Republic
Chemicals
Poland
Geological Services
Eastern Europe
Nafta Piła (Exalo)
Drilling
Europe, Asia, Africa
Pl. St. Staszica 9 64 - 920 Piła, Poland
(+48) 672 151 300
National Oilwell Varco
Oilfield services
United states
Wierzbowa 9/11 00 - 094 Warsaw, Poland
(+48) 40 729 639 686
Business Advisory
Global
Petro Chemicals
Europe, North America, Middle East
P.O. Box 310 FI- 06101 Porvoo, Finland
(+358) 10 4581200 NJ.Info@nestejacobs.com
NovaSeis (San Leon)
Seismic
Poland
ul. Mokotowska1 00 - 640 Warsaw, Poland
(+48) 22 378 9700
NTS Construction
Poland
Well pad construction
ul. Rynek 26 37 - 500 Jarosław, Poland
(+48) 16 623 22 51
NuTech Energy Alliance
Petrophysical, geological, field study, and well services
Global
7702 FM 1960 East, Suite 300, Houston, TX 77346 USA
(+1) 281 812 4030
Pace Global Energy Services
Consultant Services, General, Management
Global
4401 Fair Lakes Court Fairfax, VA 22033 USA
(+1) 703 818 9100 info@paceglobal.com
Packers Plus
Open hole, multi-stage completions equipment
Canada, US, Middle East, Russia
Bow Valley Sq. 2, Suite 2200, 205 - 5th Ave. SW Calgary, Canada
(+1) 403 263 7587
PanTerra Geoconsultants
Seismic Analysis
Global
Weversbaan 1-3 2352 BZ Leiderdorp The Netherlands
(+31) 71 581 3505 info@panterra.nl
Paradigm
Reservoir Characterization, Well Planning
Global
Dukes Street Woking, Surrey GU21 5BH United Kingdom
(+44) 1483 758 000
PerekopBromine
Chemicals
CIS, CEE
Laboratornaya Str., 45 Dnepropetrovsk Ukraine
Perforator GmbH
Completions, Pressure Pumping
Global
Bei dem Gerichte D - 37445 Walkenried Germany
(+49) 5525 201 28 AHentschel@perforator.de
Oilfield Services
Global
4th Floor, 117 Jermyn Street London SW1Y 6HH, UK
(+44) 1224 650570 patrick.odonnell@spdltd. com
Consulting Services
Global
19 rue du Général Foy 75008 Paris, France
(+33) 147 702 900
Rotating control devices
Global
9700 Aire Circle, P.O. Box 181359, Fort Smith AR 72918, USA
(+1) 479 646 1641
MI-SWACO MND Multi-chem NADRA Group
Navigant Neste Jacobs
Petrofac PFC Energy Pruitt
2905 Southwest Boulevard San Angelo, TX 76904, USA
(+1) 325 223 6200
41 - 49 Agiou Nikolaou NIMELI Court, Block C 3rd floor 2408, Nicosia Cyprus
office@nadragroup.com
5th Floor, Woolgate Exchange 25 Basinghall Street London, UK
(+420) 518 315 555
(+44) 20 7469 1111
(+38) 056 787 37 00
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| 137
CO M PA N Y NAME
SERVICE SPECIALITY Well Pad Construction
Pro Euro Energy Services
Rodelta Pumps International Schlumberger SERAFIM Ltd SGS
Shale Gas Solutions
Poland, Ukraine
ADDRESS Ul. Słoneczna 153 05 - 506 Lesznowola, Poland
C O N TA C T Eric Bollard (+48) 503 861 695
Pro Euro Energy Services is a construction services company that builds well pads all over Poland. Formed as a partnership, by several professionals with with years of construction experience, the company brings quality to the worksite, along with an emphasis on health and safety. Eric Bollard and Kris Sylwanowicz lead a team who have won high praise from local workers and local community alike. Consulting, Business Advisory, Auditing, Tax, Legal
PwC
COUNTRY ACTIVITY
Global
Al. Armii Ludowej 14 00 - 638 Warsaw, Poland
(+48) 22 523 4000 pwcpoland@pl.pwc.com
Provides oil and gas companies advisory, tax & legal, and auditing services. PwC, a global services company, has been in POland for 20 years and there are 46 local partners. Regularily provides up to date information about the regulatory and tax environment for shale operators. Pumps
Global
Enschedesestraat 234 7552 CM Hengelo The Netherlands
(+31) 74 245 52 00 info@rodelta.com
All integrated well services
Global
Al Jana Pawła II 25 00 - 854 Warsaw, Poland
(+44) 203 320 4900
Consultant Services, Reservior Modeling
Europe
Belfast office231 Bangor Road, Holywood , Belfast BT18 0JQ United Kingdom
(+44) 28 9042 1106 future@serafimltd.com
Consulting Services
Global
38, Calea Serban Voda sector 4 Bucharest 40212, Romania
(+48) 606 285 100
Equity fundraising, operator introductions, intelligence
CEE
Ul. Elektryczna 2 00 - 346 Warsaw, Poland
(+48) 694 478 075 Keith Luke
Shale Gas Solutions provides mobile telecoms and wellsite internet services. Contact us to for equity fundraising, contingency planning and in-country representation. We provide market entry services, including operator introductions and market reports about the current state of play.
SIMCO International Ltd.
Technology
CEE
Bucuresti-Domnesti 49-50 Street Clinceni, Bucharest
(+40) 744 319 001
Spirit Innovative Technologies
Technology
Netherlands
prof. dr. Dorgelolaan 20 5613 AM Eindhoven the Netherlands
(+31) 40 23 69 445 sales@spiritIT.com
Sumitomo Europe
Tubular Steel
Europe
Vintners’ Place 68 Upper Thames Street London, EC4V 3BJ, UK
(+44) 2072463600
Superior Energy Services
Oilfield Services
Global
11000 Equity Drive Suite 300 Houston, Texas 77041, USA
(+1) 281 999 0047 info@superiorenergy.com
Tata Steel Group
Steel Supply
Global
30 Millbank London, SW 1P 4 WY,UK
(+44) 207 717 4444
Tebodin
Consultancy & Project Management
Global
ul. Taśmowa 7 02 - 677 Warsaw, Poland
(+48) 22 334 41 11
TECH-POMP
Electric, pneumatic, engine driven pumps
Poland
Al. Sztandarów n1/3 04 - 423 Warsaw, Poland
(+48) 22 612 98 25
Line pipe, coiled tubing, casing, connections
Global
2200 W. Loop S., Suite 800 Houston, TX 77027, USA
(+1) 713 767 4400
Tenaris
TPS - Technitube Röhrenwerke
A full range of quality casing and tubing, drill pipe, premium connections, pipe accessories, sucker rods and coiled tubing for use in all types of oil and gas drilling and well completion activities. Exceptional services based on expertise of material selection and pipe handling. Seamless pipes, welded pipes, bending
138 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
Germany
Julius - Saxler-Str. 7 54550 Daun, Germany
(+49) 65 92 7120
EUROPE SERVICE SPECIALITY
COUNTRY ACTIVITY
Trinity Corporate Services
Corporate services, HR
Poland, Czech Republic, Romania, Bulgaria
United Oilfield Services
Drilling, completions, pressure pumping
Poland
URS
Siting, permitting, geotechnical, construction management
US Steel
C O N TA C T
Al. Jerozolimskie 56C 00 - 803 Warsaw, Poland
(+48) 223 799 440
Al. Jerozolemskie123a 02 - 017 Warsaw, Poland
United States, Europe
Steel pipe supply
(+49) 65 92 7120
ADDRESS
SERVICES
CO M PA N Y NAME
(+48) 22 1162 300
Ul. Rejtana 17 02 - 516 Warsaw, Poland
(+48) 224 273 700
Vstupny areal, 044 54 Kosice, Slovak Republic
(+421) 55 673 9536
Tubular products for all sectors of oil and gas industry. Extensive experience in the North American shale markets allows US Steel to provide an unparalleled level of service. US Steel manages their supply chain from a factory and back-office in Slovakia. Supplier of tubular products to operators in Poland and elsewhere in continental Europe. Pipe and tubing
France
Ave. du Général Leclerc 27 92100 France
(+33) 1 49 09 35 00
Water treatment
Poland
Ul. Balicka 48 30 - 149 Kraków, Poland
(+48) 12 423 38 66
Seismic services: 2D/3D
Poland, Ukraine
Ul. Emilii Plater 53 00 - 113, Warsaw, Poland
(+48) 225 286 822
All integrated well services
Global
Ul. Krolewska 16 00 - 103, Warsaw, Poland
(+48) 226 451 330
Weir Oil & Gas Division
Pumping, proppant, water and flowlines
Global
Alega 3 Maja 9 30 - 062 Krakow, Poland
(+48) 126 328 469
Wellynx
Engineering and Consultancy services
Europe
Viale G. D’Annunzio, 267 65127 Pescara, Italy
Drilling, Pipe and procurement
Global
1150 Smede Hwy Broussard, LA 70518, USA
(+1) 337 989 9675
Acousitc Services
Poland
ul. Royal 1 59 - 101 Polkowice, Poland
(+48) 76 847 00 80
Integrated Consulting Services
Global
10111 Richmond Avenue Suite 150 Houston, Texas, USA
(+1) 832 775 1620
Downhole Equipment, Well Stimulation and Well Logging
Europe, Asia, Africa
Ul. Łukasiewicza 93 38 - 400 Krosno, Poland
(+48) 134 372 100
Vallourec Veolia Water Systems Viking Weatherford
Workstrings World Acoustic Group Xodus Group ZRG Krosno (Exalo)
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| FAC HO ’S W MARKET ANTS TO WHO W ENTR - UK £11 2000 RS | NE T - EU €12 TURA BBY WA PLN + VA N | NA SELS LO KRIS WHITE PROFILE | BALTIC VALUE CHAIN | WHO’S WHO IN CONCESSIONS | GLOBAL UPDATE ND 50 BASI BRUS D - POLA LTIC URES | 1 CA NT £1 BA $18 VE E USA $32 | $30CAD | POLAND 100 PLN - UK€25 | UK £20 TH+ VAT 2| EU RM-IN USA $18
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EXPERT’S CORNER
Flatbed Collaboration Drives innovation and value
C.H. Robinson and General Cable collaborated to develop a strategic sourcing model focused on sustainable service and cost and implemented a single source flatbed program. BY C.H.ROBINSON
G
eneral Cable is a global leader in the production of copper, aluminum and fiber optic wire and cable products, with 18 operational facilities in the U.S. About 50 percent of their products are transported via flatbed. General Cable is a Lean Six Sigma-driven organization with a corporate culture of building strategic relationships with their preferred suppliers. FIX FRAGMENTED FLATBED SERVICES General Cable made a number of mergers and acquisitions before 2003. This created a fragmented network that independ140 140 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
ently sourced, contracted, and tendered loads. Each plant had 10 to 20 flatbed carriers on their carrier list but no capacity commitments. This autonomy made it difficult to manage supply chain costs and provide reliable service to customers. Paul Kasinski, Director of Logistics at General Cable, said, “Prior to our relationship with C.H. Robinson, we had a decentralized sourcing model, a fragmented carrier base, and unreliable shipping contracts. We shopped based on price, not value.” It took a significant amount of time for staff at each facility to find flatbeds to meet the demand, posing numerous opera-
© 2013 C.H. Robinson Worldwide, Inc. All Rights Reserved.
tional inefficiencies. As Greg Wells, Corporate Transportation Manager at General Cable, described, “The sheer number of carriers we called each day to get our loads covered was a serious workload issue.” This reactive approach was neither sustainable nor cost effective.
COMPETITIVE ADVANTAGE WITH A RELIABLE SUPPLY CHAIN CHALLENGE
SOLUTION
RESULT
General Cable had decentralized transportation sourcing, with each facility operating Independently. Three of the largest business units relied on the highly fragmented flatbed marketplace to service customers. It was extremely difficult to maintain reliable capacity and predictable transportation costs, let alone identify logistics efficiencies.
C.H. Robinson and General Cable collaborated to develop a strategic sourcing model focused on sustainable service and cost and implemented a single source flatbed program.
C.H. Robinson is General Cable’s single source flatbed provider, bringing greater operational efficiency, more reliable flatbed service, enhanced market expertise, and increased total value.
“A strategic provider does two things: they help us become better operationally, and they save us money. C.H. Robinson has done both for us.”
To learn more about C.H. Robinson’s outsourcing programs, call us at +48 22 653 6512 or email us at warsaw-sales@chreurope.com.
with the right solution and became a strategic provider, based on where we were headed,” Mr. Wells added. To create a successful, single source program, C.H. Robinson employed its Collaborative Outsourcing® model. This low or no-cost strategy did not require General Cable to export control to C.H. Robinson. Instead, C.H. Robinson imported expertise and a powerful technology platform, Navisphere®, to help General Cable drive down costs, improve efficiency, and enhance customer satisfaction. Several years later, C.H. Robinson coordinates virtually all mid- and long-haul
and General Cable obtains greater cost stability and reliable service. Other continuous process improvements include cost-saving geographic zone distribution and a pilot program that provides greater visibility to General Cable’s orders and systems. This information helps C.H. Robinson add lead time to schedule pickups/deliveries, identify multi-origin consolidation opportunities, and determine the most cost effective option for every shipment. The result of all these initiatives is the most cost effective network for General Cable that improves sustainability and responsiveness to customers.
WWW.CLEANTECHPOLAND.COM
| 141 141
ADVERTORIAL
STRATEGIC PROVIDER MAXIMIZES VALUE General Cable worked with C.H. Robinson, a leader in flatbed transportation, to establish a centralized, strategic approach to sourcing reliable flatbed service. “C.H. Robinson came in at the right time
flatbed freight for General Cable’s 18 U.S. operational facilities. The facilities need only one C.H. Robinson contact to execute tactical operations, from procurement to shipment coordination, saving a substantial amount of time. In its new, strategic approach to carrier management, General Cable focuses less exclusively on price and more on developing long-term, mutually beneficial carrier relationships that drive scalable innovation and value. New programs employ carriers to transport freight out, but also to return empty reels to its facilities. In the process, carriers get better use of their equipment
TITLE
DINNER
DRINKS
David DeBenedetti, Partner, DMS law firm
Joel Appleton, Packers Plus Energy Services, title sponsor of party
At center, Emmett Beaver, US Steel Tubular Products, dinner sponsor
At center, Donnie Sperry, ConocoPhillips, Well Operations Manager
Izabela Kawczynski, Partner, IP Group, preparing a few words as drinks sponsor
Tomasz Barańczyk, Partner, PwC, partner of Cleantech Poland and the SGIG
Maria Meijer, Technical Marketing Manager, Packers Plus Energy Services, picks the winner of the raffle
Witold Domek, CDM Smith, at left, in conversation with Dariusz Łątka, Talisman
146 142 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
From left, Parker Snyder, Director, Cleantech Poland, John Buggenhagen, Exploration Director, San Leon Energy, Sean Willis, Managing Director, Terrapinn, attend a press conference
EVENTS
The Shale Gas Investment Guide is a biannual publication that debuts at a launch party
Matias Malik, Sales Representative Continental Europe, Tenaris Oilfield Services
Shale Gas Investment Guide
LAUNCH PARTY
Olga Babicz, Client Service Manager, Tobiasz Adamczewski, Principal Analyst, and Keith Luke, Key Account Manager, Cleantech Poland
150 guests. Hilton Hotel. Title: Packers Plus. Dinner: US Steel Tubular Products. Drinks: IP Group. The Shale Gas Investment Guide has grown to become a premiere unconventional gas publication in Europe. PHOTOGRAPHY BY SZYMON SZCZESNIAK
Second from right, Andreas Rudolf, Regional Manager Central Europe, Baker Corp,
At left, Josh Audet, Packers Plus Energy Services, in foreground, Lars Hubert, San Leon Energy Enrique Schindelheim, Business Development Manager, Terrapinn
Joel Appleton, Business Development Manager, Josh Audet, Engineer, and Maria Meijer, Technical Marketing Manager, all with Packers Plus Energy Services, talk to Bill Marble, COO, Wisent Oil & Gas
At left, Donnie Sperry, Poland Well Operations Manager, ConocoPhillips
Guests enjoy speed networking, rotating between cocktail tables
Bill Flint, President, DMB Services
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Events JUN
2013 Calendar
JUL
AUG
01 04 07 10 14 17 21 24 27 30 01 02 05
8
11
14 17 20 23 26 29 01 02 05
8
11
14 17 20 23 26 29
SHALE GAS
Unconventional Gas & Oil Summit (Informa)
investment
GUIDE
World Drilling 2013 (IADC)
June 19-20, 2013, Istanbul, Turkey
June 3-6, London, UK
UGOS 2013 is Europe’s leading international conference exploring the latest trends in unconventional gas and oil. The agenda has been written by and for the industry after consulting with over 150 unconventionals specialists from around the world. Join oil majors, energy companies, technology providers & policy makers to ensure you overcome your critical technological, regulatory & commercial challenges.
World Shale Oil and Gas (CWC Group)
“Managing Transition: It’s Not Your Father’s Oilpatch!” is the theme for World Drilling 2013, comments on transformation of the well-construction industry across a breathtaking range of areas, in HSE, regulation, markets and energy supply, automation, downhole technology, personnel. IADC World Drilling 2013, through high-level panels and speakers and through cuttingedge technical papers, will chart each inflection point and trace the path to the future.
September 25-26, Bruges, Belgium
Critical Issues for Unconventionals Europe (IADC)
The Europe Shale Retreat, held under Chatham House Rule is an exclusive two-day gathering of senior policy makers and industry leaders convening for in-depth discussion on the future of Europe’s shale oil and gas. 3rd party independent presentations will provide a clear and concise understanding and allow for the right questions and challenges to be addressed. Country focused roundtables will provide a platform for private discussion on the key areas that are of interest to you.
Shales in North America have proven so prolific that their development is reshaping the global oil market, and produced a bonanza of natural gas. However, challenges exist. IADC Critical Issues for Unconventionals Europe 2013 will examine the technical, environmental, logistical, and health and safety aspects of drilling & completing shale formations in Europe, and the influence of unconventional development around the world.
International Coal & Climate Summit (SCC Consulting)
October 23-24, 2013, Warsaw, Poland
SHALE GAS
SHALE GAS
GUIDE
GUIDE
investment
investment
November 18-19, 2013, Warsaw, Poland
CLEANTECH PAVILION at Shale Gas World Europe (Terrapinn)
International Coal & Climate Summit will bring together the leadership of the world’s largest coal producing companies, senior policy-makers, academics and NGO representatives to discuss the role of coal in the global economy, in the context of the climate change agenda. The industry’s most important event this year will be held at the Ministry of Economy of Poland during climate change negotiations COP19.
We created the “Cleantech Pavilion” to give companies an option to exhibit at Shale Gas World Europe. If you are a technology company, consider the Pavilion. We do the marketing, build-out, promotion and site managment for you. You just show up and enjoy access to the crowd. Co-brand your involvement with Cleantech. SEE PAGES 48-49 FOR DETAILS
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November 27-29, 2012, Warsaw, Poland
SHALE GAS
investment
GUIDE
denotes that we are a media partner, sponsor, or participant.
FK
10 % O
E2VIP U 24 Cod NT 3C e: TP A
SC
DI
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PHOTO ESSAY BY SZYMON SZCZESNIAK
Low carbon gas? Talk low-carbon in Munich, Tel Aviv or Dubai, and you’ll find plenty of supporters of wind turbines, electric vehhicles and smart grid. Talk cleantech in Poland and you get blank stares, a bit of skepticism. Over the last four years, a team of dedicated professionals has flipped the conversation on its head, emphasizing low-carbon while being realistic about the chosen trajectory in a country entirely dependent on coal. Cleantech Poland believes in a smart, achievable energy policy. “Yes, shale gas has its place,” says director Parker Snyder, pictured 3rd from left with his team.
WWW.CLEANTECHPOLAND.COM
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ALBERTA GEOLOGICAL SURVEY
WELLHEAD
Alberta Geological Survey, a Canadian provincial organization, makes data available in ESRI GIS format for ease of use
WELLHEAD
Europe needs access
to DATA
It’s ironic that in the US, where the oil and gas rights are owned by individuals, the data is more freely available than in Europe, where all the minerals are owned by the government. That should change. BY F R A N K M A I O, E X P LO R AT I O N D I R E C T O R , H U T T O N E N E R G Y/ S T R Z E L E C K I E N E R G I A
THERE ARE OVER 45,000 wells
drilled per year in the United States and over 10,000 per year in Canada. Many of these wells are drilled by small, independent, entrepreneurial companies who enjoy access to a wealth of relatively inexpensive data. Few small exploration companies are operating in Europe, and although it’s not anticipated that Europe will ever attain North America’s volume of wells drilled, one can imagine that oil and gas plays go unproven and unproduced due to the absence of equivalent North American small operators. One of the reasons is there’s no inexpensive access to geological data, a critical part of the exploration process. Some states, such as Kentucky, offer well data for free online. Other states, such as North Dakota, offer data online for a nominal fee. Oil production in North Dakota has leaped to over 760,000 barrels of oil per day from an average of only 89,394 barrels per day and much of that production has been thanks to small operators. Europe could 146 | SHALE GAS INVESTMENT GUIDE | SUMMER 2013
benefit by offering inexpensive access to data as in North America. So it goes that in most of the United States an independent explorer can build his own database cheaply and efficiently. The local, state and federal governments benefit from higher tax and royalty revenues. This is hardly the case in Europe. WHAT NEEDS TO CHANGE? Entrepreneurs are constrained in Europe because of barriers to data access. They don’t have a historical database, nor do they wish to purchase expensive vendor data sets before they commit to funding an exploration program. Most western European agencies administering petroleum databases “get” the fact that the actual data is worth more in terms of potential production than the paper it is printed on; unfortunately, many eastern European governments still treat such data as state secrets. Only small amounts of data are available and can be easily accessed. Government sponsored journals and academic research projects often supply
a wealth of information on the geology, sometimes without respect to national borders. These include publications of the Polish Geological Institute, such as Geological Quarterly, Volumina Jurassica, and the bulletin of the State Geological Institute. Unfortunately some government agencies are underfunded due to the dire economic situation in Europe. I urge government agencies to make oil and gas data available to all interested parties in order to expedite exploration. Once the independent explorer determines an area in which to commence an exploration project he can budget for comprehensive vendor databases. And despite economic woes, state geological surveys and academic research should continue to be funded. The state will benefit from rapid and successful drilling. The countries in Europe that make data acquisition difficult will ultimately have less oil and gas production, and therefore less revenues, than countries that make such data easily accessible.