Shale Gas Investment Guide vol. 7 by Cleantech Poland LLC

shale gas investment guide

Shale Gas

investment

Guide

SUMMER 2014

Kamlesh Parmar

china wins

Guest column

dash for gas

SUMMER 2014

UK FOCUS

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2013-11-04 12:47:22

4 | Shale Gas Investment guide | Winter 2013

6 | Shale Gas Investment guide | SUMMER 2014

CONTENTS

Contents

p/13

INDICATORS

p/18

TRENDING

p/2 4

UK FOCUS • Licence to Drill • Is Shale Gas Viable? • Cuadrilla Resources • Call to Action • Caroline Lucas Interviewed

p/38

UKRAINE CRISIS p/4 0 San Leon and BNK p/4 8 UOS: Dennis McKee p/50 Zoom on concessions p/56 Phelim McAleer

GLOBAL UPDATE

p/70

Accidents don’t happen

p/72

Best technoloigies

p/7 7

WHO’S WHO • UK • Poland

p/92 Poland Shale Coalition

SERVICES DIRECTORY

106

p/112 Wellhead: Kamlesh Parmar

www.cleantechpoland.com

opinion

By wojciech kość

Spawn a New Dawn The Ukraine crisis has provided Poland with a strong political argument for shale gas, which Warsaw says should be central element of Europe’s new union for energy. When we placed a picture of Yulia Tymoshenko on the cover of the previous SGIG, little did we know that Ukraine would become the focus of international attention. Instability in Ukraine is having a ripple effect on Europe. Russia is using the gas that it supplies to several countries in Europe, non-EU members among them as well, as a tool of pressure. This has been evident ever since the fall of the Soviet Union and Soviet-backed regimes in Central and Eastern Europe. Until Crimea, however, Russia was seen as a difficult yet manageable partner. Today, Moscow’s military activity in Ukraine is tarnishing Russia’s credibility as a gas supplier. The EU’s response, while it could have been stronger and more federalist, is welcome. What the EU could and should do was well drafted by a Financial Times article by the Polish Prime Minister Donald Tusk in April. “I propose an energy union. It will return the European project to its roots. Herman Van Rompuy, president of the European Council, has likened today’s energy challenge to the problems faced 60 years ago – problems that spawned the European Coal and Steel Community,” Mr. Tusk wrote. According to the Polish Prime Minister, the energy union would rest on six pillars, three of them having to do directly with Russia and

Prime Minister Tusk’s idea of energy union, with gas as a central element, makes sense and is doable

8 | Shale Gas Investment guide | SUMMER 2014

natural gas. Mr. Tusk proposes that the EU negotiates gas contracts with Russia as a block, with the European Commission active in the process, just like it is active in all other aspects of the EU energy policy. Secondly, the EU should guarantee its member states an effective response in the event of Russia’s reaching out to disruption of gas supplies as a political weapon. Thirdly, “in countries where the security of supply is weakest, storage capacity and gas links should be built with the help of the EU,” Mr. Tusk also wrote. A logical consequence of this approach to the chief supplier of gas to several EU member states is the development of indigenous gas resources, including unconventional gas. Although Mr. Tusk’s call to max out the use of fossil fuels, coal and shale gas in particular, to increase energy security in the EU, still requires some work as the world braces itself for a global climate change agreement to be decided in 2015, the energy union idea makes sense and is doable. Shale gas has a dual and important role to play in Europe’s new situation. On one hand, it could be a resource to alter the structure of several member states’ gas imports. On the other hand, it could reduce the use of coal and therefore help Europe move along toward a low-emissions economy. Mr. Tusk’s tour of Poland’s key EU allies about the energy union was well received. It could be that Poland’s pushing for shale gas will not be Warsaw’s sole effort that other member states would see as extravagant - as was the case in 2011 - but an element of a new momentum for the EU.

investment

LETTER

Shale Gas

not a dime

Guide

editor in chief Wojciech Kos´c´

for exploration

Publisher Parker Snyder

art directOR Łukasz mazurek

Editorial contact Wojciech@CleantechPoland.com (+48) 602 458 099

Advertising contact PARKER@CleantechPoland.com

(+48) 517 469 881

COPY EDITOR Marynia Kruk

PROJECT MANAGER Juliusz Kowalczyk

COMMUNICATIONS Kacper Ciesiołkiewicz

ANALYSTS

Grzegorz Kus´, Jacek Ciborski, Wojciech słowiNski

WRITERS Rhodri Davis (Buenos Aires) Paul Garrett (London), Sara Lichwa (London), Jerin Mathew (Bangalore), Nicholas Newman (London), Greg Penfold (Cape Town), Claudia Perez Rivas (Texas), Gordon Wasilewski, Jan Wypijewski, Wu Ming (Beijing)

GUEST COLUMN Kamlesh Parmar

HIRED! Radek Budzowski, Hubert Karon, Piotr Lewandowski, Edyta Stopyra, Gordon Wasilewski, Dawid Wierzbicki, Jan Wypijewski

PHOTOGRAPHY photopin krzysztof M. Ratschka Szymon Szczes´NIAK

Dear Colleague, Andrew Moorfield, a banker, gave a presentation in Vienna in January that showed how London investors are severely undervaluing global exploration. On average the NAV, or net asset value, of a hundred or so explorers is around 60 percent. Investors are saying, we won’t pay a dime more than your book value, and most often, we won’t even pay this. Depressed valuations are making exploring for oil and gas onshore all the more challenging because operators are having trouble raising exploration capital. Until TransAtlantic announced a non-binding commitment to fund exploration in tight gas and carboniferous formations in southwest Poland, it looked to be a painful year for independents. Should the deal go through, the parties to the JV will receive $5 million outright to pay existing expenses. Liquidity is in short supply. The TransAtlantic deal is more of what the market needs. But who else wants to take on Poland’s exploration risk? Regards, Parker

PRINTER Drukarnia Beltrani, Kraków www.drukarniabeltrani.pl

PublisheR Cleantech Poland LLC Ul. KRUCZA 51/31 00-022 Warsaw, Poland

www.cleantechpoland.com

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10 | Shale Gas Investment guide | Winter 2013

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To become a partner for the magazine, please contact the publisher Hays is the world’s leading company in recruiting qualified, professional and skilled workforce. Hays Energy team is dedicated to serve energy, oil and gas sectors and since its launch in 2007, the team has covered over 200 placements for middle and top management functions. Ul. Złota 59, 00-120 Warsaw warsaw@hays.pl Nutech is a U.S. based global oilfield consultancy providing reservoir optimization and evaluation services including optimization of existing wells. 7702 Fm 1960 Rd E # 300, Humble, TX info@nutechenergy.com

Poland Shale Coalition is an industry organization open to anyone. The Poland Shale Coalition, founded in 2013, aims at education and outreach. Founding members of the Poland Shale Coalition receive priority outreach in their concession areas. ul. Rzymowskiego 53, Warszawa, 02-697 PolandShaleCoalition@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 proposed changes to oil and gas laws. Rondo ONZ 1, 00-124 Warsaw www.ssw.pl DTZ is a property services company, providing occupiers and investors with end-to-end property solutions, global and local market knowledge, forecasting and trend analysis. ul. Złota 59, 00-120 Warsaw info@dtz.pl 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 oil and gas and cleantech industries providing representation services. Cleantech Poland publishes the Shale Gas Investment Guide and the magazine Cleantech. ul. Krucza 51/31, 00-022 Warsaw info@cleantechpoland.com

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| 11

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Tomasz Barańczyk – Partner phone: +48 502 184 852 tomasz.baranczyk@pl.pwc.com

© 2013 PwC. All rights reserved. PwC refers to the companies associated in the PricewaterhouseCoopers International Limited (PwCIL), each member of which is a separate legal entity and does not act on behalf of PwCIL or other member firms.

Shale Gas

investment

Guide

I nd I ca t o r s unconventional gas operations in Poland to date

w h o ' s d o n e w h at Company

No. of licences*

No. of wells

3 (0)

ORLEN Upstream

4 (0)

San Leon Energy **

2 (1)

Marathon Oil Poland

3 (1)

Lane Energy Poland

4 (0)

BNK Petroleum***

1 (0)

Chevron Polska

1 (1)

Eni Polska

1 (0)

Wisent Oil&Gas

2 (0)

Lane Energy

0 (1)

Others

0 (0)

JACEK CIBORSKI V ice - d irec tor , E n er g y Gro u p, P w C

Source: PwC, Ministry of Environment

* as of March 1, 2014 ** includes Liesa Energy, Gora Energy , Talisman Energy Polska and Vabush Energia *** includes Indiana Investments and Saponis Investments

It only has taken 57 wells (as of March 1, 2014) for the Polish shale gas operations to move close to flowing gas at commercial volumes. San Leon Energy appears closes to achieve the feat on their Lewino-1G2 well in the Baltic Basin, but others may not be far behind, for example BNK Petroleum, which got on with a frac job on its Gapowo B-1 well, following "excellent gas readings".

pace of drilling in poland and the marcellus play, Us 2,500

Gdańsk

Olsztyn

Poland Marcellus (PA)

2,000

Szczecin Bydgoszcz

1,500

Poznań

WARSZAWA

1,000

Łódź

Lublin

Wrocław

500 Katowice

Wells completed Wells under development

Kraków

Rzeszów

Source: PwC, Ministry of Environment data

0 Year 1

EXPERT VIEW

Fracs (microfracs/DFIT)

PGNiG

distribution of shale gas wells in poland

-1-

Year 2

Year 3

Year 4

Year 5

Source: shale coalition

Operators' drilling activity has been distributed equally between the Baltic

Basin and the Podlasie Basin (see map on the left), but industry insiders are saying that it's the Baltic Basin that looks most promising in terms of yielding gas at commercial quantities. Fracs performed by the likes of Orlen Upstream in the Podlasie Basin proved unsuccessful, even if the company says that they would be useful for further work in the basin. Meanwhile, a couple promising fracs cannot obscure the fact that the pace of drilling has been slow (see chart) in comparison to one that gave the US shale gas industry its momentum.

More than three years have passed

since Poland began exploration of unconventional natural gas resources, following the publication of reports by Advanced Research International and the Energy Information Administration that estimated recoverable shale gas resources in Poland at 3 billion cubic meters (bcm) and 5.3bcm, respectively. In this period, oil and gas companies have drilled 57 exploratory wells in Poland and performed 25 operations of hydraulic fracturing. Poland leads Europe in the number of wells aimed at determining unconventional gas resources. This work is still insufficient to confirm the country’s shale gas reserves, let alone to evaluate the potential for their commercial use. The number of wells drilled in Poland, or even the whole of Europe, pales in comparison to the number of wells drilled during the initial exploratory period in the Marcellus play in the United States. At this pace, there’s no chance to document Poland’s resources in the next few years. Unstable environmental regulation and lack of support for the industry on both the national and EU level are to blame for the slow pace of exploration. Some investors have given up. The number of exploratory concessions granted in Poland dropped to 92 as of early March this year from 115 in 2012. The government has since accelerated work on regulation of the legal environment (see interview, p. 12), prompted by the withdrawal of a few operators and by the conflict over Crimea, close to Poland’s eastern border.

www.cleantechpoland.com

| 13

Shale Gas

investment

Guide

I nd I ca t o r s

-2-

EXPERT INTERVIEW SGIG speaks to Grzegorz Kuś, tax advisor at PWC about the government proposals to change geology and mining law and the tax law in Poland. In short, the government proposes to simplify the process of granting concessions and to make concessions cover both exploration as well as production. Concession operators will come under a greater scrutiny in terms of the real work they do on their acreage. Once and if gas from shales does flow, its producers will be taxed with a special hydrocarbons tax and new increased royalty fees that - together with the standard CIT - will construct a tax rate of about 40 percent.

“Concessions are for real work: seismic, drilling, possibly production. They’re not financial assets that companies apply for only to trade them on” tion, first of all that there will be one concession for exploration and production, are also perceived as positive by the industry and investors. Whether they will turn out good for the state’s strategy to use mineral resources most effectively, we don’t know that yet.

prefers financing of operation with capital, not debt. The ministry of environment [responsible for concessions] is already asking some companies about capital to carry out operations. Operators will have to pay taxes

How can Poland make sure that

Gr z e g or z K u ś

Attorney-at-law, tax advisor, PWC.

concession operators are indeed doing their job? The key thing here is that there will exist a mechanism to relinquish concessions in case operators don’t do anything on them. Concession are for real work: seismic, drilling, possibly production. They’re not financial assets that companies apply for only to sell them on. Also, in the case of future concessions, there will be a mechanism to pre-qualify companies for their financial strength and competence in oil and gas so that no speculators do get concessions to “operate”.

In your conversations with the

industry, what are oil and gas stakeholders saying about the government’s ideas? I think that the general reception is that these changes are definitely for the better. Since the leadership of the ministry changed, there have been meetings with industry that discussed what needs changed and changes have come. First of all, the key change is getting rid of NOKE [the proposed state operator]. It’s a relief for the industry because no one had any idea how NOKE would work. They suspected that NOKE would be a superior office that would slow down the exploration process. Changes in how concessions will func-

14| |Shale ShaleGas GasInvestment Investmentguide guide| Summer | Winter SUMMER2013 2013 2014

Since there’s not good enough

data, are the government tax proposals coming too early? The industry shouldn’t be surprised at all that the government wants to tax shale gas. It’s standard in many gas markets across the world. You might say that it’s premature as there’s no production yet, but on the other hand investors need something to plan their activities so that they can apply a tax and cost regime to their financial models. There are problematic issues, for example, the cost of financing operations won’t be recognized as a cost to lessen your tax, which is a rather radical approach. It’s a philosophy that

from 2020, but production may not begin until 2016-2018. So the window of favorable tax environment will be really short. Does it matter to oil and gas companies? In theory, companies should now speed up exploration in order to max out the time during which they won’t have to pay these taxes. But the government

“The government's idea for the new taxation to enter into force from 2020 is also to shield PGNiG from paying them right away, because they produce oil and gas already” idea for the new taxation to enter into force from 2020 is also to shield Polish Oil and Gas Company (PGNiG, Poland’s state own oil and gas firm) from paying them right away, because they produce oil and gas already.

Shale Gas

investment

Guide

I nd I ca t o r s tied to the east Most European countries are dependent on imported Russian gas in at least 11%. Several countries, mainly in Central and Eastern Europe, are getting close to 100% of their gas from Russia, which is creating a strategic disadvantage and a political problem. Poland has recently proposed that the EU negotiates gas purchases from Russia as a bloc, develops domestic production and works to increase supplies from Middle East and North Africa. WOJCIECH SŁOWIŃSKI Par t n er , E n er g y Gro u p, P w C

caused by the Crimea conflict, the European Union is paying increased attention to the need for energy source diversification of its individual member states. Poland has proposed joint purchases of natural gas by EU member countries. Spain has suggested wider use of its regasification terminals by other member states. EU’s ally, the United States, is working to change the law so that it can export LNG overseas. The capacity of LNG terminals in Europe is not sufficient to replace supplies from Russia. Changing the direction of gas supplies for the whole Europe would require multi-billion dollar investments in expanding and redeveloping network infrastructure. The US’s first liquefaction terminal that could be used for exporting gas will come onstream in 2016 at the earliest. For this reason, the EU has turned its attention to energy sources like unconventional oil and gas that could be a real alternative to hydrocarbons supplied from Russia. Great Britain, which introduced a moratorium on hydraulic fracturing just a few years ago, is now declaring support for shale gas exploration, including tax preferences and leaving part of the revenue from the resource’s production with local communities. The tension between Russia and Western Europe and the United States may breathe second life into Europe’s extractive industry.

11-50%

Norway

22%

51-89%

Russia

> 90% LNG: Qatar, Algeria Egypt, Nigeria, Peru, Trinidad and Tobago

24%

12%

LNG Terminals in Continental Europe:

existing under construction

l n g ' s e n try p o i n t s Location

As a result of the strained situation

< 10%

Country

Algeria, Libya

EXISTING and under construction (*) LNG terminals in europe

Regasification capacity (bcm)

Sines

Portugal

7,9

Huelva

Spain

11,8

Cartagena

Spain

11,8

Sagunto

Spain

8,8

Barcelona

Spain

17,1

Bilbao

Spain

Mugardos

Spain

3,6

Fos Tonkin

France

5,5

Fos Cavaou

France

8,25

Montoir de Bretagne

France

Zeebrugge

Belgium

Rotterdam

Netherlands

Panigaglia

Italy

3,4

Porto Levante

Italy

7,56

Revithoussa

Greece

5,3

Milford Haven (South Hook )

United Kingdom

Milford Haven (Dragon LNG)

United Kingdom

Teesside

United Kingdom

4,6

Isle of Grain

United Kingdom

19,5

Gijon (Musel) *

Spain

Dunkerque *

France

Toscana Offshore *

Italy

3,75

Klaipeda *

Lithuania

Świnoujście *

Poland

Source: PwC elaboration based on Eurogas Statistical Report 2013, Gas Infrastructure Europe, ENI World Oil and Gas Review 2013

EXPERT VIEW

-3-

The Polish LNG terminal is scheduled for delivery at the end of 2014. Its initial

regasification capacity will be 5 billion cubic metres (bcm) annually, to be expanded to 7.5 bcm, which would cover some 50% of the annual Polish gas demand. Source: PwC elaboration based on Gas Infrastructure Europe

www.cleantechpoland.com

| 15

Shale Gas

investment

Guide

I nd I ca t o r s

entry points are expanded, even up to 7 bcm per year. Besides, completion of LNG regasif icat ion ter mina l in Świnoujście will allow import of additional 5 bcm gas from overseas, with the option to expand up to 7.5 bcm. Nevertheless, no matter the extent to which gas system in Poland and Central and Eastern Europe will be expanded, we need to consider that Russia is, and will long remain, the main natural gas supplier in the region Regardless of the direction of supply, gas flowing to Poland from Germany as well from the south will, for the most part, originate from Russia and Central Asia. The only viable alternative to in crease energy independence - of Poland and other countries in the Central and Eastern European region is searching for additional energy sources, including unconventional gas.

country’s dependence on imports is set to grow. In 2013, more than 72 percent of gas supply to the domestic market came from imports, 77 percent of which from Russia. Just a few years ago, Poland had a single intersystem connection in Lasów that enabled gas supplies from alternative directions in the annual amount of mere 1 billion cubic meters (bcm). In recent years investments in gas infrastructure in Poland have stepped up, however (see map below). The result was launching new connection with the Czech system and expansion of the Lasów node – each providing for a possibility to import additional 0.5 bcm of gas per year. But the real difference was creation of so-called reverse on the Yamal gas pipeline. The reverse can secure supplies from Germany at the level of 5.5 bcm per year initially, and, once the

EXPERT VIEW

JACEK CIBORSKI V ice - d irec tor , E n er g y Gro u p, P w C

At a relatively stable level of domes-

tic extraction, and with the growth of domestic demand for natural gas, the

GEOGRAPHY OF NEW GAS IMPORT INFRASTRUCTURE

new gas import infrastructure capacity (BCM)

new ways in Direction

Current capacity

Target capacity

-4-

Operational from

LNG Świnoujście

global

0.0

5.0 (7.5)

2015 (2020)

Mallnow (reverse flow)

Germany

5.5

7.0

2015

Lasów

Germany

1.5

1.6

2015

PL-CZ

Czech Rep.

0.5

7.0

2019

PL-SK

Slovakia

0.0

5.8

2020

Gdańsk

LNG Świnoujście

Olsztyn Szczecin Bydgoszcz

PL-DE Mallnow (revers)

Poznań

WARSZAWA Łódź

Lublin

Wrocław

PL-DE Lasów

Source: PwC based on public data Katowice Kraków

After years of discussion, Poland is finally getting on to create new infrastruc-

Rzeszów

PL-CZ

ture to import gas from directions other than Russia. This should, in theory, give Warsaw some leverage in negotiating future contracts with Gazprom.

PL-SK

capacity (mcm, mcm/day) GAs storage facilities

current & future storage Current parameters

TARGET parameters

Active capacity[mcm]

Injection [mcm/d]

Withdraw [mcm/d]

Target capacity[mcm]

Injection [mcm/d]

Withdraw [mcm/d]

Operational from

Mogilno

412

9.6

800

9.6

28.8

2023

Wierzchowice

1,200

6.0

9.6

1,200

6.0

14.4

2015

Husów

350

2.8

5.76

500

3.68

5.76

2014

Strachocina

330

2.4

3.36

330

2.4

3.36

n/a

Swarzów

1.0

n/a

Brzeźnica

1.1

0.93

100

1.44

2016 2014/2021

Kosakowo

100/250

2.4

9.6

Total

2,447

22.9

38.65

3,270

26.52

64.36

Source: PwC based on public data

Another part of Poland's strategy to boost security of gas supplies is to expand or develop storage capacity. Plans are in place to increase gas storage capacity by 33% by 2021, mostly by expanding existing facilities, with an exception of a new project in Kosakowo.

16| |Shale ShaleGas GasInvestment Investmentguide guide| Summer | Winter SUMMER2013 2013 2014

a d vert o ri a l

Investors should smile at the new oil and gas law. It makes everything easier, from licensing to appraisal to production.

Piot r S pac z yĹ&#x201E;ski , S S W

A n n a Piot ro w ska , S S W

Welcome Amendments to the Geological and Mining Act

n March 2014, the Council of Ministers accepted a draft of an amendment to the Polish Geological and Mining Act. The text of the draft may still change as it will proceed through the parliament. Some of the proposed changes are disputable and will probably be still subject to public and parliamentary discussions. In general, however, these changes can be viewed as positive for investors, helping to streamline oil and gas investment. First of all, the proposed amendments plan to introduce a preliminary qualifying procedure for licensing, designed to evaluate the financial and technical ability of oil and gas operators to explore, appraise and produce. Only once an operator has been qualified, will they be able to apply for a concession. The draft amendment proposes a single concession to cover search, appraisal and production. This means the current distinction between exploration and production concessions

could be eliminated. Operators will be able to convert the currently issued concessions into a single joint concession, and seismic work done way of a simplified notification procedure. The current challenges with Joint Operating Agreements (JOAs) could get easier for investors. Hydrocarbon concessions shall be granted by way of tender, as is the current practice, but it will become possible for several entities to submit a joint tender which, if successful, would lead to the signing of a statutorily-regulated cooperation agreement. This is in contrast to the current system which entitled a single licence holder (ie. the SPV) to legal ownership of the concession. A procedure for granting concessions upon request will also be possible in respect to geographical areas that were already the subject of tender proceedings, where the tender was concluded without a concession having been awarded. All concessions will be granted for a period of 10 to 30 years.

The government has withdrawn from the idea of utilizing the National Operator of Energy Minerals (NOKE), which was originally intended to acquire shares in every production licence. Other changes designed to streamline oil and gas investment include the possibility to produce oil and gas after only partially appraising the asset. This will allow the remaining search and appraisal activities to be conducted simultaneously. Environmental cards for individual wells will be required instead of an environmental impact assessment (EIA). Finally, the duty to submit geological information shall be modified so as to require the mere submission of geological data, without any accompanying interpretation. The government has also accepted a draft proposal for a new Tax on the Exploitation of Hydrocarbons Act. However, such a tax shall only become payable from 2020 when the target joint taxation of shale gas production will reach approximately 40 percent. www.ssw.pl

www.cleantechpoland.com

| 17

t r e nd i ng

DZIENNIK.PL

March 12/14 Poland proposes new shale gas rules

They like me better

Poland’s government released draft rules on the taxation of hydrocarbon production and on geology and mining in an attempt to increase pace of shale gas exploration. The draft geology and mining law simplifies the process of obtaining concessions. Companies will be granted only one concession to explore, prove and ultimately produce gas. The government also scrapped the controversial provision to establish NOKE, a state-run operator with obligatory stake in each concession, to execute state control over “rational use of mineral resources”. The draft taxation law sets a cap of around 40 percent on shale gas operators, including CIT, a tax of maximum 25 percent on income and a special hydrocarbons tax of 1.5 percent of the value of extracted gas. According to the Polish Prime Minister Donald Tusk, the proposal was supposed to go to the first reading in the parliament in April.

Dec 2/13

Jan 14/14

Feb 14/14

March 5/14

Chevron resumes shale program in Romania

Eni quits Poland, focuses on Ukraine

FrackNation premieres in Poland

Cuadrilla’s shale gas in NW of UK estimated at 330 tcf; bigger than thought

Dec 19/13

Poland’s chief geologist Woźniak fired; replaced by Sławomir Brodziński

18 | Shale Gas Investment guide | summer 2014

KM Ratschka

Is anyone listening?

March 27/14 TransAtlantic farms into San Leon

WINTERSHALL.COM

Although challenges in communication between industry and government are common in most countries, Poland’s oil and gas operators have had particular cause to complain. The March meeting in the Polish parliament, the Sejm, of the Polish Shale Coalition (PSC) with members of the parliamentary committee on energy provided an opportunity for a frank discussion between members of the industry and parliamentarians. The meeting was initiated by Prof. Mariusz Orion-Jędrysek MP, former chief geologist, and organised by the PSC, an industry organization focused on education and advocacy. During the meeting, PSC member representatives spoke about obstacles that they face in getting shale gas exploration off the ground so that commercial scale production does take place by 2016. Key problems at the moment remain the amount of time required to gain necessary permissions, which raises the costs of exploration programs.

What we hope for someday

Poland-operating unconventional gas company San Leon Energy signed an agreement with North American independent TransAtlantic Petroleum Limited to farm-in to the San Leon’s acreage position in the Permian/SW Carboniferous Basin of Poland. Under the terms of the agreement, TransAtlantic would fund 100 percent of a six well work program focused on achieving commercial production in the Permian Main Dolomite and Rotliegendes formations while further proving the upside potential of the Carboniferous tight gas play. TransAtlantic would earn an undivided 50 percent working interest in the Nowa Sól, Wschowa, Góra, Rawicz, Prusice, Kotlarka, Oleśnica, Praszka and Wieluń concessions totaling more than 1.9 million gross acres. The carried work program is scheduled for completion by December 2015. Hutton Energy is also participating in the joint venture through its interests in the Oleśnica and Wieluń concessions.

March 25/14

March 13/14

trending

March 20/14 Poland Shale Coalition in the Sejm

Aberdeen Unconventional Gas: next 12 months critical for UK shale gas

March 31/14 PGNiG, Chevron team up to develop shale acreage in SE Poland

Shell cuts spending on US shales

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| 19

t r e nd i ng April 1/14 PM Tusk proposes EU energy union

He can crawl either direction

In April, Poland’s prime minister Donald Tusk toured Brussels (the seat of the EU key institutions) and Poland’s allies France and Germany in order to gain support for his Energy Union concept that Poland considers essential for the EU in the wake of Russia’s dented credibility as a supplier, following the Crimea crisis. The pillars of Tusk’s proposal are: • negotiation of gas prices by the EU as whole, • intensified investment in the European energy infrastructure, • better use of Europe’s own energy resources, including fossil fuel, • better solidarity in case of embargos or disruptions to gas supply, and • openness for new energy suppliers, like the US or Australia. The EU faces having to import up to to 80 percent of its oil and gas by 2035, EU leaders acknowledged at a high-level meeting in March. Mr. Tusk said that “signing agreements with emerging suppliers could transform the situation on the European energy market.

German operator of gas pipeline network GASCADE Gastransport finished an upgrade of its Mallnow station located at the Polish-German border that will allow gas to flow in reverse, from Germany to Poland. According to Gaz-System, Poland’s operator of gas transmission network, the upgraded Mallnow station will increase the safety of gas supplies to Poland. Poland currently imports about 11 billion cubic meters of gas, most of it from Russia. The potential to import gas from other directions, mainly the Czech Republic and Germany, is about 7.5 billion cubic meters. The issue of security of gas supplies has risen to political prominence in Poland recently, following Russia’s annexation of Crimea and a dent in Moscow’s credibility as European partner that ensued. Poland is also going to renegotiate price of gas imported from Russia, according to deputy Prime Minister Janusz Piechociński.

premier.gov.pl

machbar.de

April 1/14 Poland gains option to import gas

Just waiting for a chance to say this

April 2/14 Segolene Royal becomes France’s energy minister

April 11/14 Ohio regulators link seismic activity to fracking

20 | Shale Gas Investment guide | summer 2014

enerjigunlungu.net

CUADRILLA RESOURCES

April 23/14 Cuadrilla rolls out Lancashire consultations

San Leon Energy decided not to proceed with acquisition of Turkish energy company Alpay Enerji, following recent improvement of the company’s cash flow position. “[The decision] has been made following a new round of successful deal making in Poland where Baker Hughes will be developing the Siekierki gas field and TransAtlantic will be developing the Rawicz gas field and continuing to appraise the upside of the Carboniferous Basin,” San Leon said in a release. San Leon’s executive chairman Oisin Fanning added that the Baker Hughes and TransAtlantic deals “have positioned Poland to deliver cash flow and production more efficiently, enabling [San Leon] to reach its target of becoming at least break-even on a cash flow basis during 2014.”

Back another day

trending

April 14/14 San Leon ditches Turkey to focus on Poland shale

I’d believe me

Following consultations with local communities of Roseacre Wood and Preston New Road in Lancashire, northwestern England, Cuadrilla Resources plans to drill, frac and test the gas flow from up to four wells in each community. The company has been carrying out a programme of public consultation for the two sites that involved over 9,000 households. As part of the process, planning and environmental consultants at Arup have produced two new brochures detailing the emerging findings of the Environmental Impact Assessments (EIA). A programme is also underway to restore the exploration sites at Anna’s Road and Preese Hall, also in Lancashire, plans for which were approved by the local county council earlier this year. Cuadrilla also intends to get a planning permission to make seismic and pressure monitoring at the Grange Hill site.

April 19/14

April 24/14

Caroline Lucas Green MP cleared over fracking protest (see also p. 34)

E&Y: shale industry worth GBP33 billion to British economy

April 22/14 UK government plans changing trespass law to boost fracking

April 25/14

Egdon Resources UK acreage estimate: 18 tcf of gas initially in-place

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| 21

t r e nd i ng April 26/14 US to help shale development in Ukraine

May 5/14 Baker & McKenzie: UK HAS 26 Tcf shale gas

IPICK.CA

Baker & McKenzie, a consultancy, released a report about potential and challenges to shale gas exploration and production in the UK. Although UK’s unconventional gas resources, estimated at 26 trillion cubic feet (tcf) are dwarfed by those potentially found in countries like Algeria (707 tcf) or Argentina (802 tcf), they could be enough for the country to undergo a US-type shale gas revolution, if challenges are overcome. Typical challenges, such as lack of public support for drilling, are still to be overcome and the UK government is hoping that throwing its political weight behind shale gas will help UK’s shale gas cause. Following Russia’s takeover of Crimea, the UK government has also been playing the energy independence card. At the moment, however, the political support doesn’t seem to be working, as hardly any IOCs have decided to start exploration and UK companies are yet to roll out exploration effort on any significant scale.

US has pledged to help Ukraine develop its shale gas resources so that the eastern European country lessens its dependence on gas imports from Russia. “With the right investments and the right choices, Ukraine can reduce its energy dependence and increase its energy security,” US Vice President Joe Biden said at a press conference in Kiev in April. “We will stand with you to help in every way we can for you to accomplish that goal,” Mr. Biden added. The US has already approved of a $50 million aid package to Ukraine to help move toward greater energy security. According to the White House, the package would also include U.S. helping Ukraine gain a reverse gas flow from its western neighbors or assist with intensification of gas production from existing conventional gas and oil fields. Secretary of the US Department of Energy (DOE) Ernest Moniz also stated that the DOE plans to work with American private companies to help Ukraine develop its shale gas industry.

CUADRILLA RESOURCES

A kiss on the other cheek

Lots of gas out there

April 25/14

April 29/14

UK and Poland to fund shale gas opportunities study

Bakken oil fields mark billionth barrel of oil

April 28/14

San Leon to develop Siekierki gas field with Baker Hughes 22 | Shale Gas Investment guide | summer 2014

May 4/14 Violence erupts at Dart Energy drilling site in UK

trending

May 6/14 Iran offers Europe gas Iranian Deputy Oil Minister for International Affairs, Ali Majedi, told FNA newswire, “Iran can export natural gas to Europe three different ways, including via the Turkish pipeline [linking Iran to Europe through Turkey] which is considered the most cost-effective route under current circumstances.” According to Mr. Majedi, Iranian exports to Europe would come right at a time when Europe is looking for new sources of gas supplies and production from South Pars gas field is expected to begin soon. Foreign Policy magazine noted in March 2014 that if international sanctions against Iran were lifted “and Europe was able to invest in Iran’s gas sector, not only would Iran’s battered economy reap the benefits of trillions of dollars of energy revenues over time, Europe would gain a new, major energy partner that its companies can invest in. Iran needs European technology and Europe needs to find a way to release itself from Russian energy reliance.”

WIKIPEDIA

May 6/14 Pomerania gets anti-shale

Poland’s Baltic Basin in the northern Gdańsk region of Pomerania has enjoyed little opposition to shale gas exploration so far. However, in early May, the local government of the Parchowo commune unanimously adopted a resolution against exploratory work in two villages on BNK Petroleum’s Bytowo concession. According to BNK, the local council’s opposition smacks of NIMBY, not in my backyard, attitude. “Shale gas exploration does not concern only a few of people. It’s about the energy safety of the whole country,” said Jacek Wróblewski, BNK’s development director. BNK said it would not undertake any exploration against the will of local residents and would set up a local information point to convince the local community of the positives of shale gas exploration in their area. Common ground might be hard to find, however. “We will not allow to destroy and poison the place where we live. There are other places where [BNK] can extract gas,” said Wiesław Stopa from a local NGO.

TRIBUINE.COM.PK

The reason why I’m king of my castle

Axis of evil exports

May 6/14

May 7/14

May 9/14

UK poll: 74% against fracking trespass law

House of Lords Econ Cttee: shale gas urgent national priority

Poland blocks sale of RWE’s shale concessions to Russian firm

May 7/14 Baltic Ceramics gets €10m for proppant factory

Compiled by Kacper Ciesiołkiewicz

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| 23

24 | Shale Gas Investment guide | Summer 2014

UK FOCUS

LICENCE TO DRILL The UK largely shed its coal industry years ago. Its offshore oil and gas reserves are in decline. While the bulk of gas imports coming from stable and friendly countries like Norway, the government is looking at shale gas as a resource that could reduce a growing dependency on foreign fuels.

CONTENTS l Coming oil and gas license bid to test interest in British shale

p.26

l Unknowns blur the picture of UK’s shale gas viability

p.30

l Cuadrilla’s execs confirm their enthusiasm for shale gas

p.32

l UK producers’ association calls for action

p.34

l Britain’s lead anti-shale voice Caroline Lucas interviewed

p.36

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| 25

D E V E L O P IN G S HA L E

Licence to Drill The UK government is hoping to make a decisive step this summer towards exploration and production of shale gas by offering exploration permits, to result in 30-120 new well pad sites in the next few years. B y S a r a L i c h w a i n lo n d o n

The United Kingdom will offer shale gas exploration permits for the first time this summer, as the country tries to develop an attractive investment framework for an industry with huge potential. How successful its 14th Onshore Oil and Gas Licensing Round is going to be will depend on whether energy companies are willing to invest in an unproven play, while also winning over the public. The UK government hopes that development of the country’s shale gas reserves will cut the gas-import bill and boost the economy through new jobs and tax revenue. The government asked the public to express any concerns during a threemonth consultation process on the licensing round which ended in March. Once the government’s Department of Energy and Climate Change (DECC) analyses the public’s responses, it plans to outline which licenses will be on offer in mid-summer, according to a DECC spokesperson. DECC will then offer the licenses in rounds in which applicants compete 26 | Shale Gas Investment guide | Summer 2014

for exclusive rights over geographical areas, rather than auction the licenses off. The process is intended to attract the investors who are most likely to develop the hydrocarbons, rather than those who pay the most for the acreage, but then just sit on it. “Licensing rounds yield better quality bids,” DECC said. “Unlike auctions, licensing rounds do not divert significant sums of money from exploration work.” The department expects a number of companies to bid. DECC has forecast that it will award between 50 and 150 licenses, each spanning between 4,000 km and 20,000 km, for unconventional oil and gas exploration drilling. The licensing round may create between 30 and 120 well pad sites. BASINS DECC has not specified where these licenses would be, but has identified areas it considers promising for shale gas exploration. The Bowland Basin in northern England, where industry frontrunner Cuadrilla Resources has drilled test wells, is

a promising area, according to the British Geological Survey (BGS). The basin could hold 2,281 trillion cubic feet (tcf) of gas from shale, the BGS has estimated. The UK’s conventional gas reserves are just 8.7 tcf. Cuadrilla Resources, the original pioneer of UK shale gas exploration, estimates there could be 200 tcf of gas within its Bowland licence alone. The company is owned by AngloAmerican equity firm Riverstone Holdings and Australian engineering company A J Lucas In September 2011, Cuadrilla said it was sitting on vast shale gas resources in Lancashire, northern England and hoped to start commercial development in 2012. But the government placed an 18-month moratorium on drilling in May 2011 after Cuadrilla’s exploratory activities caused two minor earth tremors. Unlike Cuadrilla, the government is tempering shale gas expectations, saying it is not yet possible “to make meaningful estimates of how much shale gas may be practically and commercially recoverable”.

PHOTOPIN

UK FOCUS

The Midland Valley in Scotland, the West Lothian Oil-Shale basins, as well as the Kimmeridge and Lias Jurassic shale intervals in the Weald and Wessex basins in southern England are also thought to harbor unconventional potential. Only when more test wells are drilled and the DECC has awarded the licenses will we know how much shale gas the UK is recoverable. It could take another decade before any of the gas is commercially produced. DANGEROUS MOMENT Protests against shale gas have popped up in Europe - in Romania, where Chevron has faced stiff opposition to its plans to drill for shale gas, as well as in Germany. But governments, especially in countries dependent on imports of Russian gas, have been keen to tap this resource. Production from shale rocks could help to cut the UK’s gas import bill, Dan Byles, a UK Member of Parliament (MP) and chair of the All Party Parliamentary Group on Unconventional Oil & Gas, told an industry conference. Unless shale gas

production takes off, he expects 80 percent of the UK’s gas will be imported at a cost of up to £15 billion per year by 2030. acreage companies could bid for in 2014

Existing Onshore licences Area Under Consideration

Source: DECC

Balcombe in the north, Weald and

Wessex in the south are deemed promising

The licensing round could be “a dangerous political moment” for an industry not yet off the ground, Mr. Byles said.

Members of Parliament, who realize companies have been awarded shale gas exploration licenses in their constituencies, could find themselves unprepared, scrambling to placate to angry voters. In fact, public support for shale gas in the UK is declining, according to a University of Nottingham study. Two groups, No Dash for Gas and Greenpeace, have organised anti-shale anti-fracking demonstrations, notably No Dash for Gas’s six-week protest at Cuadrilla Resources’ drilling site in Balcombe, southern England, last summer (see interview with one of the protest’s leaders, Caroline Lucas MP, p. 30). IGas, another UK-based independent company, has had protestors camped near one of its sites, at Barton Moss near Manchester, since December last year. The company’s license areas between Liverpool and Manchester could contain 172 trillion cf of shale gas, IGas said in June 2013. “Unless we get the public onside we won’t get to find out if the gas is there or not,” said Andrew Austin, IGas’ chief executive. “Southern England 

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| 27

PHOTOPIN

Unlike auctions, licensing rounds do not divert significant sums of money from exploration work is a pretty sensitive area for NIMBYism (“not in my back yard”). That’s the difference between operating offshore and onshore.” SECURITY OF SUPPLY Tensions between Russia and Ukraine “have redoubled politicians’ views on the importance of indigenous supply,” and will boost support for shale gas, Mr. Austin said. Shale gas could be a new source of energy supply for the UK as its conventional oil and gas reserves dwindle. The UK’s total energy production fell 7 peercent last year, to 114 million tonnes of oil equivalent, according figures released by DECC in March. Onshore coal production fell to a historic low in 2013, while oil and gas output from the UK Continental Shelf continues to decline. As a result the UK’s net energy-import dependency soared to 47 percent in 2013, the highest level since 28 | Shale Gas Investment guide | Summer 2014

1975. This is compared to Germany, quickly, said Greg Pytel, a founding which relies on imports from Russia for member of the Expert Advisory around 40 percent of its oil and gas needs. Panel of Shale Gas Europe. “This government is too cozy with LURING OPERATORS private companies,” Mr. Pytel charged. Last year the government announced “The government should allow the a series of tax breaks for shale gas free market to work to get the best development aimed at luring operators deal for the taxpayers...to push cominto the sector. George Osborne, the panies against each other in a comUK chancellor, said in March 2013 the petitive process,” Mr. Pytel added. government will increase the period These financial incentives have atduring which companies can offset tracted interest from energy compaexpenditures against losses for tax nies. Last October GDF Suez, which purposes, to 10 years from 6 years, for is partly owned by the French governshale-gas projects. The UK also plans ment, bought a 25 percent stake in 13 to trim its corporate tax to 20 percent of Dart Energy’s UK onshore licences from 21 percent in 2015. in Cheshire and the East Midlands, New shale-gas projects could be overlying the Bowland Shale. This was GDF Suez’s first entry into eligible for taxpayer-sourced infrastructure funding of up to £3 billion licences with shale gas potential globstarting in 2015. ally and its first foray into onshore By announcing these tax cuts, the exploration in the UK. The French government has given energy com- utility company cannot explore for panies negotiating power - too shale gas in France because because

UK FOCUS

the government has banned fracking. GDF Suez agreed to pay Dart Energy an upfront cash consideration of $12 million in addition to appraisal costs of $27 million. The two companies plan to drill up to 4 wells targeting shale gas in different areas of the Bowland basin in addition to wells targeting coal bed methane. GDF Suez declined to comment on whether it plans to bid for additional licenses in the new round. The supermajors have also shown an interest in UK shale gas exploration. In January, France’s Total bought a 40 percent stake in two of IGas’s shale gas exploration licences in Lincolnshire.

legal obstacles, such as access to privately-owned land, remain. UK landowners don’t have the same incentive as their US counterparts to allow companies to drill on their land because they cannot reap the benefits. Mineral rights in the UK are owned by the Crown, the Royal Family’s Estate. INCENTIVIZE THEM ALL To provide incentives for the UK public to support shale gas exploration the energy department has suggested operators should compensate local communities at a rate of £100,000 ($167,000) per well where fracking takes place, in addition to one percent

But Wood Mackenzie, a consultancy, is skeptical on unconventional gas and oil prospects outside of the US and Australia. Energy companies are prioritizing value over volume in their energy strategies, said Dr. Andrew Latham, Wood Mackenzie’s Vice President of Exploration. This has led to a renewed focus on proven, liquids-rich plays at the expense of frontier, unproven ones, such as the UK’s, or European in general, shale gas sector. “We are seeing a trend of companies adjusting course, after having been focused for several years on high impact frontier exploration,”

UK’s gas imports by country of origin; UK’s gas imports 2000-2013 ( million cubic meters)

60,000

575 3,307

50,000

7,804

40,000 27,962

8,607

30,000 20,000

09 20 10 20 11 20 12 20 13

08 20

07 20

04 20

03 20

02 20

Other

Belgium

Qatar

10,000

Netherlands

Norway

Source: DECC

UK’s gas imports decreased in 2012-2013, but with domestic production in decline, the country’s dependence on imports will

grow. Norway and Qatar remain key suppliers, but Egypt, Algeria, or Trinidad and Tobago have also put themselves on supplier’s map.

Total will pay $1.6 million in back costs and fund a work program of up to $46.5 million, with a $19.5 million minimum cash commitment. While the financial commitments energy companies have made to UK shale gas exploration indicate interest,

of revenues from production. This could raise between £3 million and £12 million for individual local communities, the DECC said. But buying public support will increase operators’ costs, potentially offsetting the benefits of tax cuts.

Mr. Latham said. “The market wants more cash returned to shareholders at a time when rising costs and taxes have eaten into companies’ free cash flow,” he said. It’s a “buyers’ market for exploration assets,” Mr. Latham added.

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s h a le g a s pol i t i cs

Before shale gas becomes a real commodity in the UK, the country needs to see through several unknowns that will have influence on the resource’s viability. The fundamental one is that hardly anyone knows how costly the British geology will turn out to explore. BY N i c h ol a s Ne w m a n i n Lo n d o n

Prime Minister David Cameron’s labelling of shale gas as key to Britain’s energy future has been selling well within the industry. But it hasn’t made the issue of determining how viable UK shale gas could be any easier. There’s no full agreement over the amount of recoverable shale gas. The Geological Society in London estimates a range of figures range from 822 trillion cubic feet (tcf) to 2281 tcf, with a central figure of at least 1329 tcf of gas in place onshore. Therefore, if 1329 tcf of gas is a realistic estimate, then it is likely that only around 10 percent, or about 130 tcf, could be available for extraction, sufficient to meet about 50 years of forecasted demand. “British consumption of gas in 2012 was 2.76 tcf, making the country one of Europe’s largest gas markets,” said Howard Rogers at Oxford Institute of Energy Studies. According to John Williams, senior principal at Pöyry Management Consulting, a consultancy, shale gas operators in the UK could be producing 30 | Shale Gas Investment guide | Summer 2014

gas at around $10 per million British Thermal Units (about 28,000 cubic meters). “This is roughly the current European wholesale gas price,” Mr. Williams said. He notes that this also is roughly double the cost of gas at the

“I would expect government to engage with key stakeholders, but to do so in order to provide responsible leadership, not pliant cheerleading” Tom Greatrex, shadow energy minister US Henry Hub Gas Index. The Henry Hub index is the US pricing point for natural gas futures contracts traded on

the New York Mercantile Exchange, world’s largest physical commodity futures exchange. The simple equation to describe economic viability of British shale gas is that shale gas companies will need to achieve a production price below that available at the UK National Balancing Point (NBP) in order for their efforts to make business sense. NBP is a virtual trading location for the sale, purchase and exchange of UK natural gas. Gas produced over NBP’s pricing will be too expensive for end users and versus imported LNG. While it’s easy to point to the NBP as a gas price reference point, it’s difficult to assess other unknowns about shale gas economics. Arguably, the most important one is that it must be sufficiently easy for companies like Cuadrilla or IGas to extract commercial quantities of gas at a cost of production that is competitive with other sources. “UK shale gas production will need to be produced at a cost that will be able to displace imported gas, most likely LNG,” Mr. Williams said. In 2012,

PHOTOPIN

Known Unknowns

UK FOCUS

“UK shale gas production will need to be produced at a cost that will be able to displace imported gas, most likely LNG” John Williams, Pöyry Management Consulting UK import dependency was at 43 percent, of which Norway provides 55 percent and Qatar 27 percent, according to DECC. “Shale gas will be no competition to major sources of gas supply, like pipeline gas from Norway,” Mr. Williams said. “More likely is that shale producers will be able to compete with marginal sources of gas such as LNG imports from the Middle East, especially in the context of the LNG market becoming increasingly globalized,” he added. Increasing demand from Asian economies such as India and China, are likely to force the price up for Middle Eastern LNG supplies. This will make UK imports of LNG from such countries as Qatar more expensive. “We don’t expect shale gas production to have a significant impact on prices here in the UK as these are set at the UK’s NBP, which itself is set at the wider European level,” said Mr. Williams. Since shale gas is no different in market terms as natural gas, the market is unlikely to price it differently from natural gas. INFORMATION GAP The industry, investors, as well as the government faces an information gap about current rock formations and ensuing production costs in the UK. What can be said with certainty is only the obvious fact that conditions in Britain are quite unlike in the United States. The differences are clear in terms of regulations, ownership of mineral rights or the fact that Britain lacks a well-established exploration and oil field support industry. Nevertheless, in terms of fundamentals – the geology – the scope of differences and how they could affect shale gas companies remains unknown. It has been suggested by some industry insiders that UK costs could be at least double those of the US. This would

limit room for price reduction for consumers, according to Bloomberg New Energy Finance. In order to determine the effect that the British geology has on the economics of shale gas, companies will have to drill as many well as they can in a relatively short time. From the point of view of the industry, however, Britain’s regulatory and planning processes are hindering big scale drilling. There has been an effort by Britain’s environment agency to streamline the approval process for obtaining the variously environmental, health and safety and planning permits to allow the drilling for shale gas. Mr. Williams does not think that there is the current institutional capacity to cope with providing the planning permits and approvals of upwards of upwards of 100 wells per year. Currently, there are only maybe five or six such applications throughout the whole country. It could be argued that the current planning procedures are inadequate for meeting today’s needs. “There could be a risk that if the approvals process is not made efficient for the production phase, then it may not be possible to produce shale gas in commercial quantities to make it worthwhile for the shale developers,” Mr. Williams said. GOLD-PLATED OR GAME OVER Political position of shale gas in the UK is ambiguous. The Prime Minister David Cameron actively supports shale gas development, while his deputy Nick Clegg’s is lukewarm at best. Even so, the government established a specific unit with DECC to facilitate shale gas development called the Office of Unconventional Gas and Oil (OUGO). It is responsible for the licensing oil and gas exploration and production. However, operators will still have to gain permission from land-

owners and various government agencies including the Welsh and Scottish governments and Health and Safety Executive. Amongst the new incentives for the industry, include a new allowance for conventional and unconventional onshore oil and gas projects is to be introduced. This will allow E&P companies to deduct 75% of their qualifying capital expenditure in relation to a well pad from their profits for the purposes of calculating the supplementary charge. As for local councils that permit shale gas developments, the government will allow them to keep 100 percent of business taxes; they collect from the sites under a government move to persuade communities to accept the fracking process used to extract the gas. A new infrastructure bill is also in the works to circumvent landowners that have not given their permission to drill. However, given the political sensitivity of shale gas in the UK, where issues of national energy security interplay with environmental concerns (see p. 34), government regulations are under a great scrutiny. “Suspicions are high so the regulatory regime needs to be very robust,” said Mr. Williams. “Everything needs to be gold-plated - any slip-ups and it’s game over. This is why we haven’t really moved forward,” Mr. Williams said. Shadow energy minister Tom Greatrex says that shale gas could have a role to play in improving energy security. He cautioned, however: “I would expect government to engage with key stakeholders, including businesses, but to do so in order to provide responsible leadership, not pliant cheerleading.” “It is increasingly concerning that Tory ministers seek to exaggerate the potential benefits of shale and dismiss genuine and legitimate concerns,” Mr. Greatrex said.

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C UADRILLA RE S OUR C E S

Gas of one’s own Cuadrilla Resources’ chairman Lord Browne and chief executive Francis Egan hope that their company will get exploration up to speed soon, meeting government expectations for domestic shale gas to reduce Britain’s growing dependency on imports. By Pau l G a r r e t t i n lo n d o n

The chairman of Cuadrilla Resources, one of Britain’s fracking frontrunners, doubts shale gas will bring about a US-style fall in European gas prices. Instead Lord Browne, former BP chief executive, sees shale gas as a transition fuel on the road to a low-carbon economy and an answer to looming questions on Britain’s security of energy supply. “The UK is part of a well-connected European gas market, and unless it is a gigantic amount of gas, it is not going to have a material impact on price,” said Lord Browne, who is also managing director of Riverstone Holdings, which co-owns Cuadrilla. Cuadrilla is a privately owned company, which includes Anglo-American equity firm Riverstone Holdings and Australian engineering company AJ Lucas as its shareholders, aiming to be the number one shale gas player in the UK. Its managers are discreet about their strategy. Lord Browne and chief executive Francis Egan both declined to comment on where they are going to drill apart from Lancashire in the 32 | Shale Gas Investment guide | SUMMER 2014

Bowland Basin or on how much they’re ready to spend on this. The company is looking at onshore oil. PROTESTS For now, in the United Kingdom, Cuadrilla is more associated with antifracking protests at its Balcombe site than with robust operational activity. Minor earth tremors precipitated by Cuadrilla operations were a flashpoint for opposition to fracking in Britain. The tremors were part of the reason for the government’s moratorium on the method. The British Geological Survey has since said more tremors per year are caused by old coal mining seams than by shale gas activities. Opposition to shale gas in Britain is now focused on water contamination as well as the traffic and noise associated with exploration, which is burdensome to local people. Fracking doesn’t cause water pollution, Lord Browne said, but concedes that “there have been some issues to do with leaking of gas into aquifers as a result of imperfect operations, mainly to do with the cementing of well casings.”

“There have been some bad practices in the US in the disposal of waste water,” because the United States government failed to create appropriate regulation for fracking, Lord Browne said. In Britain, academic organization The Royal Society recommended last year that there is no need for specific regulations for fracking to be drawn up in the UK. Lord Browne echoed that sentiment when he said the current web of regulation spanning the Department of Energy (DECC), Environment Agency, Health and Safety Executive, and local planning consents is sufficient. DRILL ASAP Cuadrilla’s acreage development program is dictated by a sense of urgency driven by UK’s increasing reliance on imported natural gas for power generation and industry, as well as domestic use. Industrial use of gas, such as in the chemical industry is less political and gets less attention, much unlike domestic use, as most homes in Britain use gas for heating and cooking.

Cuadrilla Resources

uk focus

Will Cuadrilla deliver? It might happen on this well pad in Preese Hall

“We need to drill probably 10-12 wells and test them and it needs to be done as quickly as possible,” Lord Browne said. For now, Cuadrilla does not intend to frack at Balcombe but is looking elsewhere, primarily in north west England.

opposition” to shale gas exploration in the UK, development “will take time,” said Mr. Egan. “People need reassurance.” “Drilling a test well only takes three months, but a lot of delays are likely

“The shale gas industry has more work to do to sell its story” Francis Egan, CEO of Cuadrilla Resources In ten years’ time, Europe will import 90% of its gas, according to data from the International Energy Agency as well as the EU’s own policy documents, much of it from an unpredictable and aggressive Russia. “Given planning issues and vocal, articulate and well-organised public

to stem from local opposition,” Mr. Egan said. “The ‘circus coming to town’ period is short, after which the footprint of a shale gas well in production mode is small.” “The shale gas industry has more work to do to sell its story,” added Mr. Egan.

REDUCE THE GAS BILL Selling the shale gas story is going to get help from the government. Like Lord Browne, the UK energy minister Michael Fallon said that the case for including shale gas in a lower carbon energy mix remains strong. “We need to reduce carbon emissions from electricity generation, enhance security of supply, and make energy in Europe more affordable,” Mr. Fallon said. “Britain’s imports of gas will cost us £10 billion a year by 2025.” To reduce the gas import bill, the UK will need to adapt the development of the shale gas industry to local conditions. In the US, the shale gas under someone’s land is their property. In the UK, it belongs to the government, in the form of the Crown Estate agency. Similar rules apply across Europe. Ownership of mineral rights is no panacea. Some myths persist about the speed at which shale gas industry progressed in the US, according to Mr. Egan. “The overnight success of shale gas in the US was no such thing,” he said. “It took more than a decade to establish a shale gas industry there… with a developed onshore oil and gas drilling infrastructure already in place,” he added. In the mid-term, international law firm Bircham Dyson Bell expects 20 to 40 explorations wells will be drilled in the UK in the next five years. That’s fewer than the 57 wells that Poland has drilled since 2011. But the industry’s potential to broaden Britain’s energy mix, boost local economies, and create thousands of jobs will prove irresistible to the government, the firm said in a report. “Significant and widespread exploitation of shale gas in the UK now looks likely to happen,” Bircham Dyson Bell added.

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O P ER A T ION S ’ NE X T YE A R

A Call to Action The importance of the next 12 months for shaping the future of the UK’s onshore unconventional oil and gas markets cannot be overestimated, says Ken Cronin, CEO of the UK producer’s association UKOOG By K e n C r o n i n

W h e n I s ta n d h e r e 1 2 months from now, someone in this industry should have drilled a vertical well, a lateral well and be on the verge of hydraulically fracturing. That’s what we need to gain over the next 12 months. If we don’t, we will have let others persuade local communities that the U.S. - with its Kyoto meeting emission targets, lower prices, manufacturing industry on the rise, investment in renewables increasing - have got it wrong - and that we in Europe have got it right - with our higher prices, higher coal burning, higher emissions and manufacturing moving to the U.S. If we don’t, then we will have let others persuade local communities that we don’t need gas, even though the fact is that it provides 40 percent of our electricity, 80 percent of our heat, and that it provides hundreds of every day with everyday products such as toothpaste and cosmetics. If we don’t, then we’ll lose the supply chain, the people living and working in our communities. If we don’t, we will have let others persuade local communities that we don’t need the vital tax revenues or direct community benefits. Above all, we will have let others win the argument that our industry 34 | Shale Gas Investment guide | SUMMER 2014

is not safe, despite the evidence from institutions such as the Chartered Institution of Water and Environmental Management, Public Health England and a plethora of other leading academic and scientists. The year 2013 was about getting our environment and planning regimes into a fit for purpose system. 2014 will be about personally communicating as

people from negative to positive. Our target is not the mobile, professional protesters. Our target is local communities. We as an industry need to do more local engagement. We have a system in place that allows us to engage with the public at least five times during the planning and permitting process. Local regulators need to do their

2014 will be about personally communicating as effectively as possible with local communities to make sure they understand the processes and benefits effectively as possible with local communities to make sure they understand the processes and benefits. Studies show that the more information given to residents the more they become convinced to support what we are doing, and the more support they give to shale as an indigenous source of energy. The other day this point was vividly underlined on BBC when Francis Egan of Cuadrilla addressed a small number of residents in Lancashire, alongside representatives of Friends of the Earth. It was interesting to see that he was able to change perceptions, moving

bit by engaging with local residents and explaining the process and underlining how tightly regulated our industry is. We cannot get into a position where we are importing the majority of our gas from countries with a worse human rights and environmental record, countries which are effectively holding the UK to ransom by energy prices and supply. The article is an edited version of Mr. Cronin’s keynote speech from the Unconventional Gas Conference, held in Aberdeen in March 2014.

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photopin

c o n c er n e d c i t i z e n s

“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”

The summer of British discontent Professor Jerzy Nawrocki

Just minutes after her acquittal by a court in Brighton, Britain’s top anti-shale gas activist, Caroline Lucas Green MP, spoke to the Shale Gas Investment Guide about why she thinks fracking is a cul-de-sac of Britain’s energy policy. By Pau l G a r r e t t i n b r i g h to n

Caroline Lucas, Green Member of Parliament (MP), has been acquitted of obstructing police during last year’s demonstrations against Cuadrilla Resources’ exploratory oil drilling operations in the village of Balcombe in Sussex, southern England. She is now free and says will continue campaigning against hydraulic fracturing, strengthening the hand of opposition to shale gas drilling in the UK. Its focus has now switched to the Bowland basin in Lancashire, north west England, where Cuadrilla plans more test drilling. “The only safe and responsible thing to do with shale gas is leave it in the ground,” Ms. Lucas told the SGIG outside the Brighton court. “Exploiting shale gas will simply undermine the 36 | Shale Gas Investment guide | SUMMER 2014

struggle to halt carbon emissions and global warming.” Ms. Lucas, 54, is interpreting a United Nations’ Intergovernmental Panel on Climate Change’s recent report on global warming. She believes its message is that renewables are the ultimate aim so too much emphasis on natural gas as a bridging fuel could be a distraction. This is not the view of those who see gas as a far more environmentally friendly fuel than coal or oil. DICTATING POLICY “The government should listen to the public and stop letting oil and gas industry lobbyists dictate UK energy policy,” said Ms. Lucas, who is Britain’s first and only Green MP, for the Brighton Pavilion constituency. “Fracking for

shale gas will not lead to lower energy prices, will not give us security of energy supply, and will not create jobs.” The Balcombe protesters include local residents, people from other areas of the country where fracking is an issue, as well as members from environmental groups and the UK Green Party. Ms. Lucas, a lifelong environmental activist and author with links to Oxfam and the Royal Society for the Protection of Animals, said the Sussex drilling operation and the protests around it represent bigger argument. “MPs have underestimated the level of opposition to shale gas, Ms. Lucas said. “If we think that wind power has problems with opponents -- you haven’t seen anything yet.”

UK FOCUS

“The only safe and responsible thing to do with shale gas is leave it in the ground” Caroline Lucas, Green MP

WELLS AGAINST WIND To extract just 10 percent of Britain’s shale gas reserves some 10,000 wells would need to be sunk, MP Alan Whitehead said at a Parliamentary debate late last year. That would suggest a big potential for protests at sites across the UK. “Wind power needs backup,” Ms. Lucas said in Brighton. “There will need to be a transitional generation fuel to get us to a point where we can rely on renewables.” But wind power is intermittent and needs baseload generation from nuclear or gas-fired power plants when the wind doesn’t blow, or storage, such as from hydro-power. Onshore, wind only blows about 30% of the time. Offshore, where building wind turbines is more expensive, it blows about 60% of the time. “We would rather continue with conventional gas – and if imports are required, by pipeline rather than LNG with its high carbon footprint,” Ms.

Lucas added. “It’s easier to turn the tap off with conventional gas when the time comes.” “I see biogas [a fuel generated from human sewage methane or agricultural sources] as part of the transitional fuel mix,” she said. “Biogas has less volume potential than shale but it has greater longevity as a resource. Shale gas has enhanced both energy security and lower prices in the United States, but only because North America is a closed market, Ms. Lucas said. “We are part of an interlinked European gas market,” meaning local com-

MS. LUCAS’ file

“It’s a touchstone issue across a broad group of people – even the National Farmers Union has expressed concerns,” she added. The Balcombe drilling site is sandwiched between a narrow country road and the London-to-Brighton railway line, close to a Victorian railway tunnel and not far from Ardingly water reservoir. The city Brighton, Ms. Lucas’ political base, has a history of environmental awareness Critics have said such sensitive geological formations in such a scenic rural setting is ill-suited for a 3,000 foot vertical and then horizontal well or for water-filled tankers making frequent deliveries. Cuadrilla said it is not undertaking fracking at Balcombe and that its activities there have presented no threat to the water table.

Ms. Lucas says she will go on campaigning

munities won’t necessarily benefit from cheap gas, she added. “It will be sold on the market to the highest bidder.” Policy certainty and scale brought about by bigger and more far-flung projects will bring down the cost of offshore wind within a decade, according to Ms. Lucas. The current government does not deliver that certainty. Greens would prefer if fossil fuels stayed in the ground, forcing human-

ity to go full-pelt into renewables. “Britain has a leadership role [in limiting greenhouse gas emissions],” Ms. Lucas said. “We were the first country to industrialise and so start the climate change process.” “Even China is investing a great deal in technologies such as hydropower and wind,” she added. OUTSIDE MAINSTREAM Lucas sees a role for gas a bridging fuel only in the short term, perhaps the next 20 years. Longer term, its role as a backup resource could be mitigated by the development of more interconnectivity between European countries with offshore wind farms. “Shale gas will lock us into decades of fossil-fuel based energy generation and that is the wrong direction to take,” she said. Ms. Lucas is not on her own in this fight, there are politicians who support her views. Keith Taylor, a Member of the European Parliament for Balcombe and its environs, is campaigning against fracking at the EU level as well. “I voted for measures which crack down on the dangers of fracking,” Mr. Taylor said. “I challenged the British Government over its proposals to hand tax breaks to fracking firms and incentives to local councils who accept shale gas extraction in their area.” It seems, however, that shale gas has a secure position with the political mainstream. Many UK politicians, including such influential figures like Lord Lawson, arguably Britain’s biggest champion of shale gas development or Shadow Environment Secretary, the Labour MP Caroline Flint, support shale gas. “Provided it is economically and environmentally viable, we [the Labour Party] support shale gas exploration,” Ms. Flint said.

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A N A LY S I S

Not Exactly a Win-Win Game Ukraine has lost Crimea and its eastern regions could well gravitate - with some external help - toward Russia. For Poland and Europe, the crisis presents opportunity to revise its gas strategy, but also a risk of allowing Ukraine’s downfall. By WOJCIECH KOŚĆ

For many in Western Europe, the Ukraine-Russia spat over Crimea might seem unimportant. After all, Crimea had been “transferred” from Russia to the then Ukrainian Soviet Republic, part of the USSR, by secretary general of the Soviet Communist Party Nikita Khrushchev in 1954. So what’s the fuss now about Russians taking it back? The taking over of Crimea by Russia is clearly a violation of Ukraine’s sovereignty and it has a number of repercussions for the Black Sea region, Ukraine itself as well as the European Union. According to an analysis of the military consequences of the annexation of Crimea, published in March by Warsaw-based think tank Center for Eastern Studies (OSW), Russia is clearly a winner. Russia won’t have to pay Ukraine for housing its Black Sea Fleet anymore in the Crimean naval bases and it has 38 | Shale Gas Investment guide | summer 2014

a decidedly better position now to modernize and expand the fleet. Within a decade Russia will cement its military advantage over all of the NATO members of the Black Sea region, according to OSW. The relationships between Moscow and Kiev are at its worst, even foreseeing open war. Having sliced off a strategic region, Russia is mounting economic pressure on its neighbor as well. The price of gas supplies is the tool of choice to do so. FREEDOM COSTS Russia has announced its gas would cost Kiev around USD 500 per 1,000 cubic meter, as compared to the current price of just USD 268 per 1,000 cubic meters. On top of that, Russian administration has suggested that Ukrainian exports to Russia might be curbed. This would prove a devastating blow to the Ukrainian economy that has been battling recession since 2012.

Russian economic pressure could also fuel anti-EU resentments in Ukraine quite easily. Most likely, some diplomatic solution will be worked out that will leave Crimea with Russia, while keeping the pretence of solving the conflict for a benefit of Ukraine as well. The crisis in Crimea is, however, one of those historic moments when the European Union could forge crisis into an important step forward, even though this would involve running some significant risks. CRISIS TO OPPORTUNITY Enter Poland, which has been one of the most vocal advocates of quick and forceful reaction to the Crimea action. Poland has not only proposed sanctions to be imposed on Russia in retaliation - which by definition is short-term and destructive - but also table a plan to move forward, by creation a new union within the EU: a union of energy.

PHOTOPIN

u k r a i ne c r i s i s

Poland proposes that the EU buys gas from Russia as an entity, in line with its principles of being one market where goods flow freely. It also wants to develop capacity to buy gas from sources other than Russia - US with its cheap shale gas in particular, but also LNG from other parts of the world. Poland also wants to step up production of gas from EU’s domestic sources, a point that suggests shale gas as a solution. Finally, the EU should create infrastructure to lessen the risk of Russia’s using gas supplies - or lack of them - as a tool of pressure. The EU should build gas storage as well as the political capacity to respond to a crisis situation like the one unfolding in Ukraine. Interestingly, while the Western part of the EU, with an exception of Germany, is largely independent from Russian gas, the crisis in Crimea opened the eyes of nations like Britain to the fact that being dependent on any non-domestic source for energy fuels, like Britain is on Norway, is in itself a situation of strategic disadvantage. Several EU member states in Central and Eastern Europe are tied to Russia for their gas supplies, sometimes, as in the case of Bulgaria, Slovakia or Hun-

gary, to the level of 100 percent. Most of gas coming to those countries is flowing through Ukraine, another strategic factor in the political game going on now. Russia’s strategy has been for a while now - even before Crimea - to exert pressure on Ukraine by building gas pipelines that circumvent Poland’s eastern neighbor. An example is Nord Stream linking Russia with Germany or South Stream, a project under development to supply Russian gas directly to Bulgaria and then to Austria. Both Nord Stream and South Stream are considered ways to circumvent Poland and Ukraine as transit countries. The ensuing EU’s challenge in dealing with Russia as a major but difficult supplier is - at the same time - to reduce demand for Russian gas but not let Ukraine’s political trajectory toward the EU lose direction. The latter could be easily instigated by Russia, which is already exerting economic pressure on Ukraine for its current EU-directed political choices. In other words, the EU has a pretty clear and practical way of disentangling itself from having to buy Russian gas within a reasonable timeframe and

The EU can free itself from having to buy Russian gas within a reasonable timeframe, but it may lose Ukraine in the process

put a pressure on Gazprom to reduce prices, but it doesn’t have such a clear way of not losing Ukraine in the process. Not least because the parties involved in the current crisis Ukraine, Poland and the EU - are guilty of being behind the times. Starting from roughly the same level as Poland in the 1990s, Ukraine has largely wasted 25 years that have followed since and is now very late in building a modern statehood. It’s a corrupt country, ranked 144th out of 175 countries in the Transparency International corruption perception index 2013, and a soaring Gini index measuring income inequality between the rich and the poor.. The EU is late in preparing a response in case Russia decides that its gas isn’t just commodity bringing billions to the Russian budget every year, but also a weapon to intimidate countries dependent on Russian supplies, some of those countries (Poland, Slovakia, Hungary) members of the bloc for a decade now. For its part, Poland is late helping its neighbor in the process of building the modern statehood. That Kiev did sign the association agreement with the EU is a welcome development, but it’s some failure of the Polish diplomacy that it was signed amidst unrest that took over 100 lives instead of being the crowning moment of a political process, much like Poland’s way to the EU membership was.

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O P E R AT I O N S U P D AT E

PHOTOPIN

Eyes on the Baltic Basin Poland may see gas from shales flow in commercial quantities this year, a welcome development for the industry. That’s on top of other recent positives, including the government’s adoption of new draft laws on concessions and the taxation level of hydrocarbons’ production. Some of the uncertainty which has dampened investor enthusiasm for years has lifted. The mood of the industry has shifted to cautious optimism rooted in reality, as concession holders, investors, regulators, local politicians, and service providers have dialed back their exorbitant optimism of 2011, but haven’t given up entirely. With 57 wells drilled to date along the Polish shale gas belt stretching from Gdańsk to Lublin, the pace of exploration remains slow. As archival geological data and the recent findings by active operators suggested, if Polish shale yields gas on a big scale, it will happen in the Baltic Basin. In particular, San Leon Energy’s Lewino 1G2 and BNK Petroleum’s 40 | Shale Gas Investment guide | SUMMER 2014

Amidst hope that the pace of drilling will pick up, we might see breakthroughs on individual wells this year. B Y W o j c ie c h K o ś ć

Gapowo-1 wells, both about an hour drive west from Gdańsk, have a chance to be bellwethers. (See page 52 for a map.) FRAC, FLOW, DRILL, FRAC Late in 2013, San Leon performed a “successful vertical frac” on the Lewino well that yielded a “sustained gas production rate of 45,000-60,000 cubic feet per day after six weeks of well clean up,” the London-listed company said. Following analysis, this result gave the company grounds to hope for a gas flow rate estimate of 200,000-400,000 cubic feet per day. “This would definitely be a commercial quantity,” Lars Hubert, San Leon’s exploration director, told the Shale Gas Investment Guide in March. T he c omp any is pl an n i ng a 1500-meter long horizontal well with

a multi-stage frac. Mr. Hubert said he will know the frac’s results in late 2014, as long as lack of drill rigs and delays in permitting don’t slow San Leon down. Forty kilometers south of Lewino, another well is in the works. In early 2014, BNK Petroleum drilled, cased, and cemented its Gapowo B-1 horizontal well with “excellent gas readings regularly recorded throughout the lateral,” the company said. BNK will attempt to “fracture stimulate approximately 30 percent of the available lateral length followed by an extended production test to optimize its design prior to fracture stimulating the remaining lateral,” it said in February. The company expects to have results this summer, said Troy Wagner, BNK’s general manager in Poland.

p o l a n d U PDA T E

Concession holders, investors, regulators, local politicians, and service providers have dialed back their exorbitant optimism of 2011, but haven’t given up entirely DIFFERENT PHILOSOPHY The way San Leon and BNK have gone about stimulating their Lewino and Gapowo wells could set an example for other operators. Each operator opted for a different approach their wells, what Mr. Hubert called “two schools of thought”. San Leon fracked the vertical part of their well before attempting a horizontal well and multi-stage frac. BNK never fracked the horizontal well. Instead, the company’s engineers opted to frack the lateral as a test of the Baltic Basin’s Lower Silurian and Ordovician, geological rock strata roughly 2000-3500 meters below the surface. “Based on experience gained in our other Polish wells and the fact that the Gapowo vertical well results were good enough [without a frac], we knew immediately that we wanted to drill a horizontal lateral in order to test the capability of the shale,” said Mr. Wagner. “As such, we decided not to case (and frac) the vertical well but to leave the well in a configuration where it could be re-entered in order to drill the lateral,” he added. “We believe that our approach is more cost effective,” he said. Fracking a vertical well doesn’t provide data solid enough to draw conclusions about commercial potential. “Vertical well tests leave everyone speculating on what a horizontal well is capable of.” Mr. Hubert of San Leon offers a different view. “There’s a debate going on [about] how relevant vertical fracs are for characterizing production potential,” he said. “There’s one school that says that one doesn’t really know how to upscale from a vertical frac to horizontal frac. We believe that we can do it,” Mr. Hubert said. A progression can be made from a

horizontal to a vertical well, but a vertical frac ahead of the horizontal one enabled the operator “crack the code” of how to optimize exploration in Polish conditions, Mr. Hubert said. Too complex a structure of fractures in shale rock can pose problems in placing enough proppant to keep fractures open and effectively flow gas, he added. “Sometimes less is more,” Mr. Hubert said. FOUR WELLS, TWO FRACS, NO RESULTS Other wells drilled in 2014 to date are: Lane Energy’s Lublewo LEP-1, PGNiG’s Opalino-3 and Kościaszyn-1, and Orlen Upstream’s Stoczek OU-1. But no stimulation has taken place this year. In the summer of 2013, Orlen Upstream fracture-stimulated its Syczyn OU2-K well. The results, which brought no commercial scale flow rates, were disappointing. The company remained silent on the failure. In its news release, Orlen placed emphasis on how the frac was “the most complex and intensive treatment carried out on an unconventional gas reservoir in Europe.” The PKN Orlen SA subsidiary was more positive about its November 2013 frac, on the Berejów OU2-K well in the Lublin basin. Its chief executive felt confident enough to comment on flow, something he hadn’t done to date. “Although the inflow of hydrocarbons was successfully induced during the production test, it has not reached commercial level yet. Most of hydrocarbons produced was light crude,” Orlen Upstream CEO Wiesław Prugar said. Orlen Upstream is analyzing the flow achieved during the test and the well’s behaviour to better understand the reservoir.

Still, “it is too early to draw any conclusions about the possible profitability of crude oil and natural gas production in this region,” Mr. Prugar said. CAUTIOUSLY ENCOURAGED In the capital, the Polish government has heard the industry’s pleas for a concessions law and taxation regime that encourages development. Mini s t e r o f E nv i r o n m e nt Ma c i e j Grabowski, who took office in November 2013, said that shale gas would be his priority. To date, it appears as if he has kept his word, even though it will still take some time to see to what effect. The government has approved the draft text of a new law on geology and mining that regulates concessions, and on taxation hydrocarbon production (see Indicators, p. 14). Operators will be subject to a new taxation regime from 2020, while the concessions system will be simplified. The government has scrapped the idea of NOKE, a state-run operator that would have a mandatory stake in new concessions. The most recent drafts of the laws are taking into account some of the industry’s concerns. But by creating a taxation regime now, the government has put the cart before the horse, said Mr. Wagner of BNK. “We are still a long way from proving there is a viable shale gas industry in Poland,” he said. “The immediate focus should be on streamlining processes and approvals at the federal to local level for existing concession holders and incentivizing investment, not increased taxation of something that is yet to be proven,” Mr. Wagner said. Jo Harper contributed to this article.

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This way to shale This simplified drawing shows state of play on what seems to two of Poland’s most promising shale gas wells: Lewino-1G2 from San Leon Energy (below) and BNK Petroleum’s Gapowo-1 well. Both wells are situated about an hour drive west from Gdańsk.

SAN LEON ENERGY: lewino

Frac 3, November 2013, Target: upper Ordovician

GROUND LEVEL ~300m

~300m

Tertiary / Quaternary glacial sediments (Aquifer)

~900m

Cretaceous, Jurassic, Triassic sediments WELL FACT SHEET

~1200m ~1475m

~275m ~4000 m

3515m

3535m

Permian Zechstein Salts, Anhydrites, Dolomites Silurian and Ordovician Gas Shales

Sustained gas production rate of 45,000–60,000 standard cubic feet per day (scf/d) after 6 weeks of well clean-up. Potential rate of 200,000–400,000 scf/d, based upon full clean-up of frac fluid. In the US, horizontal wells typically yield 7-30 times the production rate and recovery of vertical wells in the same formation, especially after optimization and learning, according to San Leon Energy.

Upper Ordovician The company now plans a 1500m horizontal well with multi-staged frac, subject to permitting, rig availability and planning with technical partners. “Quote about timing,” said Lars Hubert, unconventional exploration manager at San Leon Energy.

3545m Lower Ordovician

~5200m

~5500m

~275m

OPERATOR: San Leon Energy KEY STAKEHOLDERS: Quantum Partners, Toscafund Asset Management, The Capital Group Companies, Kulczyk Investments WELL LOCATION: Lewino, Linia commune, Wejherowo county, Pomorskie province TOTAL WATER VOLUME: 4685.8 m3 PROPPANT VOLUME (KILOGRAMS): 209,802 WELL DEPTH: 3600m DRILLING CONTRACTOR: KCA Deutag HYDRAULIC FRACTURING: United Oilfield Services

Cambrian Quartzites Pre Cambrian Quartzites

42 | Shale Gas Investment guide | SUMMER 2014

The lower Ordovician net pay has higher effective porosity and gas saturation than the upper Ordovician, although slightly lower net pay thickness. The per-frac potential for the Lewino Ordovician formation could be materially higher than measured and inferred from the flowback data and post-clean up extrapolation.

p o l a n d U PDA T E

BNK PETROLEUM:

Gapowo

MAY 2014

FEB 2014, poland’s longest lateral: gapowo b-1

WELL FACT SHEET OPERATOR: BNK Petroleum KEY STAKEHOLDERS: Soros Fund Management, BlackRock, Capital Research and Management Company, American Funds Smallcap World A WELL LOCATION: Gapowo, Stężyca commune, Kartuzy county, Pomorskie province DRILLING CONTRACTOR: MND Drilling & Services WELL DEPTH: 4300m WELL LATERAL: 1800m

3515m The vertical Gapowo B-1 well had encountered over-pressured, gas charged, organic-rich shales in the Lower Silurian and Ordovician intervals.

3535m 3545m

The conclusions of the log and core data analysis and sustained elevated gas shows in the lateral validate the belief that the Lower Silurian and Ordovician shales are highly prospective for shale gas. The analysis indicated the shales have good total organic carbon, porosity and permeability.

High gas readings recorded during the drilling of the lateral. BNK plans to fracture stimulate approx 30% of the available lateral, followed by an extended production test to pptimize its design before fracture stimulating the remaining lateral.

4300m Longest horizontally drilled well in Poland.

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MND DRILLING & SERVICES

MND Drilling & Services: Longest Shale Horizontal in Europe I n t erview wi t h R a d o v a n J edli č k a

MND Drilling & Services, a Czech company, drilled the longest horizontal in Europe, a 1650 meter horizontal for a Baltic operator that will soon be hydraulically stimulated.

an you tell me about MND Drilling & Services?

We are the largest drilling contractor in the Czech Republic with over 100 years tradition in the industry. In 2010, MND Drilling & Services was the first foreign drilling contractor to enter Poland. We spent six months getting our crew as well as Bentec 350 rig certified by local Polish authorities for our first contract for Exxon Mobil. After we drilled Exxon Mobil’s two wells, we went to work for Lane Energy, Orlen Upstream, BNK Polska and also ConocoPhillips. For BNK Polska this year, we drilled the longest horizontal in Europe, which was completed in March. Was it technically challenging to drill the longest horizontal well in Europe? First of all I know that at the time it was the longest horizontal in shale gas - unfortunately I am not sure how it compares to conventional projects. The main challenges are of course always on the operators’ side and it is the contractor’s task to follow the project plans and try

44 | Shale Gas Investment guide | SUMMER 2014

to fulfil the requirements of the operator. Our company has drilled throughout the years number of deviated and horizontal wells so this was nothing new to us but the parameters of this well were quite impressive as the total measured depth was 6,058 meters. The horizontal section was in TVD approximately 4,200 meters and the whole section was 1,650 long – which equals about 15 football fields. I believe that the Operator appreciated the professionalism of the crew as well as the low non-productive time (NPT) of the rig. You are a member of MND Group. Can you tell me about MND Group’s global oil and gas portfolio? MND Group represents a strong and sound Czech group of companies engaged in oil and gas activities in the Czech Republic, Russia, Georgia and Germany. The area in the Czech Republic where we come from and where our main assets are, have over 100 years history in the oil and gas sector. We focus on oils and gas production and exploration, gas trade, under-

ground storage and drilling and workover services. As a vertically integrated company, we offer a complete range of services. Since you started in Poland in 2010, the number of wells drilled annually has been decreasing. How have you dealt with the slowdown? As a matter of fact we still had job opportunities in Poland when we decided to move the rig to Serbia, but of course we had expected some decrease in the number of wells drilled in Poland and we wanted to take up the unique chance and enter another new market. The good thing about our Bentec rigs is that they are manufactured and equipped as a so called Euro rigs - meaning they are designed to work even in highly populated areas throughout the whole of Europe. That’s why over the last few years, we’ve drilled successfully in Hungary, Slovak Republic, Germany, Poland or Serbia - and we’re looking right now at a lot of work - so the slowdown has not slowed us down.

a d v er t o r i a l

“We’ve drilled successfully in Germany, Poland and Serbia - and we’re looking right now at a lot of work - so the slowdown in Poland has not slowed us down”

You mentioned you drilled horizontal wells elsewhere; can you tell us more about your experience with directional drilling? Well, directional and horizontal drilling is a common practice for any drilling contractors and I would say that most of the wells drilled today are directional. As a matter of fact the rig and the crew that carried out the horizontal project in Poland had drilled the deepest geothermal well (6036 meters MD) in Germany in a joint venture with our German partner. Also drilling and workover make up a large majority of MND Drilling & Service’s activities. We operate four drilling crews and four workover crews - in and outside the Czech Republic. We brought our own drilling crews with us to Poland because we think that it’s important to keep an

experienced crew working continuously on a drilling rig. This way, you retain all the learning that go into the drilling. What are the specifications on the Bentec 350 rig? Actually we own three Bentec rigs - 450, 350 and we have last addition into our fleet the Bentec 250 coming at the beginning of June 2014. This last rig was purchased to fill in the gap between our smaller IDECO rigs and the heavier Bentec rigs. All the Bentec rigs are state of the art, manufactured in Germany and less than 5 years old. The hook load capacity of 250, 350 and 450 tons; top drives for the 450 and 250 are manufactured directly by Bentec and by NOV Varco for the 350. The rigs are AC driven and joystick operated, using all the benefits of the following systems: Info Drill,

Automatic Driller, Soft Torque Rotary, Anti Collision or Gas Detection. As the rigs are intended for operations in Europe they are very quiet, flexible and all three of them equipped with skidding system. We can demobilize and move the rig within 10-12 days even on long distances. Tell us a bit about the company’s policies. All of MND Group activities are based on consideration and preservation of the natural environment, adhering to principles designed to maintain ecological balance. We support regional culture and sports, and promote a policy of equal opportunity. Those who want to talk to me are welcome to get in touch at jedlicka@mnd.cz.

MND DRILLING & SERVICES IN POLAND

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i n ter v i ew

Phelim McAleer’s documentary Fracknation is challenging allegations made in another famous film, Gasland, which presented fracking as a threat to the environment and people. It is not the case, says Mr. McAleer. i n ter v i ew b y G or d o n W as i l ews k i

Was your intention to defend oil and gas companies against environmentalists like Josh Fox [director of Oscar-nominated documentary, Gasland]? No. I don’t care about energy corporations, I don’t even care about Pennsylvania farmers, whom I’ve shown in the movie. To be honest I don’t care about Polish pensioners. Caring is not my job. I’m not a therapist. I’m a journalist and my job is to tell the truth and to be skeptical. When someone looks me in the eyes and says – I’ve got three types of uranium in my water, two of them weapon’s grade – I have to respond with a normal rational reaction. My duty is to search for evidence of these allegations, not to feel sorry for that person. And there is no evidence – the water is clean. People are afraid of fracking but they’re afraid for very good reasons. They’ve been told it’s dangerous. The fear is real. I want to look for the science behind it and let people make up their own minds. 46 | Shale Gas Investment guide | SUMMER 2014

Are you alone in this approach? It’s not just me who says all those things about fracking and shale gas. Lisa Jackson, head of Environmental Protection Agency [until February 2014] under President Obama is definitely not a friend of the oil and gas industry, but she gave evidence to Congress that there’s not one single case of fracking ever having contaminated ground water, even though there’s been thousands of wells fracked in the United States. You’re more likely to win the lottery than to have your water polluted by fracking. At this stage, it’s not for me to find cases of environment contamination but for Josh Fox and the Sautners to prove their claims. [Ed. note: the Sautners, who had flaming faucets, are the main characters of Gasland. They are shown in FrackNation to have produced false evidence claiming their water was contaminated by hydraulic fracturing.] They had their own independent testing [done, which] they never released. State level testing said the water [in Dimock, PA where Gasland was filmed] is

piotr droździk

Caring is not my job

clean. The Environmental Protection Agency – best scientists in America -went to Dimock, PA and confirmed it. The anti-fracking movement is either a mass illusion or the truth is somewhere in the middle. Some things that Gasland claimed must be true, no? I don’t believe in truth being in the middle. The truth is absolute, it’s binary – either true or not. But I’ve met victims of hydraulic fracturing – their family is sick, they’re getting divorced, they drink too much. [Ed note: Their problems have nothing to do with fracking.] Willie Sutton was a famous American bank robber. Once someone asked him “why do you rob banks?” and he answered “because that’s where the money is”. So why do you sue oil and gas companies? Because that’s where the money is. And there’s another reason – everyone wants to be famous in America, and to exist in a reality show. People get this ephemeral feeling after claiming in TV the industry destroyed their life and health.

Who is Josh Fox? He was born in Manhattan, his father was a lawyer, his mother a psychotherapist. He’s the elite, he’s rich. The home he has in Pennsylvania was not his domicile T h e d i re c tor Phelim McAleer is an Irish journalist and filmmaker. He has covered Romania and Bulgaria for the Financial Times and the Economist. He has also covered Ireland for the Sunday Times. His Fracknation documentary is a polemic with Gasland, a documentary by Josh Fox that attempted to prove that fracking is dangerous for the environment and human health. In Fracknation, Mr. McAleer challenges these allegations. Mr. McAleer was interviewed during the European premieres of Fracknation in Brussels and Warsaw, which were organized by the Kosciuszko Institute, a conservative think tank, and Claeys & Casteels, a publishing house based in the Netherlands specialising in European Law, which is publishing a portfolio of titles about shale oil and gas. The film was produced with crowdfunding from Kickstarter.

piotr droździk

INTERVIEW

Yet people have legitimate concerns, for example increased traffic, about fracking in their communities, no? There’s only one thing worse than too much traffic -- not enough traffic. Yes, fracking will change your countryside and that’s a political decision to make: do you want trucks and inconvenience? Lots of Poles drive trucks in Ireland, the Irish do the same in Canada. Wouldn’t people rather have them driving trucks in their homeland? Your roads will have to be reconstructed, bridges strengthened – because of heavy traffic.

[where a person has his/her permanent principal home]. He was neither born nor raised there. This whole movement is driven by urban elites - although I don’t think we should consider them as such. They are hyper-educated, opinionated elites, who don’t know where electricity comes from, who fly around the world to tell other people they can’t fly around the world. Josh Fox is not motivated by money. He’s a true believer. Otherwise anyone could buy him off. What is the biggest threat to shale gas in Europe, other than the geology and the red tape? Is it external like Russia or internal? Russia doesn’t want shale gas, but Russia is not an enemy. You are your own enemy. It’s completely up to you. I think western environmentalists are a bigger threat than Russia. Mr. Putin can’t stop you drilling. In Romania, people are against fracking. They don’t trust their government for good reason.There’s a lot of corruption. There is no good rule of law. If someone does something illegal, you can’t really sue him. [Ed. note: There is widespread belief that an individual doesn’t have a chance to have a fair hearing against a company, especially if they don’t have money to fund their case.]

If a big multinational company lands on a farmer’s field and that farmer doesn’t feel he has a right to be heard in a local court, he’s not going to be pro-fracking. There needs to be the possibility of disputes being resolved fairly. That would make fracking a lot easier. In America, it works because people trust their local government and courts and believe in the rule of law. What do you think about the public’s approach to organizations such as Greenpeace? People need to treat environmentalists the same way they treat big business. As a journalist you ask the same hard questions of both big environmentalists and big entrepreneurs. Greenpeace is a multinational globalist organization that has offices all over the world, more offices than Chevron. It has a bigger marketing budget than Chevron. They don’t even have to tell the truth. If the chairman of Chevron lies, he goes to jail, gets an investigation, [Chevron’s] share prices drops, bankers pull loans out. There are consequences for the whole firm. If the head of Greenpeace lies, they raise more money. Journalists need to hold them accountable. It’s theater journalism not to treat ‘Big Environment’ the same way you treat ‘Big Business’.

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I N T E R V IE W

The Only Show in Town With $165 million invested, UOS has been building their market position, betting on shale gas production on a commercial scale. But things have moved slower than the company’s CEO Dennis McKee would like, and the oilfield veteran’s strategy is at a critical point now. BY Wojciech Kość

Dennis McKee is not a young guy. He’s retired twice, only to be lured back when opportunity comes knocking. A petroleum engineer with deep experience in Texas shale gas plays, Mr. McKee has a few stories that reach back to the 1970s. Knowing then his long standing career in the oilfield, it should come as no surprise to hear that in 2010, amid an oilfield boom in his home country, Mr. McKee took up another challenge. He lived out of a Warsaw hotel for three months to prepare to do what he loves to do: prove up a shale play in a country with no shale experience. Upon his arrival to Warsaw, Mr. McKee had little to prove. He had worked for Halliburton and Weatherford and then founded several oil and gas start-up companies which he would later exit at a considerable premium to his initial investment. But Poland would prove a challenge the likes of which he’s never faced before, and whether he will succeed is very much an open question. SWEET DREAMS Back in 2010, shale gas was hardly the 48 | Shale Gas Investment guide | summer 2014

talk of the street in Poland that it became in 2011 following an investors’ rush to capitalize exploration, but those few foreign companies with concessions on Polish onshore acreage were enthusiastic. The 2011 change in enthusiasm came at the hest of very optimistic estimates of Poland’s shale gas reserves from the US Energy Information Administration, working with Advanced International, and later from Wood Mackenzie, a consultancy. The most optimistic estimates allowed for Poland not only to become independent from Russian gas but turning into a gas exporter, with a geopolitical and economic position rising to unprecedented heights in the region. “The strategic goal that Poland would like to achieve [in] taking advantage of shale gas sector is to improve Poland’s energy security,” Barbara Stelmach, deputy foreign minister, told SGIG in 2012. This early exultation had waned by 2012, however, with some explorers leaving and service companies struggling to stay afloat. It took another year, until 2013, for the climate around shale

gas to improve although the return to the optimism of 2011 seems all but impossible. BACK ON THE RIGHT TRACK Mr. McKee says he has seen the government do a lot of “funky things that scared investors, but things are back on the right track again. Last year was a turning point as the number of wells doubled and this year is going to keep up pace,” Mr. McKee said. Not only are there several horizontal wells being drilled this year, but in the Baltic Basin, where UOS has been working with San Leon Energy, the vertical well Lewino yielded enough gas for the operator and UOS to say that Poland’s shale gas has been “unlocked.” “It’s going to be far from the maximum potential of course. Once you get the gas flowing at commercial rates, you start tweaking things to optimize and that takes a long time and a lot of wells,” Mr. McKee said. “But it’s gonna flow,” he added. “I believe that all shale in Poland is going to productive. The TOCs are good and even if permeability is low

with gas prices the way they are now, Polish shale gas will be commercial even at low volumes,” Mr. McKee said. “If we get five to ten million [cubic feet] a day per horizontal, it’s gonna be there,” he added. HARD TALK, EVERY QUARTER That said, this bright future of shale gas in Poland is still some time away and a private equity-backed company like

MAREK CZARNECKI

c o m pa n y p r o f i l e

Oilfield veteran Dennis McKee claims Poland’s shale gas will take off soon

UOS has to answer to investors, among them the CEE based Enterprise Investors. After all, Poland has drilled 60 wells in four years, compared to the Marcellus shale play in Pennsylvania which saw close to 2,000 wells drilled in a comparable period. There is $165 million of investor equity tied up in a company with seismic, drilling and fracking assets. Investors are impatient, given that seismic

exploration has been all but put on hold. Some are clamoring for assets to be divested, while others are struggling to stay patient in a world where investors demand a return on equity in 18 to 36 months. Mr. McKee admits he has some hard time convincing his investors that shale gas in Poland may be slow in coming, but it is coming. “Happens every quarter!” he laughed. “It takes three years here what it takes three months in the US. But I tell them that once we get to production, activity can only speed up the way we provide services,” Mr. McKee said. UOS is currently performing three out of every four frack jobs in Poland. According to Mr. McKee they have won them because UOS has been able to put an incredible downward pressure on pricing - even up to 75 percent - but also due to up-to-date equipment, and efficiency of work that the big oilfield service companies are not able to provide at the moment. “The big guys have been in Europe for 50 years and they haven’t brought in new equipment since the EU was formed. You can’t blame them because companies like them won’t spend capital on a niche market like Europe. They will do what they’re capable of doing with what they have, but there was no chance they could do it successfully in non-conventional shales,” Mr. McKee said. “We can mob and de-mob in days, not weeks. We move in and out quickly and we don’t charge stand-by,” said Mr. McKee.

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z o o m i n o n c o nc e s s i o n s

On the ground A lot has been said about how shale gas development is imposing environmental challenges on the relatively densely populated Polish countryside. This section provides geographical context to where the drilling and fracking is actually taking place.

PGNiG

Lubocino INFO BOX Concession Holder

PGNIG

Well Name

Lubocino - 2H

Concession Name

Wejherowo

Commune, Province

Krokowa, pomorskie

Fracture Date

January - February, 2013

Depth (meters)

3,050

50 | Shale Gas Investment guide | SUMMER 2014

This Lubocino well made headlines in 2013, after PGNiG flared some gas on it, but there has been hardly any positive news from the well since. The well lies close to the likely location of Polandâ&#x20AC;&#x2122;s first nuclear power plant, Ĺťarnowiec.

Berejów According to Orlen Upstream, “the inflow of hydrocarbons was successfully induced during the production test, but [didn’t] reach commercial level.” The company says, however, it’s not done with the Lublin Basin yet.

zoom in on concessions

Orlen Upstream

INFO BOX Operator Name

Orlen Upstream

Fracture Date

December, 2013

Well Name

Berejow - OU2K

Concession Name

Lubartow

Commune, Province

Niedzwiada, lubelskie

Total Water Volume (cubic meters)*

22,499

Water % of total hydraulic fracturing fluid**

94,5%

Proppant (kilograms)

1,101,477

Proppant % of total hydraulic fracturing fluid**

4,6%

True Vertical Depth (TVD, meters)

2563

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| 51

z o o m i n o n c o nc e s s i o n s

lane energy

Łebień One of the pioneering wells in Poland that was flared, briefly, in 2011 and then for over a week in 2012. Although it didn’t prove commercial, the well showed that Polish shale gas could become reality.

52 | Shale Gas Investment guide | SUMMER 2014

INFO BOX Operator Name

Lane Energy Poland

Fracture Date

October 2010

Well Name

Łebień LE-1

Concession Name

Lębork

Commune, Province

Nowa Wieś, pomorskie

Total Water Volume (cubic meters)

1,452

Water % of total hydraulic fracturing fluid

94.08

Proppant (kilograms)

86,401

Proppant % of total hydraulic fracturing fluid

5.6

True Vertical Depth (TVD, meters)

3,092

Lewino

The Lewino 1G2 well along with BNK Petroleumâ&#x20AC;&#x2122;s Gapowo B1 (also shown on the map below) is where the focus is on now, as both San Leon and BNK have said their respective wells have a lot of what it takes for production to take place (see also p. 38).

INFO BOX Fracture Date

July 2, November 9, November 13 - 2013

Well Name

Lewino 1G2

Concession Name

GdaĹ&#x201E;sk W. 71/2009/p

Commune, Province

Linia, pomorskie

Total Water Volume (m3)*

4,685

Max mass % of total hydraulic fracturing fluid**

94.5

Proppant (kilograms)

209,802

Max mass % of total hydraulic fracturing fluid**

5.42

True Vertical Depth (TVD)

3,600m

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zoom in on concessions

San Leon Energy

ntal in Europe

EXPERT’S CORNER

UK Unconventional Shale Play Study Reservoir Intelligence works to combine staff experience and expertise with proprietary technology to provide integrated solutions at all stages of a reservoir’s lifecycle. By R. Greiss, C. Hughes, S. Large

ith increasing demand for energy, the UK must seek alternatives to the declining production of conventional oil and gas fields in the North Sea. The present imperative is to evaluate unconventional resources, which primarily lie onshore. The development of UK shale plays will be accelerated by applying lessons learned from North America. Over the past decade, operators have found success in a number of U.S. shale plays, including the Delaware Basin, Eagle Ford, Wolf Camp and Utica. NUTECH has been instrumental in defining and evaluating the plays and driving increased production since the consultancy started in 1998 in Houston, Texas. RESERVOIR INTELLIGENCE Reservoir Intelligence is NUTECH’s life cycle strategy that helps operators and investors to value, manage and act upon the reservoir. We apply a unique and holistic approach to petrophysics in order to inform reservoir modelling, completion design and engineering solutions. In a new shale play, participating operators have specific questions to answer and vital decisions to make: how do I adeptly expand my position? What is the quickest way to reservoir understanding? How do I ensure reservoir economic success and optimization? How can I manage capital and preserve growth? In order to make those decisions, operators must 54 | Shale Gas Investment guide | SUMMER 2014

have a firm grasp and understanding of the critical reservoir elements utilized in Reservoir Intelligence: effective porosity, total organic carbon, permeability, volume of clay, saturation, mineralogy, brittleness and rock competency. UK BASIN WIDE STUDY NUTECH’s UK Onshore Shale Play Study commenced with a large and challenging exercise in data gathering. NUTECH joined with the Department of Energy and Climate Change (DECC) to become a data release agent for the UK onshore, enabling the acquisition of digital well log UK ONSHORE BASINS IN STUDY

MIDLAND VALLEY BASIN

NE ENGLAND PROVINCE WEST LANCASHIRE BASIN

CHESHIRE BASIN

EAST MIDLANDS PROVINCE

WORCESTER GRABEN

WESSEX/ WEALD PROVINCE

Source: NUTECH

data and all relevant documentation such as drilling and geological reports, for thorough examination in preparation for the study. The UK Onshore Shale Play study was divided geographically into seven main basins (Figure 1) across mainland Britain: Wessex, Weald, West Lancashire, Cheshire, East Midlands, North East England Province and Midland Valley, with a total of 381 individual wells analysed via available well log data and supporting reports. Core and cuttings samples were obtained from the British Geological Survey and analysed by the NUTECH laboratory, POROLABS, in order to measure Total Organic Content (TOC) and carry out Mercury Injection Capillary Pressure (MICP) tests, X-Ray Diffraction (XRD) and Source Rock Analysis (SRA). These measurements provide calibration points in the petrophysical evaluation of the wells and support a better understanding of the kerogen characteristics. An advanced petrophysical process (Figure 2), using Textural Analysis models suitable for source rock environments was applied to evaluate the reservoir characteristics and geomechanical properties (brittleness and competency) of each individual well in order to estimate the hydrocarbon in place and reservoir potential. Particular skill and detailed quality control was required in working with old vintage logs.

EXPERT’S CORNER NULOOK SHALE ANALYSIS

“Reservoir Intelligence is NUTECH’s life cycle strategy that helps operators and investors to value, manage and act upon the reservoir” Next, correlation cross-sections and attribute maps, drawn across the seven basins, provide a view of the reservoir continuity, reservoir thickness (isopachs), clay volume, average porosity and permeability. Most importantly, the study helps to identify hydrocarbons in place, resulting in the identification of formation sweet-spots. insight AVAILABLE With this study, which is now available, NUTECH better equips operators and service companies with knowledge of the geological, depositional, structural, petrophysical and geomechanical nature of the UK unconventional reservoirs and formations. Overall, holders of the study will be better placed to make wise decisions in the investment and development of these resources in order to achieve success by drilling fewer wells. As the UK shale plays develop, the study can be updated with new data as it becomes available, further enhancing the Operator’s Reservoir Intelligence, to bring these assets to life. Analogues will be made to compare with the experiences of North America and development programs will be refined to drive more favourable economics, increase resource recovery and optimize productive field life.

Stuart Large, Senior Account Manager, and co-author of the article, can tell you more about the UK unconventional shale play study at SLarge@nutechenergy.com.

Conventional Data NuTech begins the NuLook analysis using conventional log data such as Gamma Ray (GR), Spontaneous Potential (SP), resistivity, neutron porosity, density porosity and sonic porosity or a subset of these.

Volume Shale Volume of shale (Vsh) is calculated from multiple shale indicators.

Textural Model NuSpec track displays the pore size distribution from clay sized to large pores derived from the textural model. Irreducible Water Irreducible Water (BVI) is modeled using relationships derived from Nuclear Magnetic Resonance output responses and NuTech’s Multiple Modeling Logic (MML) produced from conventional log data responses.

Total Organic Carbon Kerogen Fraction is determined using multivariable logic Corrections for Kerogen effect on density, neutron, sonic, and Pe are made.

Volume Clay NuTech utilizes the new input of BVI to quantify the amount of mechanically bound water contained in the matrix as well as the amount of silt contained in the shale volume.

Lithology The Kerogen corrected data is used in multimineral model to solve for Silica, Lime, and Heavy Minerals to determine porosity.

Bulk Volume Water Saturation, bulk volume water are determined using NuTech’s proprietary multimodeling logic.

Permeability Permeability is determinded using an algorithm calibrated to core data and production matching.

Flags NuTech’s grading system indicates the risk rating applied to each zone. The number of flags increases as the quality and calculated productivity of each identified zone increases. At least three flags are needed to indicate if a zone qualifies in the net pay.

Adsorbed and Free Gas Volumes Adsorbed and Free Gas volumes are determined from core calibrated data Langmuir Isotherms.

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global update

G LO B A L U P D AT E

China Wins the Dash for Gas Most markets are still in early exploration stages, trying to overcome political, societal and geological obstacles. China, however, is full steam ahead in a manner that seems unattainable in Western democracies based on rule of law and respect for human rights. By SGIG international correspondents

CONTENTS l l l l l l l l

China’s once laughed-at shale gas plans might be getting into shape, Political pressure mounts in the US to sell its shale gas across the world, Mexico’s reform on energy could open doors to exploration, India’s enormous energy imports inspire early attempts to flow shale gas, Argentina pays off Repsol to boost attractiveness to oil and gas investors, South African government seen as too zealous to control shale resources, CEE in pains to reduce dependence on Russian gas, Western Europe: what shale gas?

p. 58 p. 60 p. 62 p. 63 p. 64 p. 65 p. 66 p. 68

CHINA

The Big Shale Gas Leap By Wu Ming in Beijing

China’s energy companies,

including giants PetroChina and Sinopec are gearing up their activities to explore and develop the country’s vast shale gas reserves in order to meet the government target of ramping up the shale gas production up to 6.5 billion cubic metres (bcm) as early as in 2015, up from 200 million cubic meters last year. For 2014, PetroChina has earmarked more than 10 billion yuan (USD 1.6 billion) for a campaign in two pilot zones – Weiyuan-Changning in Sichuan province and Zhaotong in Yunnan province, both in the country’s southwest – aiming to produce 1 bcm from Weiyuan-Changning and 500 million cubic metres from Zhaotong. Another 100 million cubic metres would come as a result of a production sharing agreement with Royal Dutch Shell in the Fushun-Yongchuan block in Sichuan, according to PetroChina’s vice president Sun Delong. 58 | Shale Gas Investment guide | summer 2014

XXX

PHOTOPIN

Unlike in the past, the big leap in China’s shale gas production might just turn out a success, as gas is flowing already while infrastructure investment are gaining momentum.

Bulk of PetroChina’s outlay will go to building 28 drilling pads, Mr. Delong said at the National Conference On Shale Gas Exploration Promotion held in Chongqing in April. At the WeiyuanChangning play alone, PetroChina is slated to build 20 drilling pads involving 110 wells at the cost of about 70 million yuan (USD 11.2 million) per well till June next year. In the meantime, PetroChina is now adding finishing touch to a 94-kilometre shale gas pipeline linking local users and Shanglou township at the Weiyuan-Changning field. The line will have a daily moving capacity of 4.5 million cubic metres. Sinopec’s shale gas E&P is no less than PetroChina’s. Its Fuling shale gas discovery in southwestern China’s Chongqing city with 2.1 trillion cubic metres of gas in place is now Sinopec’s major battlefield, where it aims to produce 1 Bcm this year, 3.2 Bcm next year before peaking at 4.8 Bcm in 2016.

By April 2014, the company has completed 33 wells, with 23 under trial production and another 29 being drilled at the 7,308-square kilometre field. Ground facilities include a gas gathering center, water supply system capable of supplying 8,000 cubic metres of water per day for fracturing. “Shale gas wells deplete quite fast, but the good thing for Fuling is that most of the wells so far drilled flowed more than 100,000 cubic metres per day when fractured,” said a source with Sinopec Jianghan Oilfield Fuling Branch Company that is the drilling contractor in the area. Some wells are still producing more than 50,000 cubic metres per day after two or three years of production, the source also added. The field is now producing at close to 3 million cubic metres per day, with gas being sold to Zhejiang, Jiangsu, Jiangxi, Anhui and Hubei provinces. In 2012, the discovery well Jiaoye 1HF flowed 203,000 cubic metres per day

global update

Most of the wells so far drilled [in Fuling play] flowed more than 100,000 cubic metres per day when fractured

after fracturing. The well is now producing 60,000 cubic metres per day. In September this year, Sinopec will start building a shale gas dedicated pipeline spanning 141 kilometres from Fuling to the local markets with annual capacity of 7.2 Bcm. The line will be completed in June 2015. Local Shaanxi government-owned Yanchang Petroleum is targeting to prove 150 Bcm of shale gas reserves and built up 500 million cubic metres of shale gas production capacity by 2015 under 2.5 billion yuan (USD 400 million) development program. LESS LUCK FOR FOREIGNERS Foreign oil and gas companies as well as service providers have their role to play in China’s shale gas sector, though lady luck is yet to fall on some players. To minimize the risk, international majors prefer to start with joint study on geology of the blocks they are interested in, before entering into multiple

pilot development schemes of shale gas to full field development. Shell is expected to complete drilling development wells at Fushun-Yongchuan shale gas block in June this year, with test production to complete by the end of this year before first gas next year. In addition to Fushun-Yongchuan, Shell is also the operator of Xiang E Xi block in partnership with Sinopec in Hubei and one block in Anhui province China National Offshore Oil Corporation (CNOOC). No discoveries have been made on these two blocks yet. American upstream giant Chevron has decided to withdraw from shale gas exploration in Qiannan basin in Guizhou province after having drilled three wells to unsatisfactory results. “We are wrapping things up in Guizhou and have just completed environmental assessment before we exit,” a Chevron source told the SGIG. In April this year, US Natural Resources Group signed a production sharing contract (PSC) with local Chongqing Energy Group to jointly explore and develop the Qianjiang shale gas block in Chongqing city. The PSC with Chongqing Energy holding a 51 percent stake with USNRG holding the remainder commits the partners to investing 1.7 billion yuan ($276 million) till next year. Chongqing Energy was licensed to explore the Qianjiang block in Chongqing city through the country’s second shale gas auction in 2012. In 2012, Henan Provincial Coal Seam Gas Development & Utilisation Company (Henan CBM) farmed out part of Xiushan block it won via China’s first shale gas auction to Australia’s Dart Energy in a PSC subject to Chinese government approval.

The area is home to estimated 35 trillion cubic metres of shale gas in place in five basins - Ordos, Junggar, Tuha, Songliao and Bohai Bay - covering 250,000 square kilometres. Of the 35 Tcm shale gas in place in the five basins, eight Tcm are considered recoverable. Overall, in two shale gas auctions that have taken place so far, China awarded 21 blocks to 18 mostly non oil and gas companies in an attempt to push reform in the country’s upstream sector as well as to introduce more investment in shale gas E&P. According to rules, the winners must invest 30,000 yuan (USD 4,800) per square kilometre, and drill two wells every 500 square kilometres. The 19 blocks licensed to 16 companies in the second shale gas auction in late 2012 will involve 12.8 billion yuan (just over USD 2 billion) investment till 2015. According to the Ministry of Land and Resources (MLR), which monitors upstream activity in China, by the end of the last year, China had drilled 285 shale gas wells, of which 105 are vertical survey wells, 94 are vertical exploration wells and 86 are horizontal appraisal wells. Upon fracturing, 38 wells flowed more than 10,000 cubic metres of gas per day and 23 flowed more than 100,000 cubic metres per day. Independents have been complaining about the challenges in exploration due to complex geology and lack of data. To facilitate the exploration activities by independents, the MLR has decided to invest more to drill more wells to obtain more data about the blocks to be offered in the third round, which has been rescheduled to take place in midor late 2014.

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| 59

To the Rescue? US shale gas continues to flow at favorable market prices, political pressure mounts Washington to change legislation to allow exports to many more countries than it’s legal today. Political issues of US influence are also at play. B y C l a u d i a P e r e z Ri v a s i n E a g l e F o r d s h a l e p l a y , T e x a s

There has been much talk

lately whether the export of US energy products such as liquefied natural gas can actually play a role in calming international energy markets. The recent spat between Ukraine and Russia over Crimea has led to speculation that the United States would somehow enter new markets exporting natural gas to Europe, where Russia has been a major supplier. The US, in turn, has seen an expansion in hydraulic fracturing and horizontal drilling that have unlocked large energy reserves. In 2009, the U.S. surpassed Russia, the world’s top producer of natural gas. And last year, the U.S. exceeded Russia as the world’s largest producer of oil and natural gas combined, according to American Petroleum Institute (API). “Now is the time to build our energy infrastructure, expand exports and lock in the economic and geopolitical opportunities that our energy revolution has created,” API’s director of upstream and industry operations Erik Milito said. EXPORTER BY 2016 But in order to do that, American policymakers would have to do two things. First, they will need to continue offering its support to build LNG export termi60 | Shale Gas Investment guide | summer 2014

nals. With more investments, according to the Energy Information Administration, America could become a net exporter of LNG by 2016. Thanks to the shale gas boom, the country could export 10 billion additional cubic feet of natural gas per day by 2020.

“Now is the time to build our energy infrastructure, expand exports and lock in the economic and geopolitical opportunities that our energy revolution has created” Erik Milito, API Secondly, the U.S. Department of Energy (DOE) would have to approve long-delayed LNG export permits to non-Free Trade Agreement nations. Under the Natural Gas Act of 1938, a person or company wanting to import or export natural gas in the United

States, including LNG, must first get authorization from the DOE. In the case of the US, a large country isolated by oceans from Asian and European markets, the only way to export natural gas is LNG (liquefied natural gas). To create LNG, natural gas has to be super-cooled and then transported in specially built double-hulled ships. The US is not expected to have its first LNG export terminal up and running until mid-2015, though companies have been applying for approval for some time now. As of February, the DOE had approved 32 applications for exporting LNG to countries with free-trade agreements with the US as well as six applications for exporting LNG to non-FTA countries. Of the six, only one has a full, final approval from the government: the Sabine Pass Liquefaction plant in Sabine Pass, Louisiana. The facility is currently under construction and is scheduled to begin exporting LNG in late 2015. The plant is a subsidiary of Cheniere Energy Investments that plans to build six trains to treat, liquefy, store and export natural gas. Houston-based Cheniere Energy could roughly handle even one sixth of the amount of gas that flows from Russia to Europe daily by the year 2017. The com-

global update

“LNG exports will create jobs for America, strengthen foreign policy and help allies who are held hostage to Russian energy” Senator John Barrasso Europe, a region where many nations rely on a single supplier for 70 to 100 percent of their natural gas. “By accelerating exports, we can strengthen the global energy market against future market disruptions and send a signal to the world that the United States is ready to lead,” Mr. Milito said. “Our growth as a major exporter would bring competition into the market and help ease the ties that bind our allies to any single supplier,” he added. The unexpected growth in US production has already helped improve leverage

PHOTOPIN

pany has already been contracted by India and South Korea. Given the time it will take for the terminals to come into play, there are those that suggest the US will not have a global energy impact. To this, Mr. Milito gives two reasons as to why that may not be so. “First, market signals are incredibly powerful - provided the market believes that we will do what we say we will do,” Mr. Milito said. Currently, the United States faces rapidly-moving competition around the world. Over 60 non-US LNG exports facilities are being planned or are

under construction. Those nations that act quickly will be the ones that will reap the rewards. FREE HOSTAGES Back in March, ambassadors for Hungary, the Czech Republic, the Slovak Republic, and Poland petitioned US Congressional leaders to help expedite US LNG exports as a means of protecting the stability and independence of Eastern

between its allies during contract negotiations. The DOE commissioned a study from NERA, which concluded that LNG exports would yield net economic benefits across all scenarios. The study also showed that concerns about domestic natural gas prices were unfounded. As the NERA study noted, “the market for LNG exports is self-limiting, in that little or no natural gas will be exported if the price of natural gas in the US in-

creases much above current expectations.” In part, that is because the cost of liquefying and exporting gas creates a natural price buffer, while multiple studies confirm that production will increase as the market expands. In recognition of this important issue, a growing number of US policymakers are ready to act. Influential Democrats, House Speaker John Boehner, and Senator Jim Inhofe have all spoken out for more exports. Senators Mark Udall, John Barrasso, and Mark Begich, along with Representatives Cory Gardner, Michael Turner, and Ted Poe have all announced work on legislation that would reduce barriers for the export of natural gas. Some have proposed fast-tracking approval for NATO or WTO trading partners, and a report by the House Energy and Commerce Committee recommends immediate approval for all pending applications. In early May, Senator John Barrasso released a statement saying he will introduce an amendment to the Energy Savings and Industrial Competitiveness Act of 2014. The amendment being presented will require the Department of Energy to approve liquefied natural gas exports to all World Trade Organization member countries, including Ukraine. “I have said repeatedly that I will take every opportunity to get a vote on legislation that will make it easier for the United States to export LNG to other countries,” Barrasso said. The amendment aims to create jobs for America, strengthen foreign policy and help allies who are “held hostage to Russian energy”, Barrasso said. “Bipartisan support for exporting LNG continues to grow stronger each day and it’s time for Washington to act on this important issue now,” Barrasso added. “The pending energy bill is the perfect opportunity to finally get this done.”

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MEXICO

Tequila Toast To Texas

Burgos Basin, one of Mexico’s most promising shale gas plays, is a part of the long-proven Eagle Ford play in Texas. Following an energy reform bill, the shale gas industry is now bracing itself for a kick-off next year. B Y C l a u d i a P e r e z Ri v a s

home of shale - Texas - north Mexico has some of the largest shale gas reserves in the world, yet the country imports about a third of its gas. This could change after the Mexican government adopted potentially game-changing energy reforms in late 2013, though the reforms’ real impact is yet to take place. The Mexico Energy Reform Bill that was signed by Mexican president Enrique Pena Nieto in late 2013 allows foreign companies to explore in Mexico. The reform will allow contracts or profit- and production-sharing, as well as licenses, in which companies pay royalties and taxes to the Mexican government for the right to explore and drill. Flexible contract terms for private companies would be available, with preferences written in for Mexican suppliers if they can match terms offered by foreign counterparts. The rules must still be approved by Congress, which is expected to vote until a special session in late June, but it seems a done deal already. Benjamin Torres-Barron, a partner in the Mexican offices of the Baker & McKenzie law firm recently said the reforms are game changers. It is lack of foreign investment, technology and know-how that has prevented Mexico to kick off exploration to date. MEH-HEE-KOH According to Mr. Torres-Barron, exploration and production companies that 62 | Shale Gas Investment guide | summer 2014

PHOTOPIN

Right across from the spiritual

Oil and gas companies should begin preparing for the first state contract tenders for shale gas E&P that will take place in 2015 are interested in investing in Mexican oil and gas should begin preparing now for the first state contract tenders, which are scheduled to take place in 2015. Once and if Mexico changes into a shale gas exploring country, the market could be really huge. It is estimated that Mexico has approximately 681 trillion cubic feet (Tcf) of technically recoverable shale resources. Mexico currently ranks sixth in the world in terms of shale gas potential, behind China, Argentina, Algeria, the U.S. and Canada, according to the United States Energy Information Administration (EIA) data. The EIA also estimates it has 14 billion barrels of recoverable shale-oil reserves. Winners of state contract tenders will face a difficult business environment once and if they get on with exploration.

Mexico currently lacks the infrastructure and technical expertise in shale gas to develop these resources. Mexico’s stateowned oil and gas company Pemex has not been able to invest enough in shale gas development for lack of experience on complex drilling procedures. The greatest known shale potential in Mexico is located in the portion of the Eagle Ford Shale that extends into the country’s Burgos Basin from South Texas. There, Pemex began its first ever production of shale gas from a test well, one of four drilled in the area. The well yielded a modest initial production rate of 2.8 MMcfd of gas. Pemex has three other wells in the play and plans to drill a total a total of 10 shale test wells in 2014 and up to 75 in the whole of Burgos Basin through 2015.

global update

INDIA

State of Deficit

State-owned Oil and Natural Gas Corporation (ONGC) is spearheading India’s initiatives in the shale gas sector, as the country is looking to marry economic growth with ever-growing demand for energy.

B Y J e r i n M at h e w i n B a n g a l o r e

Having drilled the country’s

first exploratory well in Gujarat’s Cambay basin in October 2013, ONGC is on track to start commercial production of shale gas this year. The Cambay basin is estimated to have a shale gas potential of 20 trillion cubic feet (Tcf). The US Energy Information Administration (EIA) estimates India’s recoverable shale gas reserves at 96 trillion cubic feet (Tcf), which could meet India’s energy demand for 26 years. ONGC plans to drill 30 exploratory wells across the country by March 2015. In addition to Gujarat, ONGC is exploring shale gas formations in the state of Rajasthan and has earmarked 20 billion Indian rupees (USD 330 million) per year for the cause. In future, the company will also explore Krishna-Godavari, Cauvery and Vindhyan basins. The company expects to derive some help from the US-based ConocoPhillips in its attempt to derisk Indian shale plays. In 2012, the two companies signed a memorandum of understanding to share shale gas knowledge and cooperate in a number of potential plays, such as Cambay, Krishna Godavari, Cauvery and Damodar. ONGC’s shale gas work accelerated after the country had revised rules for exploration of unconventional resources in October 2013 to allow ONGC and another national oil com-

pany, Oil India Ltd., to explore for shale gas and shale oil on their acreage. The government’s strategy is to boost domestic energy production and reduce soaring energy import bills, which contribute significantly to India’s current account deficit. In fiscal year 2012-13, India’s oil imports rose to USD144 billion, representing the largest portion of its overall import costs. The country has increased oil imports from about 40

India is the fourth largest consumer of energy in the world after China, US and Russia. The country is meeting about 75 percent of its energy needs through oil and gas imports percent of total demand in 1990 to more than 70 percent by 2011, according to the EIA, shooting current account deficit up to USD88 billion or 4.7 percent of GDP in fiscal year 201213, compared to USD78 billion or 4.2

percent GDP in the previous year. In November 2013, Oil minister M. Veerappa Moily said shale gas exploration would be a major step for the country’s “economic freedom”. India is the fourth largest consumer of energy in the world after China, US and Russia. The country is meeting about 75 percent of its energy needs through oil and gas imports. Adding to its energy woes, Asia’s third largest economy’s energy demand is expected to rise 132 percent by 2035, surpassing a 71 percent demand growth in China and Brazil and a 20 percent growth in Russia in the so-called BRIC group, according to the latest energy outlook report by British Petroleum. Gas demand is expected to increase to 446 million standard cubic metres per day (MSCMD) by fiscal year 201516. Meanwhile, domestic production and imports are expected to yield 118 MSCMD and 170 MSCMD, respectively, resulting in a shortage of 158 MSCMD, according to the petroleum and natural gas ministry. In order to tackle the crisis, the government has been encouraging companies to acquire profitable energy assets overseas, especially in African and other Asian countries. However, the government in New Delhi currently thinks that tapping unconventional resources such as shale gas would be a more feasible option to tackle the country’s deepening energy crisis, given the sector’s enormous potential.

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ARGENTINA

Milking a Dead Cow Argentine has shed some of its bad reputation in the world of oil and gas investment after compensating Spain’s Repsol for the 2012 nationalization. b y R h o d r i D a v i e s i n B u e n o s Ai r e s

Argentine state-owned energy company YPF hopes a settlement between Argentina and Spain’s oil and gas giant Repsol, agreed in February 2014, will attract new investors to explore for shale gas in the country, whose recoverable reserves of unconventional gas are thought to be the second largest in the world after China. The U.S. Energy Information Administration said Argentina has 802 trillion cubic feet (Tcf) of technically recoverable shale gas. President Cristina Fernandez de Kirchner’s government nationalized the 51 percent stake in YPF, or Yacimientos Petrolíferos Fiscales, in 2012. Ms. Kirchner argued that Repsol, which previously controlled YPF through this majority percent stake, had not done enough to raise output. In February, Argentina agreed to pay Repsol $5 billion in compensation for its action. “Although late, [the deal is] a good sign for companies who are considering partnering with YPF in the future,” said Emilio Apud, a former official at the energy ministry and now an Academic Councillor at Argentine research center Liberty and Progress. “Without this payment arrangement, the nationalization was illegal and therefore the ownership of those shares by the Argentine state was not recognized internationally.”

INVESTMENT, CURRENCY NEEDED The government now hopes to exploit the reserves and export natural gas to bring in desperately needed foreign currency, increase Argentina’s energy independence, and drive economic growth. The American oil major Chevron said in April it will develop the western Neuquen Basin, part of so-called Vaca Muerta (“Dead Cow”) reserves, a poten64 | Shale Gas Investment guide | summer 2014

tially massive shale gas play, where YPF said it has also found 22 billion barrels of shale oil. Chevron has drilled three exploratory shale oil wells since 2012, but will now look to drill test wells for shale gas. Next, Chevron will drill 100 wells on its own in 2014 and another 1,500 later in a joint venture with YPF. The western Neuquen Basin contains 50 percent of Argentina’s shale gas reserves. It’s followed by Golfo San Jorge and Austral-Magallanes basins in the southern region of Patagonia. There are also reserves in the north, towards the border with Paraguay and Bolivia. In Argentina, mineral rights are owned by the state, and control is split between

however, if Argentina’s shale gas ambitions are to be fulfilled. For now, YPF is in talks with Petronas, Malaysia’ state oil and gas company, over a shale gas venture, YPF Chief Executive Miguel Galuccio said in January 2014. The two firms have “advanced towards a future deal,” he said. “The picture today is wait and see,” said Mr. Apud. “The development of the potential of Vaca Muerta requires more than ARG$15 billion ($1.8 billion) per year over the next 20 years. Argentina has the resources, but lacks technology and capital.” Fulfilling the country’s resource potential could make it energy indepen-

“The development of the potential of Vaca Muerta requires more than ARG$15 billion ($1.8 billion) per year over the next 20 years” Emilio Apud, Liberty and Progress federal and provincial governments. Local communities have voiced opposition to fracking, most vocally indigenous communities in Neuquen, but there are groups opposing fracking throughout the country, usually citing environmental pollution, particularly concerning water, as the biggest concern. But Chevron and YPF appear determined to raise daily production in these early exploration stage to about one million cubic feet of cubic gas compared to current 1,369 billion cubic feet daily production nationwide. The entire remainder of the resource needed to cover domestic demand comes from neighboring Bolivia. Many more investors need to make substantial investment commitments,

dent, and even an exporter. Being a firm inside Argentina and trying to export energy can be problematic because of high Argentine export taxes put in place to ensure cheap supply for domestic consumption. To address this issue, the government has floated the idea to permit firms investing $1 billion over fiveyears to sell up to 20 percent of their output abroad, tax-free. “The energy market remains distorted with insufficient long-term incentives for producers to explore for and extract more hydrocarbons, and with similarly insufficient incentives for consumers of energy to curb their heretofore subsidized demand,” said Arturo Porzecanski, a professor of economics at American University in Washington DC.

global update

SOUTH AFRICA

Potential to waste

Investors large and small have been lining up to get their teeth into South Africa’s shale gas reserves, but recent legislation may kill the sector off before a single well is sunk.

By Greg Penfold in cApe town

The Karoo Basin’s Lower

Permian Ecca Group shales contain 1,559 trillion cubic feet (Tcf) of technically-recoverable resources, according to the US Energy Information Administration. This makes the Karoo potentially the eighth largest such resource in the world, two-thirds of the size of shale gas reserves in the United States. It could give the South African economy a massive boost. “If there were only 50 Tcf, you get a lot of revenue to the state,” said Shell Upstream General Manager Jan-Willem Eggink. “You get many jobs – hundreds of thousands of jobs not only with the ordinary gas industry, but also with the new industries that will pop up because there’s security of supply, and in addition to that a significant boost to GDP.” No wonder, then, that Africa’s largest fund investor, the Public Investment Corporation (PIC), with a portfolio estimated at $135 billion, has thrown its weight behind shale gas. “We have taken the decision that we will play the lead in the energy space,” PIC Chief Executive Elias Masilela told Bloomberg in April. “Energy is one of the biggest barriers for the continent.” This gung-ho attitude is also echoed by the latest company to apply for a shale gas exploration license, Bundu Gas & Oil Exploration, 95 percent owned by Australian junior Challenger, which joins Shell, Falcon, and Chevron in the queue.

Results from a series of wells drilled in apartheid times by state exploration company Soekor piqued Bundu’s interest. “When Soekor penetrated the shale, they actually took such a kick from gas that they had to activate the blowout preventers and then the gas flowed to surface,” Challenger managing director Robert Willes told Engineering News in January 2014. “This is an incredibly exciting and encouraging prospect.” This excitement is shared by South African Mineral Resources Minister Susan Shabangu, who commented at the Mining Indaba in Cape Town:

“If we’re providing a regulatory framework where there’s no assurance of a reasonable return on your investment, they’re going to look elsewhere” Dr. Luke Havemann, ENSAfrica “Government is excited about major game-changing discoveries of untapped potential for petroleum development,

spanning both off-shore and on-shore, including shale gas. We will move ahead decisively, yet responsibly, with the exploration of shale gas.” NATIONALIZATION BY STEALTH Despite the staggering potential of Karoo shale, not a single license has been granted. The process risks being derailed altogether by a controversial amendment to the Mineral and Petroleum Resources Development (MPRDA) Bill, passed by the South African Parliament in March 2014. Under the original version of the MPRDA Bill, the State was entitled to 20% free carry interest – effectively a risk-free portion of production. In addition, it was mooted that the State be entitled to claim 30% of production at the going market rate. However, under the amendment – passed abruptly without the industry having been consulted – the State now has the right the exercise the option to purchase 80% of production “at an agreed price,” not the going market rate. In other words, the State’s risk-free 20 percent share in production is raised to a potential 100 percent. Commentators have evoked the spectre of “nationalisation by stealth”, saying any significant shale gas investments could effectively be nationalised by the state. In such a regulatory environment, investors such as Shell – which has committed USD 250 million to exploration alone – aren’t likely to bother drilling in the first place. “If we’re providing a regulatory framework where there’s no assurance of a reasonable return on your investment, they’re going to look elsewhere,” said oil-and-gas legal expert Dr. Luke Havemann from ENSAfrica, a law firm. “They will simply relinquish their acreage.”

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PHOTOPIN

CENTRAL & EASTERN EUROPE

Stalled Out The strategic disadvantage of CEE states’ being too much dependent on gas imports from Russia has been striking for two decades now. Yet, even the Ukraine crisis isn’t much prompting anyone in the region to increase domestic gas production. By Wojciech Kość

Statistics of Europe’s dependency on Russian gas could be misleading. The bulk of countries that are largely dependent on Russia for their gas supplies are in Central and Eastern Europe. It’s unsurprising that Poland is the most vocal state advocating shale gas exploration now that the European Union is coming to terms that Russia might not be a credible supplier after all. Elsewhere, however, despite fairly encouraging geological data and reliance on imports from Russia reaching 100 percent, the shale gas industry has made little to no progress. In some countries, political decisions to ban fracking are holding back development, like in Bulgaria or the Czech Republic (where also nuclear 66 | Shale Gas Investment guide | summer 2014

power is an important energy source). Some governments also don’t see shale gas as worth going after, having huge potential in shale oil (Estonia) or again nuclear power (Slovakia).

Romania, two years after the government of Victor Ponta lifted a moratorium on fracking that was instigated by the previous cabinet as a result of popular protests. Fracking may be legal in Romania, but protests continue. February saw biggest one to date, with a 1,500-person demonstration in Curtici, western Romania, the area permitted to Hungary’s national oil and gas company MOL and SC Expert Petroleum. In April, American IOC Chevron was permitted to drill two shale gas exploration wells in Vaslui county, in south-eastern of the country, Chevron Romania Manager Tom Holst announced in mid-April. Instead of moving forward to shale gas production, however, the Chevron announcement is rather expected to give the protest movement a new momentum in Curtici, Vaslui and other locations seen as prospective for shale gas exploration.

Shale gas still has a chance to alter the energy mix in Romania, Lithuania and Hungary Even if this is looking improbable at the moment, shale gas has a chance to alter energy mixes, apart from Poland, in Romania, Lithuania and Hungary. ROMANIA Exploration is still at a slow start in

Historically a major oil and gas country, Romania is still able to cover 75 per cent of its oil and gas demand with domestic production. All of its gas imports come from Russia. In theory, the country might have enough shale gas reserves to meet do-

LITHUANIA Following Chevron’s retreat from Lithuania, the Baltic state now mulls announcing a new tender for a potentially shale gas-rich strip in Western Lithuania in the fall of 2014, Lithuanian minister of environment, Valentinas Mazuronis tells SGIG. Before the tender takes place, however, some work to ease the public with shale gas is still needed, Mr. Mazuronis says. “We have not yet stitched up the program aimed at having the public acquainted with the process of exploration and extraction and the benefits that the community in the area in question will have from it,” Mr. Mazuronis said. “The shale gas information dissemination program will be overwhelming and will encompass a range of measures, from using the traditional media to working on-site with every community. This would be following in the Poles’ footsteps in terms of getting locals in favor of shale,” the minister said. Chevron, which won the previous tender for shale gas exploration, pulled out from Lithuania, citing adverse tax and legal environment. The US energy giant was particularly disappointed in a proposal to levy a 40 percent basic tax on shale gas.

The government has changed its tax strategy, however. It now proposes that shale gas extraction will be tax-free for up to four years once operators flow gas. A tax of 15 percent will be applied after the tax-free period ends. HUNGARY In Hungary, Ireland-based Falcon Oil & Gas announced the beginning of the well testing operations on the Kútvölgy-1 well. The well is the first of three to evaluate the gas potential of the Algyő Formation in Falcon’s Mako Trough permit. The drilling and testing programme is funded by Naftna Industrija Srbije (NIS) is expected to take about 3 months. According to a January 2013 study by RPS Energy, a natural energy re-

sources consultancy, Falcon might be operating acreage with 568 billion cubic feet (bcf) of prospective recoverable gas resources. Interest in shale gas is going to receive some more attention this spring, as the results of a bid for gas exploration licences, which took place in late 2013, will be made available. The bid has been long awaited by the industry, as there have been no new concessions since 1998 and no new exploration licenses issued since 2010, Natural Gas Europe reported in November 2013. Four exploration areas were selected for the bid, whose results will provide an important indicator in shale gas interest in Hungary. With reporting from Maria Popa in Bucharest and Linas Jegelevicius in Vilnius.

PHOTOPIN

global update

mestic demand for decades to come. But it will take at least five years of exploration before any gas flows at all, the Prime Minister Ponta said in April. Until that time, wrote foreign policy and strategic studies expert Ariz Huseynov in analysis for New Eastern Europe magazine, Romania will continue to rely on gas imports that are substantial enough to cause problems if halted. Romania’s relationships with Russia are also tense because of Moldova that Romania considers its historic territory and promotes Moldova’s integration with the EU.

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WESTERN EUROPE

What Shale Gas? There’s only a faint echo of the Ukraine crisis in Western Europe, so governments there have been giving little political importance to shale gas exploration. Some countries however have their own reasons to go after gas. By Wojciech Kość

It cannot be a coincidence that

in the European Union, shale gas is most loudly praised by the United States two staunchest allies Poland in the east and the United Kingdom in the west. Elsewhere, the discussion about shale gas exploration has largely stopped at the stage of identifying potential plays and the battle is on between industrial and environmental lobbies, typically supported by governments, to put a shale gas strategy in place. EU: NO BINDING RULES An EU-wide development that could have an influence on Western Europe’s stance on fracking took place in January 2014, as the European Commission said there would be no binding rules for shale gas exploration in the EU. Contrary to concerns that in countries like Poland the UK had that the Commission would phase-in strict rules concerning shale gas across the EU, the Commission said in its January guidelines that countries are free to do what they think is best. The Commission did make sure it had a power to step in, however, as it said that in case of shale gas development proving harmful to the environment, binding 68 | Shale Gas Investment guide | summer 2014

rules could enter into force. The Commission will give shale gas situation in the EU an overview in July 2015. The Commission suggests that countries that will support shale gas development will need to show compliance with the best environmental practices

“Cheaper natural gas in the US is lowering electricity and other energy costs for American manufacturers, while Germany’s [power costs] continue to rise IP Journal, Germany that require extensive public consultations and environmental impact assessments - pretty much as in the case of almost all major energy or infrastructure developments. The countries would also be called to implement a system to monitor

operations “in a way which prevents possible surface leaks and spills to soil, water or air.” Reduction of flaring and venting will also be encouraged. Just two countries in Western Europe, apart from the UK, are actively discussing shale gas: Germany and Spain. Another major European economy, France, is anti-shale gas, expected to remain that way as long as current president Francois Hollande is in power. SPAIN In Spain, a legal tussle continues between the regional government of Cantabria and the federal government in Madrid over Cantabria’s ban on fracking that the regional authorities imposed in April 2013. The move by Cantabria had Repsol, Spain’s largest oil producer, postpone planned shale gas explorations in Northern Spain. Repsol holds a concession over 290 square miles in Cantabria, licensed in 2011 for six years, conditional upon a minimum investment of 30 million euros in exploration activities. A hearing is scheduled to take place before Spain’s Constitutional Court to rule on Cantabria’s ban. The central government will reportedly argue that the ban violates the national law on

PHOTOPIN

global update

hydrocarbons, which allows hydraulic fracturing under the permitted exploration techniques for the oil and gas sector. GERMANY A stalemate over the future of shale gas in Germany continues, as German oil and gas industry has been at odds with the so-called Great Coalition of two biggest political parties, conservative CDU and leftist SPD over political reasons to keep a ban on fracking, originally introduced in 2012 by the previous CDU-led government. According to the industry, German politician are giving in to environmental lobbyism all too easily, while domestic production of gas has been in decline. “Currently, there is a decline in domestic production. A major share of planned investments in our industry is stymied politically,” said Hartmut Pick, spokesman for the WEG oil and gas industry group, told Reuters. The industry claims that the ban on fracking isn’t well grounded at all. “While shale gas development through

hydraulic fracturing is new to Germany, the technique has been used in the country since 1961 to allow gas production from low permeability, or tight sandstone reservoirs,” Ritva Westendorf Lahouse, spokeswoman for ExxonMobil’s German operations, told Natural Gas Europe in February. German manufacturers, in turn, are concerned that German industry will lose competitive edge against its American counterpart as a result of energy prices in the US going down thanks to shale gas. “Cheaper natural gas in the US is lowering electricity and other energy costs for American manufacturers, while Germany’s continue to rise. This is especially of concern to energy-intensive industries, where the EU now has 36 percent of world capacity and the US only 10 percent. Secondly, as the US begins to build facilities for export of liquefied gas (LNG), this capacity could have a significant effect on the price of electricity and gas in Asia, which looks to become the main recipient of US LNG, which would

improve Asian competitiveness versus the EU,” German foreign policy magazine IP Journal noted in February. FRANCE According to a parliamentary report on shale gas, development of shale gas in France would produce less benefits to consumers than in the US due to production costs, and regulatory moves should prioritise protecting energy intensive companies, Platts reported in May 2014. The report said that France, as well as entire Europe, would not be able to produce shale gas to reach prices anywhere near in the US. European shale gas’ price would stand at about USD 7-8 per Million british thermal units (Mbtu), as compared to America’s price of just USD 3.7 per Mbtu. The report comes in support of France’s state policy not to allow fracking, which is considered dangerous to environment and agriculture. Several industry sectors are however lobbying for president Hollande to revert on his 2013 statement that shale gas development simply would not happen in France.

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Accidents Don’t Happen In early February, 50 miles south of Pittsburgh, Wild Well Control, a service company that responds to oilfield emergencies, was called to a well blowout. According to the Associated Press, Chevron spokesman Trip Oliver said, “A fire was reported at about 6:45 a.m. on February 11 at the Lanco 7H well in Dunkard Township.” John Poister, a spokesman for the Pennsylvania Department of Environmental Protection (DEP), said “the fire was aided by a truck on the well pad which contained 1,000 litres of propane, which exploded and killed one of the site workers.” He added that the fire was so intense the firefighters had to pull back from the flames. “They essentially re70 | Shale Gas Investment guide | summer 2014

Well blow-outs, uncontrolled fires, and road accidents pose serious risks to human health and environmental safety. By hunter diamond

treated to let the fire burn,” Mr. Poister said. CHEVRON BLOWUP In April, the DEP cited Chevron Appalachia with nine violations, including various health and safety violations. The DEP took air and soil samples within days of the accident and concluded that due to the fire the area had higher concentration of propane, heptane, and 1,2,4-trimethylbenzene than is typically

found in rural areas across the state. The higher concentrations of propane are believed to have come from the nearby storage tanks, the DEP reported. Among the violations, the DEP alleged that Chevron Appalachia refused unrestricted access for two days to properly identified agency personnel at the wellsite the day of the incident. Chevron Appalachia failed to effectively prevent an explosion; they failed to prevent waste of gas due to inadequate blowout equip-

PHOTOPIN

Photo by Glen Ellman/Fort Worth Police Department

w e l l pa d s e c u r i t y

health & safety

Due to the fire the area had higher concentration of propane, heptane, and 1,2,4-trimethylbenzene than is typically found in rural areas across the state ment, and they failed to contain fugitive air emissions. Chevron Appalachia, in responding to the DEP’s allegations, was quoted in the Pittsburgh Post Gazette saying, “During our response to this incident, Chevron’s first priority was to ensure the safety of all responders and prevent additional injuries. For that reason, access to the Lanco site during the initial stages of the incident was restricted. “At Chevron’s request, the Pennsylvania State Police established an access control point near the pad. No one, including

these risks are. The Marcellus Shale Coalition, an industry group, avoids discussion of the well blowout altogether. In the last two years, no news piece on their website, nor update from a member, describes anything unfavorable. Europe could do better with a tasteful reporting of the facts, resolutions and discussion. ACCIDENTS DON’T HAPPEN? Underreported are the traffic accidents that result from onshore oil and gas production. The growth in the Barnett

Future think tank, suggested that “one additional well drilled per month raises the frequency of accidents involving a heavy truck by more than 2 percent and that with one additional well drilled in a county, the number of accidents involving a fatality increases by 0.6 percent.” Although any increase of any type of traffic will increase likelihood for accidents and fatalities, the study also pointed out to the fact that “there are oil field exemptions from highway

“Chevron’s first priority was to ensure the safety of all responders and prevent additional injuries” Chevron Appalachia spokesman Chevron personnel, was permitted access to the pad on the day of the incident, until experts from Wild Well Control arrived on the scene and were able to assess the situation.” According to reporting by the NGI’s Shale Daily, the explosion and fires that began on February 11th at Chevron’s Lanco 6H and Lanco 7H wells were one of the “worst accidents the state has seen in modern history and the largest accident yet at an unconventional well in the state.” The AP reported that one worker was killed and another was injured in the incident. The fires didn’t extinguish themselves until February 15th. Industry isn’t well equipped to deal with emergencies or explain how big

shale play has more than quadrupled the number of heavy trucks on local roads in some counties in Texas. According to the Star Telegram, the local Texas newspaper in Fort Worth, “two young boys crushed to death last year by a tanker truck in West Virginia. A father in Pennsylvania was killed by a tanker in 2011. And a 19year old Texas man fatally was injured in 2012 after colliding with a drilling truck on his way to work. A month later, on the same road, three retired teachers died in another collision with a truck.” A study on the impact of well drilling and ensuing increase in truck traffic to and from well pads in Pennsylvania, carried out by Resources for

safety rules created in the 1960s that allow truckers in the oil and gas industry to work longer hours than drivers in other industries.” Marvin Odum, director of Royal Dutch Shell’s exploration operations in the United States, said that deadly crashes are “recognized as one of the key risk areas of the business.” Improving road safety and lessening the risk of well site accidents is important for an industry who will be under close scrutiny in Europe. Although in Europe the industry is under tighter regulation, from fuel burning to waste removal, from site impacts to making noise, the chances for “accidents that never happen” are still as high.

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| 71

TECHNOLO G Y

Prevention, not Cure At the early stage of US shale development, E&P companies were so engaged in drilling and fracking wells they forgot to address communities’ concerns about technology and its possible impacts on environment. Because shale development is getting more and more attention from the public outside of the United States, new technologies deserve a close look. Now anti-fracking movements, both national and local, force the industry not merely to explain, but also to ensure the public trust with new HSE solutions and establish a system of transparency. Meeting tight regulatory conditions and increasing social acceptance takes a bulk of well development time, thus it is crucial to focus on meeting these conditions using best practices and state-of-art technologies. Technologies to reduce shale gas operations’ impact on the environment and minimize risk to human health makes it easier to win support for shale development on the side of local communities and authorities as well as build public trust in companies’ activities. On the other hand, these technologies often provide operators with 72 | Shale Gas Investment guide | summer 2014

There is an environmental impact of shale gas production, though not quite as dramatic as is often presented. These technologies from the established North American markets should be making their way into Europe - sooner the better. by G o r d o n Wa s i l e ws k i a n d J a n W yp i j e ws k i

an opportunity to reduce costs. Below are examples of technologies that can be put to use in order to gain local communities and authorities support by reducing the potential environmental impact of shale development. EMISSIONS REDUCTION Arguably the biggest concern of local communities and environmentalists is the release of Volatile Organic Compounds (VOCs) and greenhouse gases. VOCs, emitted while venting hydrocarbons during the last stages of well preparation, contribute to smog formation and air pollution with benzene, which is carcinogenic, and hexane, which may cause dizziness, nausea, skin and eyes’ irritation. Other substances like oxides of nitrogen, carbon monoxide and PM2.5 (particulate mat-

ter of less than 2.5 micrometers in diameter) also flow into the air during flaring.

Ta x a t i o n

Green completion means the recapture of a majority of toxic fumes like VOCs that would have been otherwise vented or flared Industry’s answer to this issue is a process called “green completion”, which allows operators to recapture a majority of toxic fumes like VOCs that would have been vented or flared otherwise. The whole process is based on the three-phase separation of reservoir fluid after hydraulic fracturing of the well. Initially, a sand separator filters out sand grains from the water-gas mixture coming from a wellbore. In the second phase, water is separated from the fluid, which then mixes again with sand in the disposal tank. As a result, natural gas is directed into a separate pipe and eventually finishes in a processing plant. In 2012, the US Environmental Protection Agency (EPA) in its new regulations about the reduction of harmful emissions linked with oil and gas industry, identified the green completion as the best available technology for tackling air pollution. The technology will be required at all wells hydraulically fractured from 2015. Gina McCarthy, EPA Assistant Administrator, estimated that between 12,000 to 20,000 tons of benzene and

90,000 to 290,000 tons of VOCs would be prevented from release annually. Some companies have already introduced the technology voluntarily. Devon Energy started green completion at Barnett Shale in 2004, while BP has been using Reduced Emission

Completions in Wyoming since 2001. A drawback of this technology is that it cannot be applied in every case. For example, it isn’t working properly in Pennsylvania January-June 2013

F lo w b a c k M a n a g e m e n t Disposal Method

Total Vol. (bbl eq.)

% (of total)

Centralized Treatment Plant for Recycle

940,692

26.8

Injection Disposal Well

94,888

2.7

Landfill

2,186

0.1

Reuse other than Road Spreading

2,457,025

70.1

Storage Pending Disposal or Reuse

9,227

0.3

Centralized Treatment then Discharge

0.0 Source: John Veil, SPE DL

case of low reservoir pressure, and low pressure wells are exempted from the EPA requirements. NOISE REDUCTION In early 2000s, a drilling rig worked just next to a shopping center’s wall in LA’s Beverly Hills. The drilling site was operated by Stocker Resources and it was not a sole instance of oil and gas companies’ urban operations that meet environmental standards for noise thanks to the use of acoustic barriers. This simple yet effective method of reduction of noise coming from the drilling rig is not uncommon in Poland. For example APEX Contracting offers mobile acoustic walls that have been used during Halliburton’s hydraulic fracturing on Chevron’s Zawada Z-1 well on Zwierzyniec concession in the Lublin region, eastern Poland, Lane Energy’s nitrogen lifting on Strzeszewo LE-1 and Łebień LE-2H in the Gdańsk region, northern Poland, and Chevron’s drilling operation of K-1 well on Kraśnik concession in the Lublin region. Typically, the use of acoustic walls will differ well by well. According to APEX, one contract assumed constructing three rows of sound barriers, for example. According to Chevron, the noise level 550 meters from the Zawada well pad, near the closest house, was 38.4 dB. Similar results were published in the Polish Geological Institute’s report from Lane Energy’s Łebień LE-2H activities, where the noise level at the fencing of the well site was 77.5 dB but 53.8 dB adjacent the nearest houses. The Ministry of Environment puts acceptable noise levels at 55 dB during the day and 45 dB at night. WATER RECYCLING Compared to other hydrocarbons, shale gas receives most attention that is

www.cleantechpoland.com

| 73

typically centering around water use by the industry. But according to a 2013 study of John Veil of Society of Petroleum Engineers, Marcellus Shale consumed 0.32 percent of Total Water Withdrawal (in other words, total consumption of water related to human activity) in Pennsylvania, New York and West Virginia and is responsible for 50 out of 882 billion gallons of produced water per year in the United States in the oil and gas sector. Stringent regulations, truck transportation and disposal costs influence ef-

Ground-gas and groundwater monitoring enables identification and quantification of hazards and provides authorities and local communities with confidence in what companies are doing fective water management. Commonly, flowback and produced water are injected into disposal wells, treated into clean brine or fresh water, or filtered and reused. In European conditions treatment and recycling seem to be the most prospective as water recycling has many benefits such as reducing environmental footprint, volume of water used and ultimately the total overall production costs. Flowback and produced water may contain hydrocarbons, solids, bacteria and heavy metals. Service companies offer various water reuse systems. For example, Halliburton’s Clean74 | Shale Gas Investment guide | summer 2014

Wave technology offers electrocoagulation (removing contamination from water by applying electrical charge to it) of frac flowback and produced water treatment at rates up to 26,000 bbl/d using minimal power. The system electrically destabilizes and “glues” dispersed matter into bigger particles which are easily removed from the water. The same technology also decreases amount of chemicals needed in wastewater treatment and helps handle hydrogen sulfide, a highly hazardous compound that is sometimes encountered during drilling. Another technology is Schlumberger’s subsidiary M-I SWACO’s comprehensive water treatment solutions like Aqualibrium that aim at maximizing water recovery, minimizing waste and reducing disposal logistics and costs. In the Marcellus shale play, reclaiming and reusing frac water provided $900,000 savings for an operator in two locations. GROUND MONITORING Ground-gas and groundwater monitoring carried out before, during and after drilling and completion enables accurate identification and quantification of hazards and provides authorities and local communities with confidence in what companies are doing. The Continuous Ground-Gas Monitoring Approach and ground-gas risk

assessment by companies like UK firm Ground-Gas Solutions (GGS) provide a range of techniques reducing shale projects’ impact uncertainty by acquiring continuous data sets from monitoring wells. GGS’ GasClam technology is an in-borehole control device, collecting precise well data at intervals of up to three minutes. Apart from physical parameters, such as atmospheric pressure, borehole pressure and temperature, it measures concentrations

of methane, carbon dioxide, oxygen, carbon monoxide, hydrogen sulphide and total VOCs content. Ground monitoring comes handy to identify well casing or cement integrity loss resulting in shale gas or hazardous chemicals’ escape into soil.

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whoâ&#x20AC;&#x2122;s who

Shale Gas

investment

Guide

WHOâ&#x20AC;&#x2122;S

WHO

IN CONCESIONS/UK operators l Celtique Energie

p. 78

l Cuadrilla Resources

p.78

l Dart Energy

p.79

l Egdon Resources

p.79

l GDF Suez

p.80

l IGas Energy

p.80

l Magellan Petroleum

p.81

l Total

p.81

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.

www.cleantechpoland.com

| 77

CONTACT INFO

holding companies

board members

Geoff Davies Chief Executive Officer

Celtique Energy Holdings

Geoff Davies Peter Bird Simon Barkham Peter Coulson

40 Berners Street London W1T 3NA United Kingdom (+44) 20 7255 6100 www.celtiqueenergie.com

CONCESSIONS HELD Name

PEDL 231

Acreage (km2)

Wells

400

PEDL 234

300

PEDL 243

300

“Celtique Energie expects that shale gas in the United Kingdom might be present at the concessions 231,234 and 243”

c o n c ess i o n a re a

Piotr Nowak, Country Manager Concession area

comment: “We are pleased to confirm that we have submitted a planning application for a temporary exploration well west of Fernhurst, following extensive engagement with the local community.” - Geoff Davies, Chief Executive Officer

CONTACT INFO

holding companies

board members

Francis Egan CEO

Cuadrilla Resources Holdings Ltd

Lord Browne Haroun Van Hovell John Lancaster Allan Campbell Tony Kelly Roy Franklin Francis Egan Tony Carruthers Andrew Quarles

Cuadrilla House Stowe Court, Stowe Street Lichfield, Staffordshire WS13 6AQ, UK (+44) 1543 266 444 www.cuadrillaresources.com

CONCESSIONS HELD Name

Acreage (km2)

PEDL 165

118

PEDL 244

PEDL 247

EXL 189

EXL 269

Wells

“We’re committed to being a good neighbour and to talking with the community at every stage of the process”

c o n c ess i o n a re a

Francis Egan, Cuadrilla’s chief executive Concession area

comment: “As a result of the extensive technical and geological analysis, we have decided to focus on just two sites at this time. This will allow us to reduce the potential impact on the local area during exploration while still gathering the important information we need to determine how much gas could be recovered.” - Francis Egan, Cuadrilla’s Chief Executive

78 | Shale Gas Investment guide | SUMMER 2014

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, UK (+44) 333 800 2000 www.dartenergy.com.au

CONCESSIONS HELD Name

CONCESSIONS HELD

Acreage (km2)

Wells

PEDL 012

PEDL 187

PEDL 133

367

PEDL 189

100

PEDL 200

120

PEDL 195

100

PEDL 207

PEDL 196

PEDL 210

PEDL 198

EXL 288

PEDL AL010

PEDL 147

PEDL 185

100

PEDL 186

100

Wells

Concession area

STAKE IN Concession Name

c o n c ess i o n a re a

Acreage (km2)

Name

comment: Interest (%)

Holder

PEDL 139

17.5

IGas

PEDL 140

17.5

IGas

“We welcome GDF SUEZ’s entry into onshore UK unconventionals, bringing valuable expertise at a critical time for the gas industry in this country.” - John McGoldrick, Dart Chief Executive Officer

CONTACT INFO

holding companies

Mark Abbott Managing Directors

Egdon Resources U.K.

The Wheat House 98 High Street, Odiham Hampshire, RG29 1LP, UK (+44) 1256 702292 www.egdon-resources.com

STAKE IN

CONCESSIONS HELD Name

Acreage (km2)

Wells

Concession Name

board members Mark Abbott Philip Stephens Jerry Field Walter Roberts Ken Ratcliff Andrew Lodge

c o n c ess i o n a re a Interest (%)

Holder

PL 161

PEDL 139

14.5

IGas

PL 162

PEDL 140

14.5

IGas

PEDL 209

who’s who

CONTACT INFO

Concession area

comment: “Egdon Resources had announced completion of 3D seismic at PEDL 139/PEDL 140.”

- Egdon Resources news , March 31, 2014

www.cleantechpoland.com

| 79

CONTACT INFO

holding companies

board members

Jean Claude Perdigues Managing Director

GDF SUEZ E&P UK Ltd

Jean Claude Perdigues Delphine Cherel-Sparham Ian Conacher Andy Hirsch Rob Buchen Andy Spancer Steve Thomson

40 Holborn Viaduct London EC1N 2PB (+44) 203 122 1400 www.gdfsuezep.co.uk

STAKE IN Concession Name

c o n c ess i o n a re a

STAKE IN Interest (%)

Concession Name

Interest (%)

Holder

EXL 273

Dart Energy

PEDL 189

Dart Energy

EXL 288

Dart Energy

PEDL 200

Dart Energy

PEDL 12 PEDL 146

Dart Energy

PEDL 207

Dart Energy

PEDL 210

Dart Energy

PEDL 147

Dart Energy

PEDL 185

Dart Energy

PEDL 186

Dart Energy

PEDL 187

Dart Energy

PEDL 188

Dart Energy

Concession area

comment: “GDF SUEZ is pleased to enter this first investment in UK shale gas as it complements the large presence of the Group in the UK We look forward to working with our partner , Dart Energy, to unlock the potential of these licences.” - Jean-Marie Dauger, Executive Vice-President

CONTACT INFO

holding companies

board members

Andrew Austin CEO

Island Gas

Andrew Austin Stephen Bowler John Blaymires

7 Down Street London W1J 7AJ UK (+44) 207 993 9899 www.igasplc.com

CONCESSIONS HELD Name

PEDL 139

Acreage (km2)

Wells

100

PEDL 140

141

PEDL 107

211

PEDL 116

102

PEDL 145

102

PEDL 145N

102

PEDL 184

386

PEDL 190

386

PEDL 193

296

“We have now completed our 3-D seismic acquisition on PEDL 139/140 on behalf of our joint venture partners, Total E&P UK Limited, Egdon Resources, Dart Energy and Corp” IGas news 31.03.2014

c o n c ess i o n a re a

Concession area

comment: “We have had a productive six months across the business with our exploration well underway at Barton, demonstrable progress on our Chase the Barrels initiative and the acquisition of Caithness.”

80 | Shale Gas Investment guide | SUMMER 2014

- Andrew Austin, CEO

holding companies

board members

Thomas Wilson President and Chief Executive Officer

Magellan Petroleum Corporation

Thomas Wilson Antoine Lafargue Mark Brannum

who’s who

CONTACT INFO

1775 Sherman Street Suite 1950, Denver, CO 80203 United States of America (+1) 720 484 2400 www.magellanpetroleum.com

STAKE IN Concession Name

Interest (%)

Holder

PEDL 231

Celtique Energie

PEDL 234

Celtique Energie

PEDL 243

Celtique Energie

“Magellan Petroleum UK Ltd holds a 50% interest in PEDLs 231, 234, 243, which are located in the central Weald Basin.”

c o n c ess i o n a re a

Cleantech Poland Concession area

comment: “Magellan Petroleum UK Ltd holds a 50% interest in PEDLs 231, 234, 243, which are located in the central Weald Basin.” - Company’s press release 13.01.2014

CONTACT INFO

holding companies

board members

Christophe de Margerie Chief Executive Officer

Total E&P UK Ltd

Christophe de Margerie Thierry Desmarset Patrick Artus Patricia Barbizet Gunnar Brock

Crawpeel Road, Altens Aberdeen, Hampshire AB12 3FG, UK (+33) 1 47 44 45 46 www.total.com

STAKE IN Concession Name

Interest (%)

Holder

PEDL 139

IGas

PEDL 140

IGas

PEDL 209

Egdon

“With investments of approximately 2 billion dollars each year in the UK, Total E&P UK will become the largest oil and gas producer in the country by 2015” Comapny’s Press release 13.01.2014

c o n c ess i o n a re a

Concession area

comment: “Total announced that it has acquired a 40% interest in two shale gas exploration licences in the United Kingdom, PEDLs 139 and 140 in the Gainsborough Trough area of the East Midlands region of the UK which cover an area of 240 km2.” - Company’s press release, January 13, 2014

www.cleantechpoland.com

| 81

who’s who

Shale Gas

investment

Guide

WHO’S

WHO IN CONCESIONS/POLAND

operators l l l l l l l l

3Legs Resources BNK Petroleum Chevron ConocoPhillips Cuadrilla Resources Eni Spa Esrey Energy Hutton Energy

p.84 p.84 p.85 p.85 p.86 p.86 p.87 p.87

l l l l l l l l

Lotos Marathon Oil Petrolinvest PGNiG PKN Orlen San Leon Energy TransAtlantic Petroleum Wisent Oil & Gas

p.88 p.88 p.89 p.89 p.90 p.90 p.91 p.91

The Who’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.)

Poland

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.coml

STAKE IN

CONCESSIONS HELD Name

Acreage (km2)

Wells

Concession Name

c o n c ess i o n a re a Interest (%)

Holder

Damnica

ConocoPhillips

625

Lębork

ConocoPhillips

904

Karwia

ConocoPhillips

Cedry Wielkie

809

Stegna Godkowo

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: “We continue to work with ConocoPhillips on finalising the completion and testing programme for the lateral well and are satisfied that our 2013/14 drilling programme is proceeding according to plan.” - Kamlesh Parmar, Chief Executive

CONTACT INFO

holding companies

board members

Troy Wagner General Manager

Indiana Investments Saponis Investments

Wolf Regener Warren Nelson Coenraad Leo Hans Handler David Nelson Martin Robert

ul. Wiktorska 63 02-587 Warsaw (+48) 22 540 17 50 www.bnkpetroleum.com

CONCESSIONS HELD Name

Acreage (km2)

c o n c ess i o n a re a Wells

Starogard

878

Słupsk

919

1 1

Sławno

1,154

Darłowo

1,152

Bytów

1,169

Trzebielino

1,167

“The Gapowo B-1 well is believed to be the longest horizontally drilled well in Poland.”

LITHUANIA

Olsztyn Szczecin Bydgoszcz

Poznań

BELARUS

WARSZAWA Łódź GERMANY

The Company’s press release

RUSSIA

Gdańsk

Wrocław

Lublin

CZECH REPUBLIC

Katowice Zone of interest Concession area

Kraków

Rzeszów

SLOVAKIA

comment: “BNK Petroleum has successfully drilled, cased and cemented its Gapowo B-1 horizontal well with excellent gas readings regularly recorded throughout the lateral.”

84 | Shale Gas Investment guide | SUMMER 2014

- The Company’s press release , February 24, 2014

Poland

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) 22 460 100 www.chevron.coml

CONCESSIONS HELD Name

Acreage (km2)

Wells

Zwierzyniec

824

Kraśnik

1,194

Frampol

1,178

Grabowiec

1,195

“Chevron Poland is delighted to partner with PGNiG in the safe and efficient exploration of energy resources” John Claussen, Country Manager

who’s who

CONTACT INFO

c o n c ess i o n a re a 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 cooperation would enable both parties to reduce costs and - by obtaining economies of scale – acceleration of exploration work, and hence, the process of assessing the potential of shale gas resources in Poland. Binding agreements between Chevron and PGNiG are expected to be signed in 2014.” - PGNiG Press Office

CONTACT INFO

holding companies

board members

Laurie St Aubin Country Manager

ConocoPhillips E&P Poland ConocoPhillips Poland BV Lane Energy Poland

Ryan Lance Matt Fox Al Hirshberg Jeff Sheets Don Wallette

Rondo ONZ 1 00-124 Warsaw (+48) 22 209 04 00 www.conocophillips.com

CONCESSIONS HELD Name

Damnica

Acreage (km2)

784

Wells

Lębork

1,062

Karwia

209

“In January 2014, ConocoPhilips finished Sławoszyno LEP-1 exploration well in Karwia concession and Lublewo LEP-1 exploration well in Lębork concession.” Cleantech Poland

c o n c ess i o n a re a 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: “In 2014 work will be continued regarding exploring and evaluating potential shale gas including additional drilling and seismic surveys”

- ConocoPhilips website

www.cleantechpoland.com

| 85

Poland

CONTACT INFO

holding companies

board members

Marek Madeja Country Manager

Cuadrilla Poland

Mark Miller Marek Madeja Dennis Carlton Peter Turner Ken Lowe

ul. Syrokomili 5C 03-335 Warsaw (+48) 22 818 97 95 www.cuadrillaresources.com

CONCESSIONS HELD Name

Acreage (km2)

Łuków*

628

Pionki

827

Wells

“Cuadrilla Resources will remain only one concession in Poland as Międzyrzec P. concession has expired and the company is preparing for exit from Łuków concession”

c o n c ess i o n a re a LITHUANIA

Olsztyn Szczecin Bydgoszcz

Poznań

BELARUS

WARSZAWA Łódź GERMANY

Lublin

Wrocław

CZECH REPUBLIC

Kraków

Katowice

Cleantech Poland

* Resignation of further work

RUSSIA

Gdańsk

Zone of interest Concession area

Rzeszów

SLOVAKIA

comment: “We have sent a letter to the ministry about resigning from conducting further work at the Łuków concessions. At the Pionki concession we have finished interpretation of the seismic and now we conduct work related to the designation of the area for the location of the planned drilling.” - Marek Madeja, Country Manager

CONTACT INFO

holding companies

board members

Giuliano Invernizzi VP External Com.

Eni Polska

Giuseppe Recchi Giorgio Ruffoni Guiseppe Tannoia Giorgio Silva Pablo Scaroni

Aleje Jerozolimskie 30/70 00-024 Warsaw (+39) 06 598 220 30 www.eni.com

c o n c ess i o n a re a

CONCESSIONS HELD Name

Elbląg

Acreage (km2)

Wells

574

RUSSIA

Gdańsk

“Italian company Eni is likely to abandon all of its shale gas projects in Poland” Cleantech Poland

LITHUANIA

Olsztyn Szczecin Bydgoszcz

Poznań

BELARUS

WARSZAWA Łódź GERMANY

Wrocław

Lublin

CZECH REPUBLIC

Katowice Zone of interest Concession area

Kraków

Rzeszów

SLOVAKIA

comment: “Eni’s Malbork and Młynary concessions have expired and the company does not intend to renew them. Elbląg concession is due to expire in 2018. The decision was confirmed by Poland’s Ministry of Environment.”

- Cleantech Poland

86 | Shale Gas Investment guide | SUMMER 2014

Poland

holding companies

board members

David Nelson CEO

Esrey 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

STAKE IN Concession Name

Interest (%)

“The acquisition of additional interest in the Baltic Basin is consistent with our long-stated objective of maintaining optionality in our holdings in Poland”

Holder

Starogard

42.96

BNK

Słupsk

42.96

BNK

Sławno

42.96

BNK

Węgrów

San Leon

Iława

San Leon

David Nelson, President and CEO

who’s who

CONTACT INFO

c o n c ess i o n a re a 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 Company has entered into a binding agreement to add to its holdings in Poland’s Baltic Basin through the acquisition of additional interest in Saponis Investments Sp. z o.o.”

CONTACT INFO

holding companies

board members

Pawel Żuk Country Manager

Strzelecki Energia Strzelecki Energia Warszawa Strzelecki Energia Mazowiecka Strzelecki Energia Łukowska Strzelecki Energia Wołomin Strzelecki Prabuty Południowe

David Messina Charles Morgan

Aleje Jerozolimskie 81 02-001 Warsaw (+48) 22 695 02 70 www.huttonenergy.com

CONCESSIONS HELD Name

Acreage (km2)

Prabuty Południowe

481

Koło

1,172

Poddębice

645

Łódź Zachód

809

Oleśnica

1,161

Wieluń

888

Wells

Company’s press release

“Hutton Energy expects that shale gas can be present in central Poland, therefore the company applied for two new licenses to the Ministry of the Environment” Cleantech Poland

c o n c ess i o n a re a 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: “Hutton Energy’s Polish subsidiary, Strzelecki Energia Sp. z o.o has announced the completion of 2D seismic acquisition over three Jurassic license areas (Kolo, Poddebice and Lodz Zachod) located in Central Poland . We are looking forward to integrating all the data we now have in this area to better define the opportunities in this exciting play.” - David Messina, Hutton’s Managing Director

www.cleantechpoland.com

| 87

Poland

CONTACT INFO

holding companies

board members

Maciej Powroźnik Deputy Director

LOTOS Petrobaltic

Zbigniew Paszkowicz Dariusz Wojdyński Krzysztof Sułecki

Stary Dwór 9 80-958 Gdańsk (+48) 58 301 30 61 www.lotos.pl

CONCESSIONS HELD Name

Acreage (km2)

Gotlandia

881

Różewie

1,172

Łeba

1,154

Gaz Południe

887

Sambia W

888

Sambia E

1,092

Słupsk E

1,139

Słupsk W

1,021

Wells

“The company highlights the fact that Lotos has shale concessions at Baltic Sea but the technology available now does not allow for viable extraction of the resource from the seabed” Cleantech Poland

c o n c ess i o n a re a Zone of interest Concession area

RUSSIA

Gdańsk

LITHUANIA

Olsztyn Szczecin Bydgoszcz

Poznań

BELARUS

WARSZAWA Łódź GERMANY

Wrocław

Lublin

CZECH REPUBLIC

Kraków

Katowice

Rzeszów

comment: “Lotos has 8 licenses for exploration of shale gas in the Baltic Sea. The company in 2012 entered into agreement with PGNiG about joint exploration activities at 4 onshore concessions. However, in 2013 the company announced it won’t engage with these activities.” - Cleantech Poland.

CONTACT INFO

holding companies

board members

John Porretto External Communications

Marathon Oil (Area A - J)

Lee M. Tillman Dennis H. Reilley

ul. Zlota 59 00-120 Warsaw (+48) 22 379 94 40 www.marathonoil.com

CONCESSIONS HELD Name

Acreage (km2)

Wells

Kwidzyń

1,197

Brodnica

1,088

Orzechów

1,008

Rypin

670

“After an extensive evaluation of our exploration activities in Poland and unsuccessful attempts to find commercial levels of hydrocarbons, Marathon Oil elected to conclude operations in the country” John Porretto - External Communications Specialist

c o n c ess i o n a re a 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 anticipate our exit will be completed during the second half of 2014 following all appropriate measures to ensure our longstanding commitment to environmental stewardship and the terms of our concessions.” - John Porretto, External Communications Specialist

88 | Shale Gas Investment guide | SUMMER 2014

Poland

holding companies

board members

Tomasz Tarnowski Communications

Silurian ECO Energy 2010

Bertrand Le Guern Franciszek Krok

who’s who

CONTACT INFO

Al. Jerozolimskie 65/79 00-697 Warsaw +48 22 553 85 14 www.petrolinvest.pl

Name

Acreage (km2)

c o n c ess i o n a re a

STAKE IN

CONCESSIONS HELD Wells

Concession Name

Interest (%)

Holder

Częstochowa

750

Lidzbark Warminski

31.67

Wisent

Repki

882

Węgorzewo

31.67

Wisent

Siemiatycze

892

Gołdap

31.67

Wisent

Grudziądz

699

Kętrzyn

31.67

Wisent

Maków Mazowiecki

699

Chodel

189

Opole

1,044

Głubczyce

1,156

Kędzierzyn-Koźle

994

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: “Project of new regulations and the conflict in Ukraine (03.2014), should accelerate shale gas exploration in Poland. We are ready to cooperate on our licenses”

- Bertrand Le Guern President of Petrolinvest S.A.

CONTACT INFO

holding companies

board members

Piotr Gliniak Head of Exploration

Polskie Górnictwo Naftowe i Gazownictwo

Mariusz Zawisza Jerzy Kurella Jarosław Bauc Zbigniew Skrzypkiewicz Andrzej Parafianowicz

ul. Kasprzacka 25 01-224 Warsaw (+48) 22 691 79 67 www.pgnig.pl

CONCESSIONS HELD Name

Acreage (km2)

Wejherowo

731

Kartuzy-Szemud

783

Stara Kiszewa

1,178

"172"

CONCESSIONS HELD Wells

Name

Acreage (km2)

c o n c ess i o n a re a Wells

Kock-Tarkawica

1,028

Pionki-Kazimierz

530

Wiszniów-Tarnoszyn

1,106

937

Tomaszów Lubelski

741

"173"

937

Górowo Iławeckie

1,094

"192"

922

Pakosław Krotoszyn

1,096

"193"

942

Warka-Ursyów

734

Ryki-Zyrzyn

426

5 1

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: “PGNiG has finished nine exploratory wells related to shale gas. Currently drilling of one well and preparation

for three next drillings is taking place. By 2014, PGNiG will spent around PLN 1.6 billion. This amount will include drilling of 33 wells, 10 of which relates to shale gas exploration.” - PGNiG Press Office

www.cleantechpoland.com

| 89

Poland

CONTACT INFO

holding companies

board members

Dominika Mackiewicz PR Specialist

Orlen Upstream

Wiesław Prugar Paweł Martynek

ul. Przyokopowa 31 01-208 Warsaw +48 22 778 02 00 www.orlenupstream.pl

CONCESSIONS HELD Name

Acreage (km2)

Wells

Garwolin

884

1 3

Lubartów

1,156

Bełżyce

1,019

Lublin

967

Wierzbica

702

Hrubieszów

415

Sieradz

917

Wołomin

1,180

Wodynie-Łuków

1,191

“In parallel to the drilling works in the municipality of Stoczek Lukowski, PKN Orlen is preparing for the implementation of the next well in the county świdnicki (Lublin Province)”

RUSSIA

Gdańsk

LITHUANIA

Olsztyn Szczecin Bydgoszcz

Poznań

BELARUS

WARSZAWA Łódź GERMANY

Lublin

Wrocław

CZECH REPUBLIC

Rzeszów

Kraków

Katowice

The Company’s Press Release 10.02.2014

c o n c ess i o n a re a

Zone of interest Concession area

SLOVAKIA

comment: “PKN ORLEN has done so far 9 exploratory wells in search for shale gas including 2 horizontal wells in Berejów

and Syczyn towns in the Lublin region. The company, based on the approved work schedule, plans to drill in 2014 at least four exploration wel - Company’s Press Release , February 10, 2014

CONTACT INFO

holding companies

board members

Oisin Fanning Executive Chairman

Aurelian Oil and Gas Poland Joyce Investments, San Leon Rawicz, San Leon Praszka, Helland Investments, Gora Energy Resources, Maryani Investments, San Leon Wschowa, Liesa Energy, San Leon Czersk, South Prabuty LLP, Oleśnica LLP, Baltic Oil&Gas Sp z o.o., Wieluń LLP

Oisin Fanning Paul Sullivan Ray King Daniel Martin Jeremy Boak Piotr Rozwadowski

ul. Mokotowska 1 00-640 Warsaw (+353) 1291 6292 www.sanleonenergy.com

CONCESSIONS HELD Name

Acreage (km2)

CONCESSIONS HELD Wells

Name

Acreage (km2)

c o n c ess i o n a re a Wells

Gniew

1,191

Prusice

758

Iława

746

Kotlarka

213

Węgrów

711

Gdańsk W

894,41

Nowa Sól

1,166

Braniewo S

1037

Wschowa

1,078

Szczawno

603,4

Rawicz

742

Prabuty Południowe

481

Góra

706

Oleśnica

1160,64

Wieluń

888

Praszka

1,199

Czersk

702

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: “San Leon Energy has announced the successful completion of flow testing in the Ordovician shales in the Lewino-1G2 well on its Gdansk W concession. This is the most encouraging vertical shale well test in Poland to date.” - Oisin Fanning, Executive Chairman

90 | Shale Gas Investment guide | SUMMER 2014

Poland

board members

Malone Mitchell Chief Executive Officer

Malone Mitchell Brian Bayley Mel Riggs Bob Alexander Charles Campise Marlan Downey Greg Renwick

16803 Dallas Parkway, P.O. Box 246Addison, TX 75001-0246 (+1) 214 220 4323 www.transatlanticpetroleum.com

CONCESSIONS HELD Name

Acreage (km2)

Nowa Sól

1,166

Góra

706

Wschowa

1,078

Rawicz

742

Prusice

758

Kotlarka

213

Oleśnica

1160,64

Praszka

1,199

Wieluń

888

Wells

“In consideration for the work program TransAtlantic will earn an undivided 50% working interest in all the concessions and will become the operator. The final agreement is subject to the approval of regulatory authorities and negotiation of final agreements.” San Leon Energy News 27.03.2014

who’s who

CONTACT INFO

c o n c ess i o n a re a 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: “TransAtlantic Petroleum has signed an agrement with San Leon, whereby TransAtlantic will carry out six operations to test three plays in nine concessions, namely Nowa Sol, Wschowa, Gora, Rawicz, Prusice, Kotlarka, Olesnica, Praska and Wielun concessions. After the completion of the work program TransAtlantic will earn an undivided 50% working interest in all the concessions. The final agreement is subject to the approval of regulatory authorities and negotiation of final agreements” - TransAtlantic’s presentation on the potential acquisition, March 27, 2014 CONTACT INFO

holding companies

board members

Wes J. Skrobowski CEO

Wisent Oil & Gas Sp. z.o.o.

Wiesław Skrobowski William Marble Manuro Sutherland

ul. Chocimska 14 A 00-791 Warsaw (+48) 22 856 10 00 wisentoilandgas.com

Name

Acreage (km2)

Lidzbark Warmiński

895

Węgorzewo

134

Gołdap

621

Kętrzyn

683

c o n c ess i o n a re a

STAKE IN

CONCESSIONS HELD Wells

Concession Name

Braniewo S

Interest (%)

Holder

RUSSIA

Gdańsk

San Leon Energy

LITHUANIA

Olsztyn Szczecin Bydgoszcz

Poznań

BELARUS

WARSZAWA Łódź GERMANY

Lublin

Wrocław

CZECH REPUBLIC

Katowice Zone of interest Concession area

Kraków

Rzeszów

SLOVAKIA

comment: “Wisent has completed all of its obligations under the farm-out agreement to earn a 45% equity stake in the San Leon’s Braniewo S concession.” - Cleantech Poland

www.cleantechpoland.com

| 91

Shale Gas

investment

Guide

ServicEs directory C o m m e n ta r y

P A R K ER S N Y D E r D IRE C T o r , C l e a n t e c h P o l a n d

Foreign owned companies (as in outside Europe)

have begun to enter the CEE oil and gas markets. Two Chinese owned equipment manufacturers have entered the Polish market - Jereh and Kerui. The former is the 3rd largest pumping manufacturer globally and has a huge Chinese business; the latter has hired a new country manager to expand their sales in the CEE. An EPCM contractor with an Indian parent who has acquired a company with deep roots in North American shale plays has begun to focus on Poland. Elsewhere, companies with long histories providing services in Aberdeen and the North Sea are looking to send that experience to mainland UK and continental Europe. Clear Solutions, for instance, a pumping fluids/ solutions provider, is looking to grow their footprint across Europe. The service markets however across Europe in unconventionals are sluggish. The big four service companies (big blue and big red among them) are cost conscious while their competitor UOS has grabbed a big toehold, in a market whose drilling volume has decreased 50% year-on-year. Parker Snyder (+48) 517 469 881 Parker@cleantechpoland.com

92 | Shale Gas Investment guide | Winter 2013

DRILLING

Casing & Cementing Baker Hughes Exalo Halliburton Schlumberger Weatherford UOS Chemicals Brenntag Champion Technologies DOW Dow Corning Dow Microbial MultiChem Coil Tubing Baker Hughes Drill-tech Halliburton Exalo Meehan Drilling Schlumberger Weatherford UOS Equipment Supply Baker Corp Balance Point Control Bentec C.A.T. CAT Discovery Drilling Drill-Lab Drilltech GE Oil & Gas ITS (Parker) JSH Drilling Kerui National Oilwell Varco Packers Plus Superior Energy Services Tech Pomp Tenaris UOS Weir Workstrings Pressure Pumping Baker Hughes Halliburton Exalo Schlumberger Tenaris Weatherford UOS Proppant Supply Baltic Ceramics Weir Water Management AECom Apex Contracting Baker Corp CDM Smith GE Oil & Gas PP-EKO Veolia Tech-Pomp

3rd PARTY SERVICES services

Casing & Cementing Baker Hughes Exalo Halliburton Schlumberger Weatherford UOS Directional Drilling Baker Hughes Drilltech Halliburton Exalo Meehan Drilling Schlumberger Weatherford UOS Drill Bits, Fluid Systems Baker Hughes Exalo Halliburton MI-SWACO Sirius Pruit UOS Schlumberger Drilling Tools and Services Baker Hughes Bentec Drilltech Exalo JSH Drilling Kerui National Oilwell Varco Pruitt Engineering and Modeling CCS Core Laboratories (Saybol) Geolog ILF Wellynx National Oilwell Varco Hard Banding Arnco Hardbanding Solutions Mud Logging Baker Hughes Drill-Lab Exalo Geolog GEO-data Geokrak Halliburton Schlumberger UOS Weatherford MWD and LWD Baker Hughes Halliburton Schlumberger Weatherford UOS Pipe Supply JSH Drilling National Oilwell Varco Sumitomo Europe Tenaris US Steel Workstrings Rig Contracting Discovery Drilling ExaloKCA Deutag MND Drilling National Oilwell Varco UOS Waste Management EkoTech Energy MI-SWACO Water Hauling Apex Contracting Well Pad Construction Apex Contracting CDM Smith NTS Construction

COMPLETIONS

Basin Modeling Argo Baker Hughes GEO-Data Geokrak Geomage Kidova Pangea Serafim Construction of Well Pads Construction of Roads Apex Contracting CDM Smith NTS Construction Corporate Services PWC Trinity Corporate Services Data Services Argo ION GEO-Data Geokrak Geofizyka Krak贸w Geofizyka Torun Geolog Geomage Geotrace IHS Kidova Pangea PFC Energy Due Dilligence Equity Fundraising Cleantech Poland Environmental Services AECom CDM Smith Golder & Associates GSE Environmental Inwatec PP-EKO URS Veolia Water Facilities Management DBM Services Geological Analysis Argo Baker Hughes GEO-Data Geokrak Geomage Kidova Pangea Serafim Human Resources HAYS IP Group Land Man Apex Contracting CDM Smith IP Group Permitting Apex Contracting CDM Smith IP Group Seismic Services Acoustic Geophysical Apex Contracting ION Geofizyka Krak贸w Geofizyka Torun IP Group ION UOS Technical Translation Bireta

www.cleantechpoland.com

| 93

Logo

Company

Speciality

Area

Address

Contact

Abbot Group

Construction, Drilling

Global

KCA DEUTAG Drilling GmbH

(+44) 122 429 9600

Abbot Group is an oil and gas services company based in Aberdeen, Scotland. The Abbot Group employs more than 8,000 people in over 20 countries and has two operating divisions, KCA DEUTAG and Bentec, which provide drilling and related well and facilities engineering services to the energy industry. Abbot Group has a presence in the North Sea and operates in locations such as Russia, the Middle East, Caspian Region, North and West Africa, and Asia. Acoustic Geophysical Services (Viking)

Seismic services

CEE

Ul. Chłodna 11 lok. 425 00-891 Warsaw

infohouston@acousticgeo.com

Acoustic Geophysical Services provides acquisition services for land seismic projects. Viking Services B.V. (Viking) announced the completion of its acquisition of Acoustic Ventures, LLC (Acoustic Geophysical Services) in late 2012. In a company statement, AGS said they will continue to provide seismic acquisition services in eastern and central Europe. AECom

General services

Global

Ambassador Building, 9th floor, Domaniewska 34a, Warsaw 02-672

(+48) 228 220 051 jarek.karpiejuk@aecom.com

AECOM is a global provider of technical and management services to in transportation, facilities, environmental, energy and water. AECOM has 45,000 employees in 140 countries and 2013 revenue of $8.2 billion. The Poland office was awarded a Chevron contract in 2013. Follow AECOM on Twitter at @AECOM. Apex Contracting Sp z o.o.

Seismic, compensation, permitting

Poland, Ukraine

Ul. Rondo 1, 00-124 Warsaw

Eric (+48) 503 861 695 (US) Norbert (+48) 601 999 345 (PL) apexcontracting.pl

Apex Contracting provides a range of energy services, including seismic, construction and logistics for water, waste and related oilfield services. In Poland, Apex provided permitting and compensation for ION Geophysical on the Poland SPAN project. Apex was responsible for well pads, sound walls and roadway construction, working for clients such as Marathon Oil, Chevron and Halliburton. In Iraq, Apex is providing construction services in Kurdistan for HESS. Archer Well - Allis Chalmers

Integrated Oilfield Services

UK, Denmark, NorwayGlobal

Damsgårdsveien 135, 5160 Bergen, Norway

(+47) 55 51 15 00 archerwell.com

Archer is a global oilfield service company that specializes in production drilling, unconventionals, well intervention and well integrity. Archer employs 8,300 people. The name “Allis-Chalmers” is the name of the former company, the AllisChalmers Manufacturing Company. In February 2011, Allis-Chalmers Energy merged with Seawell to form specialist drilling and well service company Archer. Argo Geological Consultants

Seismic Services

Netherlands

Bachlaan 46, 3706 BD Zeist, The Netherlands

(+31) 306 959 150 info@argo-geoscience.com

Argo Geological Consultants offer geo-scientific services to the oil and gas industry. Formed in 1987, Argo consultants perform the following services: seismic interpretation, geological and geophysical mapping, stratigraphic prediction, reservoir modeling, and E&P team support. Argo Consultants can be seconded to the client office. Arnco

Hardbanding

Global

Aberdeen, UK

(+44) 774 028 0302 ssmit@arncotech.com

Arnco Technology Trust, Ltd. - Arnco - does hardbanding in a history that dates to 1946 when its founder Roman F. Arnoldy developed and patented a hardfacing alloy. Arnco Technology has products to improve drill string performance and casing wear protection. Consider the product for extreme conditions in deeper, more critical, directional and horizontal extended reach wells. AVISHIP

Logistics (maritime)

France

Bat D3, 135 Av Pierre Semard, 84000 - AVIGNON - France

(+33) 490 480 127 office@aviship.com

AVISHIP is dedicated to maritime transportation of project cargo, breakbulk and heavylifts. AVISHIP has a 10 year history providing lifting and maritime transport, consulting expertise and services in maritime engineering and brokerage. The company works in the energy, oil and gas industries, in projects related to civil engineering, offshore drilling and marine infrastructure. Baker Corp

Liquids and sludge storage

North America/ Europe

North Lincolnshire, DN20 8UN, UK

(+48) 604 113 028 mkoprowski@bakercorp.com

“BakerCorp provides containment, pumping and filtration equipment and services. BakerCorp provides temporary steel storage tanks to the oilfield industry. The company has 100 locations in the U.S.A. and operators internationally in Europe, Canada and Mexico. Markets include chemical, manufacturing, refining, oil and gas, construction, municipal, industrial services, environmental remediation and wastewater. Baker Hughes

All integrated well services

Global

France Office and Ul. Rondo ONZ 1, 00-124 Warszawa

(+44) 203 320 4900 jens.rodiek@bakerhughes.com

Baker Hughes is an oilfield services company. Baker Hughes operates in 90 countries, providing drilling, formation evaluation, completion, production and reservoir consulting services. Baker Hughes has its headquarters in the America Tower in the American General Center in Houston. Baker Hughes Incorporated was formed when Baker International and Hughes Tool Company merged in 1987.

94 | Shale Gas Investment guide | Winter SUMMER2013 2014

Logo

Company

Speciality

Area

Address

Contact

Balance Point Control BV

Balanced pressure and wireline services

UK, Germany, Netherlands

Karel Doormanstraat 4, 7825 VT Emmen, The Netherlands

(+31) 591 667 687 info@bpc.nl

services

Balance Point Control (BPC) provides hydraulic work over, snubbing, well control, engineering, wireline and rental services. Equipment includes Space Saver 385K, 340K Unit, 600K Unit, HWT 600K, Pulling Units, Casing Jack and Wireline Unit. Projects include water production shut off, straddle recovery, safeguarding a blown out well and securing a chemically contaminated well. Baltic Ceramics

Proppant

Poland

ul. Reymonta 7, 68-300 Lubsko

(+48) 22 654 66 14 office@balticceramics.com

Baltic Ceramics retails proppants and other products used in the extraction of hydrocarbons from unconventional oil and gas formations. Baltic Cerammics is the first proppant distributor on the Polish market, and aims to build a large production facility through both private and public funding sources. BDP International

Logistics

Global

ul.Osmanska 5 02-823, Warsaw, Poland

(+48) 22 544 1721 bdpinternational.com

BDP provides logistics services: air, ocean and ground - through the use of subsidiaries throughout Europe. In Poland they work with POL-MARE, ul. 17 Stycznia 32 lok. 2/8 02-148 Warszawa and C.E. TRANSPORT POLAND SP. Z O.O., ul. Osmanska 5, 02-823 in Warsaw. The company is privately owned and located in Philadelphia, Pennsylvania in the U.S.A. Bentec

Rig and drill manufacturer

Europe, Middle East

Deilmannstraße 1, 48455 Bad Bentheim

(+49) 592 272 80 info@bentec.com

Bentec is a manufacturer of drilling rigs and oilfield equipment worldwide based on 125 years of history. A vertical integrated systems provider, their drilling solutions include engineering, design and manufacturing customized drilling rigs, drilling components and electrical control systems. They can provide 24/7 field support and can repair or overhaul rigs globally. Bireta

Translation

Poland

ul. Bronikowskiego 3/1, 02-981 Warszawa

(+48) 22 648 55 77 bireta@bireta.pl

Bireta provides technical translation services up to several thousand pages per month. A project management team guides translators and proofreaders in the construction, process control, electrical, mechanical, natural gas and information technology sectors. Projects include FGD Plants, wind farms, power units, CFB boilers, Combined Cycle Power Plants, CCS plants, NOx denitrification plants, and the LNG Regasification Terminal. Brenntag

Chemical distribution

Global

Ul. Kwasowa 5, 95-100 Zgierz, Poland

(+48) 61 89 36 510 brenntag.pl

Brenntag is a chemical distributor headquartered in Germany. Brenntag operates a global network in 70 countries employing 13,000 and generating sales of €9.7 billion in 2012. Brenntag links chemical manufacturers to users with 10,000 products and claims to be market leader in Europe. C.A.T.

Oilfield Equipment, Tubing, Proppant

Europe

Celle, Vorbruch 6, 29227

(+49) 5141 9895 0 info@consulting-agency-trade.com

C.A.T. is a designer, manufacturer and marketer of oilfield equipment. A 20 year history, C.A.T.’s product lines include equipment for well stimulation, well workover and service, including drilling, coiled tubing, nitrogen pumping, cementing, acidizing and sand control equipment. Headquartered in Celle, Germany C.A.T. is vertically integrated: C.A.T. Construction GmbH, TACROM Service S.R.L., and TACROM Drilling S.R.L. among its sister companies. C.H. Robinson

Logistics, Supply Chain Management

Global

Al. Jana Pawła II 29 Warsaw, Poland

(+48) 22 653 65 30 tom.sullivan@chreurope.com

C.H. Robinson is one of the world’s largest third party logistics (3PL) providers offering multimodal transportation services and logistics solutions. In Poland, C.H. Robinson works with shale gas operators and service companies to manage air and ocean freight forwarding, customs brokerage, intra-continental distribution, documentation, and regulatory requirements. Caterpillar

Machine Construction

Global

100 North East Adams Street, Peoria, Illinois USA 61629

(+1) 309 675 1000 cat.com

Caterpillar provides equipment and services to the oil and gas industry including gas compression, land and offshore drilling, well servicing, work over rigs, mechanical drives for cranes, fire pumps, fracturing, pressure pumps, generator sets, power modules. Claims to be one of the market leaders in gas compression, drilling, and well servicing products. CB&I

Technology, procurement and construction

Global

Oostduinlaan 75 2596 JJ The Hague

(+31) 703 732 010 cbi.com

Chicago Bridge & Iron Company, commonly known as CB&I, is a large multinational conglomerate engineering, procurement and construction (EPC) company. CB&I specializes in projects for oil and gas companies. According to one of the founder’s heirs, “Chicago Bridge & Iron isn’t in Chicago, doesn’t build bridges and doesn’t use iron.” CB&I employs approximately 50,000 persons. CDM Smith

Consulting, engineering, construction, permitting and operations

Global

Ul. Stawki 40, 01-040 Warsaw, Poland

(+48) 225 519 300 warsaw@cdmsmith.com

CDM Smith provides services in water, environment, transportation, energy and facilities. An engineering and construction firm, CDM Smith is employee-owned with its headquarters in Cambridge, Massachusetts in the U.S.A. In Poland, the company provides environmental, construction and project management services to the oilfield and power sectors.

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Champion Technologies

Chemicals

Global

3200 Southwest Freeway, Suite 2700, Houston, Texaspian B.V.

(+1) 713 627 3303 champ-tech.com

Champion Technologies is a specialty chemical company with 3,200 employees in 100 locations in more than 50 countries delivering to upstream and midstream oil and gas markets. Champion Technologies, from its roots in West Texas, provides services in offshore/deepwater, Arctic, heavy oil, oil sands, EOR, refinery, shale gas and oil, and industrial facilities. Cleantech Poland

Commercial due dilligence

Europe

ul. Krucza 51/31, 00022, Warsaw

(+48) 517 469 881 info@cleantechpoland.com

Cleantech Poland LLC is a consultancy for oil and gas who connects clients to help them grow their businesses. Cleantech Poland LLC publishes the Shale Gas Investment Guide, a magazine about unconventional onshore European oil and gas. Cleantech Poland LLC provides commercial due dilligence for investors entering the CEE oil and gas markets, and introduces prospective parties to equity investors. Continuous Control Solutions (CCS)

Control Systems & Engineers

Global

11275 Aurora Ave., Des Moines, IA

(+1) 515 278 9655 bshcharansky@ccsia.com

CCS provides the design, implementation and commissioning of control systems for industrial turbines, compressors and process applications. CCS turbo machinery systems control gas turbines, steam turbines, expanders, compressors, pumps and generators for use in speed control, load control, surge prevention control, among other processes. Core Laboratories

Reservoir description and management, production enhancement

Global

Herengracht 424, 1017 BZ Amsterdam, The Netherlands

(+48) 5586 244 641 saybolt.poland@corelab.com

Core Laboratories provides reservoir description, production enhancement, and reservoir management services. Core Laboratories has 70 offices in 50 countries to increase total recovery from existing fields. Core Laboratories helps clients optimize their reservoir performance and maximize hydrocarbon recovery from their production fields. DBM Services

Facilities, project management, HSE, operations and logistics

Poland

ul. Klimczaka 12B/28 02-797 Warsaw, Poland

(+48) 693 131 693 info@dbmservices.pl

DBM Services, a private venture named after its two managing partners: Dorota Flint and Marek Cibor, as well as Bill Flint the President, provides facilities management services to Halliburton, and aims to expand across segments including HSE, contract management, procurement, project handover, closeout and testing/commissioning. dGB Earth Sciences

Seismic Analysis

India, Texas, Netherlands

Nijverheidstraat 11-2, 7511 JM Enschede, The Netherlands

(+31) 53 4315155 info@dgbes.com

dGB Earth Sciences is a privately owned company that has been providing seismic interpretation solutions to the oil and gas industry since 1995. dGB operates under a unique freemium business model. They make money by giving their software away for free, and having clients pay for commercial plug-ins and customer support. Discovery Drilling Equipment

Drilling Rigs and Equipment

Global

Hanover Square, 16 Hanover Square, London – W1S 1HT

(+44) 207 408 9494 info@discoveryde.com

Discover Drilling is a private equipment and drilling rig manufacturing company in the oil and gas industry. Headquartered in London, with offices and representations in most major oil regions of the world including US, Canada, Middle East, Northern Africa, Russia and South East Asia. Discovery is a new name in the industry, after the company was formed by private investors on the basis of some rig/component building assets purchased in late 2008. DNV GL

Consulting: Risk Management

Global

Ul . Łużycka 6E 81-537 Gdynia, Poland

(+48) 58 511 50 00 dnvgl.com

Stiftelsen Det Norske Veritas (DNV GL) is a classification society organized as a foundation, with the objective of “safeguarding life, property, and the environment”. The organization’s history goes back to 1864, when the foundation was established in Norway to inspect and evaluate the technical condition of Norwegian merchant vessels. DOW

Chemicals including lubricants and gelling agents

Global

Domaniewska 50A 02-672 Warsaw

(+48) 228 332 222 easterneruope.dow.com

The Dow Chemical Company, Dow, is an American multinational chemical corporation headquartered in Midland, Michigan in the USA. As of 2007, it is the second-largest chemical manufacturer in the world by revenue and as of February 2009, the third-largest chemical company in the world by market capitalization with a presence in 160 countries. Dow Corning

Global

ul. Marynarska 15, 02-674, Warsaw

(+48) 228 540 320 fwrpols@dow.com

Dow Corning is an American multinational corporation headquartered in Midland, Michigan in the USA. Dow Corning specializes in silicone and silicon-based technology, offering more than 7,000 products and services. Dow Corning is an equally-owned joint venture of Dow Chemical and Corning to produce silicone sealants, adhesives and other products.

DOW Microbial Control

Plastics and chemicals

Global

Domaniewska 50A, 02-672 Warsaw

(+48) 228 540 320

Dow Microbial Control is a provider of biocide and antimicrobial technologies that control & prevent growth of nuisance and dangerous micro-organisms. Products stress process preservation, formulation expertise, dry film fungicides, water treatment chemistry, sanitizing and disinfecting.

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Speciality

Area

Address

Contact

Drill-Lab Sp. z o.o. (PGNiG)

Mudlogging equipment and services

CEE

Ul. Krośnienska 7, 65958 Zielona Góra

(+48) 683 238 454 dl@drill-lab.com.pl

services

Drill-Lab has provided geological consulting and mudlogging services to customers since 1990. Custom developed software for mudlogging delivers real-time parameters during drilling, which are visually and numerically to operators so they know what they’re drilling into. Equipment is supplied by Petron Industries Inc. of Houston Texas. Drilltech

Drilling equipment rental

Global

Greenwell Road, East Tullos, Aberdeen, AB12 3AX

(+44) 122 424 9988 drill-tech.pl

Drilltech Group is a specialist drilling rental tool company whose focus is supporting complex drilling such as ERD, deepwater, horizontal and HP/HT. Drilltech supplies drill strings with high torque capabilities and Spiro-Torq, a casing wear protection and torque reduction device. Achilles certified and ISO standards on equipment.

DTZ

Real estate services

Poland, Global

ul. Złota 59, 00-120 Warsaw

(+48) 22 222 3000 info@dtz.pl

DTZ is a property services company, providing occupiers and investors with end-to-end property solutions, global and local market knowledge, forecasting and trend analysis. In the oil and gas markets, DTZ can help suppliers and logistics companies find commercial space for lease, as DTZ has experts who can help real estate assets throughout the CEE Duon

Energy Trading

Poland

ul. Serdezna 8, Wysogotowo k. Poznania, 62-081 Przeźmierowo

ir@duon.pl (+48) 61 664 18 50

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. EkoTech Energy

Waste management, treatement, effluents

Global

Aleje Jerozolimskie 96, 00-807, Warsaw

(+48) 222 755 625 info@ekotechenergy.com

EkoTech Energy is a privately company partly owned by Climate Equity Solutions. CES is an investment vehicle established in 2006 for investing in start-up companies. EkoEnergy offers technologies, products, and services aimed at the cleantech, renewable energy and waste management sectors. Energy Specialists Platform (ESP)

General, Independent Consultants

Europe

Klateringerweg 6, 9433 TB Zwiggelte, The Netherlands

(+31) 593 33 13 30 asperkok@bart.nl

ESP is a team of twenty employees with a technical, economic and commercial background. All employees are experienced in the oil & gas industry or have been working in the gas sales market. Most have international experience, while some are technical specialists and/or function in management. ESP works both upstream and downstream oil and gas. Ensign

Drilling, well services, production and manufacturing

Global

400 - 5th Avenue SW Calgary, Canada

(+1) 403 262 1361

Ensign Energy Services Inc. is a land-based driller and well service provider for oil, natural gas and geothermal. Since Ensign’s launch in 1987, the Canada-based company has a drilling fleet characterized by proprietary technology such as Automated Drill Rig (ADR). With headquarters in Calgary, Alberta, Ensign’s shares are listed on TSE. EurMidstream

Midstream services

Europe

Chaussée de la Hulpe 120, 1000 Brussels

(+32) 266 317 63 anslester@eurmidstream.com

EurMidstream is in the midstream oil and gas business from early stage production to commercial production. Services are offered during the testing and commercialization phases: testing involves CNG trucking and gas powered electricity generation. Commercialization involves design, construction and operation of facilities e.g. pipelines and infrastructure Exalo Drilling S.A.

Integrated oilfield services

Africa, Europe, India, Pakistan, Russia

Pl. Staszica 9, 64-920 Piła

(+48) 67 215 13 00 marketing@exalo.pl

Exalo, a Polish state owned services company, was formed by the merger of five PGNiG Group companies, Exalo Drilling is the largest service company in terms of the size of its drilling and workover fleet in the Polish onshore drilling market. Exalo works predominantly in Central and Eastern Europe, but has a presence in Asia and Africa. Expro

Well testing, wireline intervention, production systems

Global

Morton Peto Rd, Great Yarmouth, Norfolk, NR31 0LT UK

(+44) 1493 600021 exprogroup.com

Expro offers well flow management. They sell products and services that measure, improve, control and process oil and gas from wells. Expro’s areas of service include exploration and appraisal, subsea safety systems, drilling/completions, flowback/clean-up, production, well integrity and intervention. 40 years, 5,000 employees, across 50 countries. Fairstar Heavy Transport

Transport (heavy)

Netherlands

Floor 20, 3012 CN, Rotterdam, The Netherlands

(+31) 10 403 5333 fairstar@fairstar.com

Fairstar Heavy Transport is a full subsidiary of Dockwise Ltd., a provider of marine heavy transport solutions, specializing in high-value cargoes for the offshore and onshore energy and construction industries. Fairstar owns and operates four of the most modern semi-submersible heavy transport ships in the global fleet, FJORD, FJELL, FORTE and FINESSE.

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Contact

Fugro

Consulting/ Analysis

Global

Veurse Achterweg 10, 2264 SG, Leidschendam, The Netherlands

(+31) 70 311 1422 holding@fugro.com

Fugro provides geotechnical, survey, subsea and geoscience services. Fugro was founded in the Netherlands in 1962 and is listed on the Amsterdam stock exchange of NYSE Euronext since 1992. Fugro was included in the AEX-index as of September 2008. Fugro employes 14,000 staff in 60 countries. GE Oil & Gas

Water treatment, oilfield equipment

Global

Ul. Emilii Plater 53, 00-113, Warsaw

(+48) 22 520 53 53 piotr.bruzda@ge.com

GE Oil & Gas provides equipment and services to the oil and gas industry. Products include drilling solutions: both on and offshore, subsea, enhanced oil recovery, unconventionals, LNG, power, refinery, gas storage and pipeline. 43,000 employees in 100 customers, GE is involved in the value chain from extraction to end-use.

GEO-Data GmbH

Wellsite services, environmental consulting

Europe

Carl-Zeiss-Str. 15, 30827 Garbsen, Germany

(+49) 5131 46810 nadolny@geo-data.de

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. GEO-data documents and evaluates drilling data regarding geology, drilling and hydraulic peformance. Geo-Microbial Technologies (GMT)

Geochemical Analysis

Global

56 BoulevardSaint Michel 75006 Paris, France

(+33) 148 103 007 gmt@gmtgeochem.com

GMT reduces the risk of drilling dry holes by identifying positive hydrocarbon signatures at the surface. To do this they provide interpretation services. The two techniques they retail are microbial oil survey technique (MOST), where soil samples are tested for hydrocarbons and sorbed soil gas analysis (SSG) testing for the absorption of gas in soils. GeoDynamics Research

Seismic Services

Italy

Via Maioliche, 53, Leno Center, Rovereto, Trento, Italy

(+39) 0464 75 00 95 info@geodynamics.it

G.D.R. GeoDynamics Research performs low frequency passive seismic spectroscopy to detect and monitor hydrocarbon reservoirs in exploration areas and developed fields based on GeoSpectra IPDS®, which stands for infrasonic passive differential spectroscopy. The evolution of passive seismic spectroscopy at low frequency started in 1995, and the GeoDynamics Research group was founded in 2003 in Italy. Geofizyka Kraków (PGNiG)

Seismic services, well logging, data interpretation

Poland, Austria, Slovakia

Ul. Łukasiewicza 3 31-429 Kraków

(+48) 122 991 200 marketing@gk.com.pl

Geofizyka Kraków is a geophysical company that performs and analyzes seismic surveys. Geofizyka Kraków is a geophysical contractor, helping clients to explore hydrocarbon and geothermal. Services include seismic data acquisition, processing, interpretation, well logging and VSP services. State owned with a 50 year history.

Geofizyka Toruń (PGNiG)

Seismic services, well logging, data interpretation

Europe, India, Egypt

Ul. Chrobrego 50 87100 Toruń

(+48) 566 593 101 marketing@geofizyka.pl

Geofizyka Toruń provides geophysical services to the oil and gas exploration industry. The services are focused on conventional oil and gas, shale gas, geothermal deposits, and underground storage. State owned with a 50 year history, having worked in Asia, the Middle East, North Africa, Europe, and Latin America.

Geokrak Sp z o.o.

Geological services

CEE

Ul. Mazowiecka 21 30-019 Kraków

(+48) 126 338 110 geokrak@geokrak.pl

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. Servicing the unshore unconventionals market as it develops in Poland. GeoLog

Surface Logging

Global, Italy, Netherlands

2 Rubislaw Terrace Aberdeen AB10 1XE, Scotland

(+44) 782 156 9280 geologinternational.com

GEOLOG International B.V. (“GEOLOG”) is an oilfield services company that does surface logging. GEOLOG’s mud logging services are centered on the optimization of the overall drilling times and costs of each well and the acquisition of good data to improve formation evaluation. GEOLOG services national and international oil companies, both onshore and offshore, across more than 35 countries.

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Speciality

Area

Address

Contact

Geomage

Seismic Processing

USA, Europe, Russia

11011 Richmond Ave. Suite 225, Houston, Texas 77042

(+1) 832 7675918 geomage.com

services

Geomage is a global company that provides seismic imaging technologies and services. Using an approach involving multifocusing, geological modeling, and reservoir characterization for a diverse range of oil and gas companies. Multifocusing may be the only method able to obtain sufficient data for geological interpretation in areas characterized by complex geology, high noise or low-fold seismic data. Geotrace Data Integration Services

TechnologyData Integration

Global

12141 Wickchester Lane, Suite 200, Houston, Texas 77079 USA

(+1) 281 497 8440 geotrace.com

Geotrace data integration services involves a proprietary software called Tigress. The software helps tie disparate data together and enables the data to be shared among geologists and geophysicists, petrophysicists and engineers, at every stage of the E&P workflow. Geotrace Data Integration Services is the software services and data management division of Geotrace. GL Noble Denton

Technical Service Provider

Global

Brooktorkai 18, 20457 Hamburg, Germany

(+49) 403 614 90 glnobeldenton@gl-group.com

GL Noble Denton is a technical service provider for the oil and gas industry. GL Noble Denton designs, builds, installs and operates oil and gas onshore, maritime and offshore assets to ensure safety, sustainability and superior value. GL Noble Denton are independent advisors providing consulting, design, assurance and project execution services. Global Geophysical

Seismic services

Global

Ul. Warowna 3/01, 02-654, Warsaw

(+48) 224 930 135 contact@globalgeophysical.com

Global Geophysical provides seismic data processing, analysis, interpretation, and data integration. Global uses proprietary and patented technologies that are ideal for processing and analyzing the full offset, rich azimuth, reservoir grade 3D datasets that our crews collect. Global Geophysical can characterize azimuthal anisotropy along with advanced time and depth imaging to extract rock properties and reservoir characteristics. Golder Associates

Consulting, design and construction

Global

Al. Solidarności 117/700, 00-140 Warsaw

(+48) 226 280 980 akaniewska@golder.com

Golder Associates is an employee-owned company that provides consulting, design, and construction services in earth, environment, and energy. 8,000 employees operate from more 180 offices in Africa, Asia, Australasia, Europe, North America and South America. Golder serves the manufacturing, mining, oil and gas, power, urban development and infrastructure sectors. The company was founded in Toronto, Canada in 1960. GSE Environmental

Lining

Global

Orchideengarten 30 09125 Chemnitz

(+43) 725 829 201 priegl@gseworld.com

GSE retails environmental products such as geotextiles and membranes. Headquartered in Houston, GSE has manufacturing facilities in Texas, South Dakota and South Carolina. GSE laboratories are accredited by the Geosynthetic Accreditation Institute, and the company has manufacturing facilities in Chile, Germany, Thailand and Egypt. A history of 40 years and a global sales network. Halliburton

Integrated oilfield services

Global

53 Ul. Emilii Plater 53, WFC 26th Floor, 00-113, Warsaw

(+48) 22 4707900 jerzy.wozniak@halliburton.com

Halliburton is one of the world’s largest oilfield services companies with operations in 80 countries. It owns hundreds of subsidiaries, affiliates, branches, brands, and divisions and employs over 100,000 people. Halliburton provides a range of integrated oilfield services such as pressure pumping, wireline, coiltubing and wastewater. Some technologies are proprietary, such as clean stream that uses UV light to treat wastewater. Hardbanding Solutions

Hardbanding, hard facing tool joints

Global

Hardbanding Solutions Europe, Scotland

(+44) 7747 468345 colin.duff@hardbandingsolutions.com

Postle Industries designs alloys for mining, farming, agriculture, recycling and manufacturing. Hardbanding Solutions, a trade name, moved the company into drill pipe, drill collars and casing/risers. Tuffband and Duraband are two of their proprietary products, and tool joint build-up wires and a non-magnetic hardbanding are two of their strategies for toughening up oil pipe in extreme conditions.

HAYS

Human Resources

Global

ul. Złota 59, 00-120 Warsaw

(+48) 22 584 5650 warsaw@hays.pl

HAYS has operated in Poland since 2002 and provide professional services in recruitment for the executive business and industrial companies. HAYS has offices in Warsaw, Tricity (Gdynia), Katowice, Wrocław, Kraków, Lodz and Poznan. Hays Poland can find employees in Accountancy, Finance, Business Services, Construction, Property, Energy among others. IHS

Consultant Services

Global

Jaśkowa Dolina 15, Gdansk, Poland

(+1) 888 906-8566 ihs.com

IHS is a global information company with expertise in energy, economics, geopolitical risk, sustainability and supply chain management. IHS employs more than 8,000 people in 31 countries. In oil and gas, IHS has grown over the last 50 years through a series of acquisitions, including companies such as Reservoir Visualization and Geological Consulting. IP Group

Seismic permiting, compensation, human resources

Poland

Ul. Elektryczna 2 00-346 Warsaw

(+48) 604 601 050 izabela.kawczynski@interpermit.com

IP Group entered the 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 into human reources to the financial and insurance markets, alongside the energy markets.

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Speciality

Area

Address

Contact

INiG (PGNiG)

State sponsored research institute

Poland

ul. Lubicz 25A, 31-503 Kraków

(+48) 12 421 00 33 office@inig.pl

Oil and Gas Institute is one of the oldest research institutes in Poland. Its 60 year history dates from November 29, 1944, when the State Petroleum Office issued a document authorizing the establishment of the Oil Institute in Krosno. In 2008, the minister of economy incorporated the oil and gas research institute. Inwatec

Environmental Consultancy

Poland, Germany

ul. Pastewna 25, 02-954 Warsaw, Poland

(+48) 22 642 95 66 biuro@inwatec.pl

INWATEC Sp. z o.o. was founded in 2003 from the merger of several companies in the field of environmental protection. The company’s activity is directed to small and medium-sized enterprises, and relates to the purification of waste water from a variety of industries, including: food industry. ION

Geophysical Services, Seismic

Europe, North/ South America

2105 CityWest Blvd., Suite 400 Houston, TX 77042-2839

(+1) 281 933 3339 info@iongeo.com

ION Geophysical is a seismic services company that provides acquisition equipment, software, planning and seismic processing, and seismic data libraries to the oil & gas industry. The company’s technologies and services are used by E&P operators and seismic acquisition contractors to generate high-resolution images of the subsurface during exploration, exploitation and production operations. ITS (Parker Drilling)

oilfield equipment and services

Global

Takelaarsweg 13, 1786 PR Den Helder,

(+31) 88 1307 100 europesales@its-energyservices.com

“Parker Drilling (NYSE:PKD) provides advanced drilling solutions to the energy industry: drilling services, rental tools and project management, including rig design, construction and operations management. Parker’s international fleet includes 25 land rigs and two barge rigs in strategic markets, and its U.S. fleet includes 13 barge rigs in the U.S. Gulf of Mexico. JSH Drilling Tool Co., Ltd.

Drill Pipes, Drill Collars

North America, Europe, Asia, Middle East

No.18 Shuguang Industrial Park, Jiangyan City, Jiangsu Province,P. R. China

(+86) 523 868 2188 youqingguo@shuguang.com

Jiangsu Shuguang Huayang Drilling Tool Co., Ltd. (JSH) is a joint venture which was set up by Jiangsu Shuguang Group Co., Ltd., Blue Diamond Pipe And Equipment SA (USA) and Wickander & Associates, Inc. (USA) and the holding company is Shuguang Group. The annual production capacity is 100,000 joints of drill pipe, drill collars, heavy weight drill pipes, non-magnetic drill collars, kellys, pup joints and others. The registered address is No. 18 Zhanghang Road, Baimi Town, Jiangyan City, Jiangsu Province. KCA DEUTAG

Drilling, General

Global

Minto Drive, Altens Industrial Estate, Aberdeen AB12 3LW, Scotland

(+44) 122 429 9600 info@uk.kcadeutag.com

KCA DEUTAG is an international oil and gas services company with headquarters in Aberdeen, United Kingdom. It has approximately 8,000 employees and operates in more than 20 countries. KCA DEUTAG is the merger of KCA Drilling and Deutag AG in 2001. The company has regional offices in Germany, Russia, the Middle East, the Caspian region, North and West Africa, Asia, Norway and across its wider operations. KCA Deutag has 61 land rigs and 39 offshore.

Kerui

Oilfield equipment and services

Global

Domaniewska 44, 02-672 Warsaw, Poland

www.keruigroup.com

Kerui Group is a Chinese company based in the region of second largest Chinese oilfield. It is a fast-developed and comprehensive international enterprise group, which combines research and design of hi-tech petroleum equipment, technical service for oilfield integrated engineering supply of oilfield comprehensive solutions and EPC turnkey projects. Kerui Group has recently joined the Poland Shale Coalition. Kidova

Geological Modeling

North America, Europe, Australia

155 avenue Roger Salengro, F-92370 Chaville, France

(+33)1 47 09 09 49 contact@kidova.com

Since 1993, KIDOVA specializes in oil & gas, environment (soil, groundwater, air), geothermal and nuclear or hazardous waste disposal sectors: geostatistics, spatial and spatiotemporal data analysis and modeling, characterization and upscaling of porous and naturally fractured rock properties, simulation of single and multiphase flows in porous and fractured media, mesh or grid generation and optimization. KIDOVA’s services cover structural and geological modeling, research and development, consulting and expert studies. Linde Gaz Polska

Gas, egineering, supply chain

Poland

Al. Jana Pawła II 41a, 31-864 Kraków, Poland

(+48) 12 643 92 00 www.linde.pl

Linde Gaz Polska is the local daughter of an international company specialized in the production and distribution of gas, including the delivery of integrated gas solutions, and the construction of industrial facilities. Employing some 62,000 people in around 100 countries, The Linde Group has a 100 year history and has been in Poland since 1993. Maxi Cargo

Logistics

Poland

Os. E. Raczyńskiego 31/13, 62-020 Swarzędz

(+48) 61 610 10 26 biuro@maxi-cargo.pl

Maxi-Cargo company operates in the field of oversize load specialist transport, including flatbed transport. Covering the EU, Maxi-Cargo’s services include oversize load transport, non-standard transport, flatbed transport, large-size transport, transport of machines, transport of construction machinery, and transport of agricultural machines.

100 | Shale Gas Investment guide | Winter SUMMER2013 2014

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Company

Speciality

Area

Address

Contact

Meehan Drilling

Drilling

40 Kilmorey Street, Newry Co. Down, BT34 2DE, UK

(+353) 28 3025 2678 info@meehandrilling.com

services

Meehan Drilling specializes in drilling and ground engineering services to clients in the public, commercial, domestic and agricultural sectors. Established in 1972, the company offers a wide range of high quality water development, oil & gas drilling, trenchless installations and renewable energy services.. MI-SWACO (Schlumberger)

Drilling Fluids, Completions, Waste Management

Global

P.O. Box 42842 Houston, TX 77242

(+1) 832 628 9187 questions@miswaco.slb.com

M-I SWACO offers systems and technologies for drilling, including drilling fluid systems engineered to improve drilling performance by anticipating fluids-related problems, fluid systems and specialty tools designed to optimize wellbore productivity, production technology solutions to maximize production rates, and environmental solutions that manage waste volumes generated in both drilling and production operations. MND Drilling & Services

Drilling

Global

Velkomoravská 900/405, 696 18 Lužice, Czech Republic

(+420) 518 315 555 info-ds.mnd.cz

MND Drilling & Services is the largest drilling contractor in the Czech Republic, including oil, gas and geothermal exploration/production drilling and well workovers to the drilling and completion of underground gas storage wells. Since 1999, a member of the International Association of Drilling Contractors (IADC). Multi-chem (Halliburton)

Chemicals, biocides, inhibitors, defoamers, breakers

Poland

2905 Southwest Boulevard San Angelo, TX 76904

(+48) 224 707 900 jerzy.wozniak@halliburton.com

Oilfield chemcial provider, owned by Halliburton, with a number of commercial, proprietary products, such as AcroClear, an acrolein based H2S scavenger and iron sulfide dissolver to remove iron sulfide in production and injection wells. Chemicals help with pipeline integrity by repairing near wellbore damage caused by iron sulfide deposits and previous acid-jobs and can be effective in removing iron sulfide based deposits on pipe or tubular surfaces. NADRA Group

Geological Services

Eastern Europe

41-49 Agiou Nikolaou, Nimeli Court, Block C, 3rd floor 2408, Nicosia, Cyprus

office@nadragroup.com

NADRA GROUP provides a range of exploration works from regional geological evaluation to the field exploration and development, support of oil and gas, metallic and non-metallic minerals and ground water production throughout the life cycle of the field. NADRA GROUP works with production companies and governments of EU, Asia and Africa. National Oilwell Varco

Oilfield services

United States

Domaniewska 5, 05-800, Warsaw

(+48) 40 729 639 686 nov.com

National Oilwell Varco (NOV) is an American multinational corporation based in Houston, Texas. NOV is a worldwide provider of equipment and components used in oil and gas drilling and production, oilfield services, and supply chain integration services. NOV conducts operations in over 1,160 locations across six continents. Navigant

Business Advisory

Global

5th Floor, Woolgate Exchange, 25 Basinghall Street, London, UK

(+44) 20 7469 1111 inquiries@navigant.com

Navigant (NYSE: NCI) is a global expert services firm. Through senior level engagement with clients, Navigant professionals combine technical expertise in disputes and investigations, economics, financial advisory and management consulting, with business pragmatism in construction, energy, financial services and healthcare industries. Neste Jacobs

Petro Chemicals

Europe, North America,

Neste Jacobs Oy

(+358) 10 4581200 NJ.Info@nestejacobs.com

Neste Jacobs is a technology, engineering and services company for oil and gas, petrochemicals, chemicals and biotechnology. Nestle Jacobs has 50 years experience in technology development and industrial investment projects as well as maintenance and performance improvement in Europe, North and South America, Asia and the Middle East with 1000 employees NTS Construction

Well pad construction

Poland

Rynek 26, 37-500 Jarosław

(+48) 16 623 22 51 k.kolouszek@stabilizacje.net

NTS offers construction services to the oilfield. With a work history in highway construction and specializing in stabilization technologies, earthwork, roadwork, preparatory and finishing work. NTS staff has twenty years experience in implementing civil engineering construction projects.

NUTECH

Petrophysical, geological, field study, and well services

Global

7702 FM 1960 East, Suite 300, Houston, TX 77346

(+1) 281 812 4030 info@nutechenergy.com

NUTECH, visionary reservoir intellience, is a privately-owned global oilfield services company founded in 1998 by oilfield professionals who pioneered Nuclear Magnetic Resonance research and development. Headquartered in Houston, Texas with over 80 employees, NUTECH has offices in the US and internationally. NUTECH has analyzed 45,000 wells in over 80 countries.

www.cleantechpoland.com

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Logo

Company

Speciality

Area

Address

Contact

Pace Global Energy Services

Consultant Services, General, Management

Global

4401 Fair Lakes Court Fairfax, VA 22033 USA

(+1) 703 818 9100, info@paceglobal.com

Pace Global is an energy consulting and management company. Consultants due commercial, technical, financial, and regulatory due dilligence to help maximize value and manage risk. For more than 35 years and in over 60 countries. Active in managing energy assets, energy companies, funds and financial institutions, industrial and commercial facilities. Packers Plus

Open hole, multi-stage completions equipment

Canada, US, Middle East, Russia

Bow Valley Sq. 2, Suite 2200, 205 - 5th Ave. SW, Calgary

(+44) 791 715 4740 joel.appleton@packersplus.com

Packers Plus Energy Services Inc. is a privately held, Calgary-based oilfield service company that provides completion equipment and services. The company specializes in multi-stage fracturing systems for open hole, horizontal wells. Multistage fracturing systems are used for hydraulic fracturing, or breaking up tight rock formations to enable release of oil and gas allowing for segmentation of horizontal wells into sections or stages such that they can be fractured. Pangea

“Geophysical and geological data processing

Europe, Russia, Africa

Aleksandr Solzhenitsyn Street, 27 Moscow, Russia

(+7) 495 912 6503, info@pangea.ru

PANGEA is a leading Russian consultant in the upstream oil & gas industry and a developer of high-technology software systems for geophysical and geological data processing, interpretation and modeling. PANGEA does geophysical surveys, including seismic, gravimag, electromagnetic data acquisition added by geochemical exploration services. Clients include ONGC (India), OMV (Austria), REPSOL (Spain), JOGMEC (Japan), Naftogaz India, GAIL (India). PBG Geophysical

Exploration, Geophysical Services

Poland

76 Jagiellonska 03-301 Warsaw

(+48) 224 864 100 pgb@pgb.com.pl

PBG LTD. offers services for exploration, engineering & environmental purposes. A Poland based company with 60 years of experience, PBG has completed work in Africa and Asia, executing contracts for oil and gas prodders, government and research agencies and private companies. Services include exploration geophysics, structural and deposit geology, although they do not do seismic exploration. PanTerra Geoconsultants

Seismic Analysis

Global

Weversbaan 1-3, 2352 BZ Leiderdorp, The Netherlands

(+31) 71 581 3505 info@panterra.nl

Established in 1988, PanTerra Geoconsultants is a geoscience consultancy group providing services to the upstream oil & gas industry. PanTerra Geoconsultants BV has three operating divisions: integrated subsurface evaluations, laboratory services, including conventional and special core analysis services, production chemistry, PVT, and geoscience staff secondment. PerekopBromine

Chemicals

CIS, CEE

Laboratornaya Str. 45, Dnepropetrovsk, Ukraine

(+38) 056 787 37 00

Publicly listed BROM (Ukraine) is the only enterprise in Ukraine and the largest enterprise in CIS and Eastern Europe specializing in the production of bromine and bromides. In 2004 the company became part of Olvia, an industrial corporation, and from that time began an active revival of the company and developing new product markets, especially overseas. PJSC Brom is a major industrial facility in Ukraine. Perforator GmbH

Completions, Pressure Pumping

Global

Bei dem Gerichte, D-37445 Walkenried, Germany

(+49) 5525 201 28 AHentschel@perforator.de

PERFORATOR is a German manufacturer with 30 years experience. Since 2002, its the core business of the former Schmidt, Kranz mining technique as an independent company. They supply drilling products to international customers. PERFORATOR focuses on thrust boring, trench less pipe, drill pies, tools, DTH, HDD Drilling, injections systems, mining and tunelling. Petrofac

Oilfield Services

Global

4th Floor, 117 Jermyn Street, London SW1Y 6HH, UK

(+44) 1224 650570 patrick.odonnell@spdltd.com

Petrofac is an oilfield service company with 30 years experience. They work across the entire spectrum of the oil and gas asset life cycle, on either a stand-alone or integrated basis, under flexible commercial models which are tailored to a customer’s needs. Our teams: design and build oil and gas infrastructure, operate, maintain and manage assets and train personnel. PFC Energy

Consulting Services

Global

19 rue du Général Foy, 75008 Paris, France

(+33) 147 702 900 pfcenergy.com

PFC Energy is a global consulting firm specializing in the oil and gas industry. Our clients are oil and gas operators, national oil companies, service companies, investors, governments and other stakeholders. Energy specialists focused on the sector, with proprietary knowledge databases. Recently the company was acquired by IHS. PPEKO

Waste Water Treatment

Poland

Ul. Agatowa 12 03-680 Warsaw

(+48) 226 770 456

PP-EKO is an environmental engineering company based in Poland. Services include designing, consulting, technology and project management, in the field of industrial and municipal wastewater treatment, sludge processing and biodegradable wastes reduction. At work over the last few years customizing solutions for the oil and gas industry.

102 | Shale Gas Investment guide | Winter SUMMER2013 2014

Logo

Company

Speciality

Area

Address

Contact

Prochem S.A.

Environmental Protection Installations

Poland

Ul. Powazkowska 44c 01-77 Warsaw

(+48) 223 260 100

services

PROCHEM is an engineering company, serving clients in the industrial, building construction and environmental protection sectors that was established in 1947. Specialized in general construction, services include technology, architecture, construction and building, road work, mechanical and electrical systems, telecommunications, and various types of large installations. Pruitt Tool & Supply

Rotating control devices

Global

9700 Aire Circle, P.O. Box 181359, Fort Smith, AR 72918, USA

(+1) 479 646 1641 pruittool.com

Incorporated in 1960, Pruitt Tool and Supply was an early rental tool and fishing tool company in the Arkoma Basin. Buddy Pruitt, along with his son-in-law Bob, saw the potential revenue in rotating heads, so they began to take their first steps into the rotating head business. In 1967, their initial invention would become a reality; the “Williams” rotating head was born. PwC

Consulting, Business Advisory, Auditing, Tax, Legal

Global

Al. Armii Ludowej 14 00-638 Warsaw

(+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. Having analyzed the proposed mining and geological law, PwC provides up to date information about the regulatory and tax environment for shale operators. Rodelta Pumps International

Pumps

Global

Enschedesestraat 234, 7552 CM Hengelo, The Netherlands

Rodelta Pumps International BV is a manufacturer of pumps, located in Hengelo in the Netherlands. With 60 years developing pumps, product example includes vertically-suspended, single casing volute line-shaft driven pumps whose applications include drinking water, marine, cooling water, fire fighting and whose performance flows up to 1200 m3/h, with heads up to 120 m.l.c. Schlumberger

All integrated well services

Global

Al Jana Pawła II 25 00-854 Warsaw

(+44) 203 320 4900 szwolan@slb.com

Schlumberger, an international oilfield service provider, was founded in 1926 by Conrad and Marcel Schlumberger. Today Schlumberger supplies the petroleum industry with services such as seismic acquisition and processing, formation evaluation, well testing and directional drilling, well cementing and stimulation, artificial lift, well completions, flow assurance and consulting, and software and information management. SERAFIM Ltd

Consultant Services, Reservior Modeling

Europe

Belfast office 231 Bangor Road, Holywood, Belfast, BT18 0JQ, UK

(+44) 28 9042 1106 future@serafimltd.com

Serafim does systems, reservoir analysis and financial mathematics. FUTURE, for instance, is a production forecasting and reserves management application and database to generate P10, P50 and P90 scenarios as input to a reserve and resource data base in an efficient and auditable way. Serafim PERIMETER is a range of services offered to asset managers, senior reservoir engineers and technical directors. SGS

Consulting Services

Global

38, Calea Serban Voda, Bucharest 40212, Romania

(+40) 21 335 46 83

SGS is an inspection, verification, testing and certification company with 75,000 employees. SGS operates a network of more than 1,500 offices and laboratories around the world and offers services in four categories: inspection, testing, certification, and verification. With broad experience from health care to energy, they refer to themselves as the global benchmark. SIMCO International Ltd.

Technology

CEE

Bucuresti-Domnesti 49-50 Street, Clinceni, Bucharest

(+40) 744 319 001 angajari@simcoint.com

Simco International Ltd. is a software company for the oil and gas industry. They program in C++, Microsoft Visual, Borland C++ and Visual Basic, also in Delphi and Java, Oracle and MySQL. Their focus is information technology for petroleum engineering. The company’s strategy is to develop expertise in computer applications, designing original software. Sirius e.s.

Drilling Fluids, Completion fluids, Waste Management Systems

CEE

Bahnhofplatz 3, A-4600 Wels, Austria

(+43) (0) 7242/9396 5660

Sirius e.s. is an Austrian company with German department providing drilling and completion fluids, chemicals, solids control and mud treatment equipment, waste disposal managements as well as associated engineering and measurement services for clients across Europe. Spirit Innovative Technologies

Technology

Netherlands

Prof. dr. Dorgelolaan 20, 5613 AM Eindhoven, The Netherlands

(+31) 40 23 69 445 sales@spiritIT.com

Spirit automates products and technical processes. Among their products, they focus on liquid and gas flow, supervisory (HMI/SCADA) software, virtual flow computer solution. Proprietary products include Spirit IT, Flow-X®, eXLerate®, SmartCen™, Flow-Xpert™ and more. Spirit IT is a technology partner to PETRONAS.

www.cleantechpoland.com

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Logo

Company

Speciality

Area

Address

Contact

Sumitomo Europe

Tubular Steel

Europe

Vintners’ Place, 68 Upper Thames Street, London, EC4V 3BJ

(+44) 2072463600 sumitomocorpeurope.com

Sumitomo is a trading company with headquarters in Japan. In Europe, Sumitomo has been present since 1955. Sumitomo provides casing and tubing (from carbon grade to Corrosion Resistant Alloy) with both API and premium VAM connections. Seamless, ERW and UOE welded line pipe and hot bends. Speciality tube, including a wide range of stainless and alloy grades. As well as titanium sheet and coils.

SSW

Legal advice to oil & gas and mining entities

Global

Rondo ONZ 1, 00-124 Warsaw, Poland

(+48) 22 544 87 00 www.ssw.pl

SSW Law Firm is providing legal advice to oil & gas and mining entities. SSW experts represent entrepreneurs in concession proceedings, environmental proceedings, investment proceedings, JV and M&A transactions. They have advised industry leaders during competitive concession proceedings before the Polish authorities, in relation to most natural resources available in Poland. SSW advises trade associations and industry members on the legislative process regarding amendment of the Geological and Mining Act and the Hydrocarbons Act. Tata Steel Group

Steel Supply

Global

30 Millbank, London, SW1P 4WY, UK

(+44) 207 717 4444 tatasteel.com

The Tata Group has business operations (114 companies and subsidiaries) in seven defined sectors – materials, engineering, information technology and communications, energy, services, consumer products and chemicals. Tata Steel with its acquisition of Corus is in the top ten steel manufacturers. Other companies include Tata Motors, Tata Consultancy Services (TCS), Tata Communications, Tata Power, Indian Hotels, Tata Global Beverages and Tata Chemicals. Tebodin

Consultancy & Project Management

Global

ul. Taśmowa 7, 02-677, Warsaw, Poland

(+48) 22 334 41 11 info@tebodin.pl

Tebodin has been on the Polish market for 20 years. Services include integrated design and complex management for industrial, commercial and infrastructural investments. Post a yearly turnover of some €25 million with 5 branch offices and 300 specialists and a total annual investment value of €500 million. Focus areas include commercial buildings, industrial projects and infrastructure works. TECH-POMP

Electric, pneumatic, engine driven pumps

Poland

Al. Sztandarów n1/3, 04-423, Warsaw

(+48) 22 612 98 25 techpomp@techpomp.pl

Tech-Pomp has been in operation in Poland since 1979. Tech-Pomp specialize in high volume water transfer services including mobile piping systems to support hydraulic fracturing. An authorized distributor of pumps and equipment, customized services include rental or purchase, and pumps can be made to order or purchased from stock. Tech-Pomp provides pumps for agricultural, industrial, energy or municipal water services.

Tenaris

Line pipe, coiled tubing, casing, connections

Global

2200 W. Loop S., Suite 800, Houston, TX 77027, USA

(+1) 713 767 4400 tenaris.com

Tenaris provides 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. From a manufacturing center in Romania, Tenaris can serve the Baltic, Lublin and Podlasie basins in Poland. Also a plant in Italy. TPS - Technitube Röhrenwerke

Seamless pipes, welded pipes, bending

Germany

Julius-Saxler-Str. 7, 54550 Daun, Germany

(+49) 65 92 7120 service@tpsd.de

TPS - Technitube Röhrenwerke is a privately owned company with production and stock facilities for tubes and pipes, oil and gas field tubular products, extended surface tubes and special piping and tubing products and accessories with 35 years experience in the supply of tubular piping products and accessories. Company headquarters is based in Germany. Trinity Corporate Services

Corporate services, HR

Poland, Czech Republic, Romania, Bulgaria

Al. Jerozolimskie 56C, 00-803, Warsaw

(+48) 223 799 440 trinity@trinitycs.com

Trinity was founded in 2004 by three professionals with broad commercial experience gained in Poland and the Central and Eastern Europe. Trinity has grown to have EUR 14 billion of client assets under our administration. Worked for a number of the foreign E&P companies in Poland and elsewhere doing commercial, tax, advisory, hiring and back office functions. United Oilfield Services

Drilling, completions, pressure pumping

Poland

Al. Jerozolemskie 123a, 02-017, Warsaw

(+48) 22 1162 300 cezary.filipowicz@uos.pl

United Oilfield Services is an oilfield service company providing hydraulic fracturing, modern drilling, and seismic data acquisition services to the European oil and gas industry. Headquartered in Poland, UOS delivers equipment, technical expertise, and local on-site crews to provide customized solutions for customers. UOS is an equity backed startup who launched in 2011 to offer oilfield services.

104 | Shale Gas Investment guide | Winter SUMMER2013 2014

Logo

Speciality

Area

Address

Contact

URS

Siting, permitting, geotechnical, construction management

Europe

Ul. Rejtana 17, 02-516, Warsaw

(+48) 224 273 700 ursglobal.info@urs.com

services

Company

URS is an engineering and environmental consulting company throughout the UK and Ireland, Continental Europe, India, the Middle East, the Americas and Asia/Pacific regions. URS does full lifecycle services for clients across a broad range of industry sectors. In oil and gas they are present in upstream, midstream, downstream and petrochemical segments.

US Steel Tubular Products

Steel pipe supply

United States, Europe

Vstupny areal, 044 54, Kosice, Slovak Republic

(+421) 55 673 9536 ekbeever@sk.uss.com

Tubular products for all sectors of oil and gas industry. Extensive experiences in the North American shale markets allows US Stell to provide an unparalleled level of service. US Steel manages their supply chain from a factory and back-office in Slovakia. One of North America’s largest integrated steelmakers and the continent’s largest producer of energy tubular products. Vallourec

Pipe and tubing

France

Ave. du Général Leclerc 27, 92100 France

(+33) 1 49 09 35 00 contact@vallourec.fr

Vallourec is a manufacturer and retailer of tubular solutions serving the energy markets (oil and gas, power generation). With 22,200 employees and sales of 5.3 billion euros in 2012 – including 78% from outside Europe – Vallourec has integrated manufacturing facilities integrated in more than 20 countries. Vallourec has five research and development facilities worldwide. Veolia Water Systems

Water treatment

Poland

Ul. Balicka 48, 30-149 Kraków

(+48) 12 423 38 66 info.poland@veoliawater.com

Veolia Water does water treatment for public authorities, including withdrawal, producing and piping drinking water. Veolia collects, conveys and treats wastewater, in order to recycle it (irrigation, watering, groundwater recharge, etc.) or release the treated water into the environment. Veolia Water conserves water resources upstream and protects release environments and ecosystems downstream. Weatherford

All integrated well services

Global

Ul. Krolewska 16, 00-103, Warsaw

(+48) 226 451 330 eu@weatherford.com

Weatherford is an international oil and natural gas service company providing products and services for drilling, evaluation, completion, production and intervention of oil and natural gas wells, along with pipeline construction and commissioning. Headquartered in Switzerland, Weatherford currently operates in more than 100 countries and employs 60,000 people. Weir Oil & Gas Division

Pumping, proppant, water and flowlines

Global

Aleja 3 Maja 9, 30-062 Krakow

(+48) 126 328 469 sales.pl@weirminerals.com

Weir Oil & Gas delivers services for customers from capital projects to long term asset management contracts for continuing operations both onshore and offshore. Services range from exploration and production through transportation, refining and storage. Weir has a portfolio of high performance pumps and safety critical equipment. Wellynx

Engineering and Consultancy services

Europe

Viale G. D’Annunzio, 267 65127 Pescara, Italy

info@wellynx.com

Wellynx is an independent Italian company providing engineering and consultancy services to O&G Companies. Founded in 2011, Wellynx is composed by professionals with sound oilfield experience in various fields such as design and engineering, operations and maintenance, quality, health, safety & environment. Workstrings

Drilling, Pipe and procurement

Global

1150 Smede Hwy, Broussard, LA 70518, USA

(+1) 337 989 9675 marketing@workstrings.com

“Workstrings International is the global leading oilfield equipment rental company providing quality primary drill strings, tubing, landing strings, completion tubulars (CTM, GTM, TTM & Turbotorque™) and handling accessories using in-house engineering and cutting edge technologies. Workstrings International was created following the merger of two companies, Premier Oilfield Rentals and Workstrings LLC.

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- Sponsored, expanded directory listings - Sponsorship of quarterly business mixer - Exposure in Ukraine, Lithuania, UK, Germany Parker Snyder tel. (+48) 517 469 881 Parker@cleantechpoland.com

www.cleantechpoland.com

| 105

VISIT TO THE SEJM The PSC, which aims to foster a positive, investor friendly climate for the production of shale gas, and is open for anyone to join, even non-governmental organizations, was invited to the Polish parliament to meet with lawmakers. p h o t o g r a p h y BY K M R at s c h k a

Poland Shale Coalition (PSC), an industry organization, met with members of the Polish parliament on Thursday, March 20, 2014 to discuss the future of Poland’s unconventional gas resources. Mr. Mariusz Orion Jędrysek, a parliamentarian and former chief geologist, initiated the meeting, which took place in the Sejm, along with other members of the parliament. Operators, suppliers and service companies were among the 18 executives from companies associated with unconventional oil and gas. According to Parker Snyder, president of the board of the PSC, “The invitation came from members of parliament. They expressed a desire to have an open dialogue and to meet members of industry.” The discussion focused on the benefits of shale gas and the challenges industry faces. Roman Rewald, of Weil Law Firm, chief counsel for the Poland Shale Coalition

Members of the Poland Shale Coalition meet with members of the Polish parliament in the Sejm in March of 2014

106 | Shale Gas Investment guide | SUMMER 2014

PICTORIAL

Victor Boraks of Encana talks to Marek Madeja of Cuadrilla

Marek Madeja of Cuadrilla making a comment

Jan Rzymełka, minister of parliament in the Citizens’ Platform (PO) party

Parker Snyder, president of PSC, presents to parliament about the organization’s achievements

Mariusz-Orion Jędrysek, a memeber of parliament in Law and Justice (PiS), next to Henryk Kmiecik a minister of parliament in the Your Movement (TR) party

Driss Boutriha of Weatherford speaks at the meeting

www.cleantechpoland.com

| 107

PSC Exhibits at Terrapinn The PSC exhibited for the first time at a major industry event. Chosing to exhibit at the Cleantech Pavilion was a cost-effective way of introducing the industry organization to oil and gas investors. p h o t o g r a p h y BY K M R at s c h k a

The Cleantech Pavilion is a 10 meter by 10 exhibition space where clients can network and showcase. The Pavilion is designed for networking so it has has no dividing walls. Clients are invited to the center of the pavilion for a drink. Exhibitors receive the benefit of attending the finest shale gas conference in Europe - and have a place to call home.

Baker Corp provided a liquids storage tank at Shale Gas World Europe

108 | Shale Gas Investment guide | SUMMER 2014

PICTORIAL

Cleantech hostess greets a client at the pavilion

Janusz KertyĹ&#x201E;ski head of chemical supply for Linde Group

Clients stop by the pavilion to read the Shale Gas Investment Guide

Xxxx

Cleantech Pavilion

www.cleantechpoland.com

| 109

Director, Minister, and Parliamentarian PSC monthly executive lunch meetings bring together industry and government stakeholders for an open discussion of challenges to Poland’s shale exploration program. April’s meeting, pictured below, with with PGI diretor Jerzy Nawrocki. p h o t o g r a p h y BY K M R at s c h k a

The first monthly meeting of 2014 was attended by minister of environment Michal Grabowski; the second by Mariusz-Orion Jędrysek, a member of parliament. Both meetings involved a frank and honest discussion, with the following representatives: Grażyna Bukowska of Chevron, Guido Van Den Bos of NOV, Karol Kuczwalski of G-Drilling, Magda

Szostek of KCA Deutag, Parker Snyder, president of Poland Shale Coalition, Pawel Poprawa of the Instute for Energy Studies, Paweł Żuk of Hutton Energy, Piotr Bujnowicz of Trailer and More, Piotr Wozniak of Baltic Ceramics, Roman Rewald of Weil Law Firm, Lars Hubert of San Leon, Andrzej Nentwig of BNK Polska, Arne Kvamsdal of Halliburton, Jadwiga Święcicka

formerly with Talisman Energy, George Psefteas of Chevron, Cezary Filipowicz of UOS, Stanislaw Zwolan of Schlumberger, Tom Junker of BNK Polska and Pawel Chalupka of San Leon Energy. Poland Shale Coalition is an industry organization open to anyone aimed at education and advocacy. To join, visit shalecoalition.pl.

Guests at the meeting include Marek Matraszek of CEC, Michal Drozdowski of Dow Microbial, Pawel Poprawa of Energy Studies Institute, Chris Hughes of NuTech, Roman Rewald of Weil law firm, Izabela Albrycht of KI, Victor Boraks of Encana and Karol Kuczwalski of G-Drilling.

110 | Shale Gas Investment guide | SUMMER 2014

PICTORIAL

Jerzy Nawrocki, director of the Polish Geological Institute, second from right

Mr. Matraszek joined the meeting

Mr. Boraks takes part in the discussion

Mr. Nawrocki presents the work of the Polish Geological Institute

Members of the coalition enjoying lunch thanks to Dow Microbial

www.cleantechpoland.com

| 111

W ELLHEAD

From beginning to breakthrough Polish shale gas sector is on the brink of gamechanging developments in unlocking the geology of the resource, but the government should offer more help.

By K a m l e s h Pa r m a r , C E O, 3 L e g s R e s o u r c e s , P r e s i d e n t o f t h e B o a r d, t h e po l i s h e x p lo r at i o n a n d p r o d u c t i o n i n d u s t r y o r g a n i z at i o n

I came to Poland in early 2007 with 3Legs Resources, a first mover in shale gas in Poland. The journey has been enlightening. During my time here, I’ve seen Poland experience significant changes: weathering a global financial crisis, undergoing two general elections and strengthening its position in the EU. Celebrating the tenth anniversary of its accession to the EU, Poland is in a comparatively healthy position today and has the resources required to pursue an energy revolution, which so many have predicted. With several years now of shale gas exploration experience, I and my fellow operators in Poland are no longer beginners. And yet the real breakthrough is yet to come. Global shale gas development has quickly moved from concept to a race towards demonstrating commercial rates of production. According to the U.S. Energy Information Administration (EIA), Poland “offers Europe’s best prospects for developing viable shale gas/oil industry”. Our shale sector is

supported by an active political movement in both Poland and the United Kingdom, seeking to remove barriers to the development of domestic energy resources and to resist unnecessary over-regulation from the EU. Recent developments in Ukraine have further highlighted the importance of domestic energy security for our region. Yet no matter how supportive the political environment or how good the commercial terms may be, unlocking the geology is crucial for success. The Polish Geological Institute estimated that Poland has enough natural gas to supply the country for 35-65 years, with the most prospective acreage being in the Baltic region, where 3Legs Resources is currently developing three exploration licenses with ConocoPhillips. MAKE IT FLOW All Polish operators, including 3Legs Resources, are now pursuing the key task of demonstrating whether wells can flow natural gas at commercial rates. Polish operators have now drilled

more than 50 wells, yet, according to the EIA, it has typically taken many more wells to de-risk new shale plays in North America. With a newly refocused Polish government finalising welcome changes to the laws and keen to see an increase in the pace of activity, we are moving closer as an industry towards commercial success. It is crucial that we have a legislative framework that provides adequate security for the interests of the state and manages local interests properly, while also providing industry with enough operational flexibility and commercial incentives to enable them to continue to invest the significant amounts of capital required. As I write, there are at least three flow tests of long lateral wells being planned in the Baltic region in the coming months, all with the same basic objective of showing the potential for commercial production. Positive news from any of these wells could prove to be gamechanging for Polish shale, bringing an end to the beginning and heralding the start of the break-through phase.

112 | Shale Gas Investment guide | SUMMER 2014

Shal

Europeâ&#x20AC;&#x2122;s #1 shale gas conference & exhibition 5th annual

1000+ attendees 100 facilitated meetings 80 exhibition stands 3 days

24-26 November 2014 EXPO XXI Centre, Warsaw, Poland

The 5th Shale Gas World Europe is firmly established as the number one unconventional oil and gas conference and exhibition in Europe. The multi streamed conference, covers everything from the big picture strategy and investment decisions of Europeâ&#x20AC;&#x2122;s unconventional pioneers and technical issues through case studies, roundtables and interactive panel discussions. The 80+ exhibition stands showcase the latest technology, equipment services for enabling a safe and commercially viable shale gas industry across Europe. Early 2014 confirmed speakers include: Marcin Lewenstein Director Strategy Department PGNiG

David Messina Managing Director Hutton Energy

Basim Faraj VP Business Development Tamboran Resources

Andras Jenei Advisor Ministry of National Development Hungary

GET INVOLVED

The floor plan is filling up and there are limited speaking opportunities. To register your interest please contact Faiz Alidina on +44 (0)207 092 1362 or faiz.alidina@terrapinn.com