The Schuman Foundation conference on “Expectations and Reality: What’s next for Shale Gas ?” took place in the European Parliament Information Office in Warsaw on 16 April 2012. The main theme of the discussion was the future of unconventional gas in Poland and Europe following the recently published Polish PGI shale gas reserve estimates and the European Parliament’s Environment, Public Health and Food Safety Committee (ENVI) report on the environmental impacts of shale gas.

Among the experts invited were MEP Boguslaw Sonik  and MEP Boguslaw Liberadzki,  Professor Jan Lubal and Dr. Piotr Kasza of Polish Oil and Gas Institute, and Chemical Substances Inspector Jerzy Majka.

Referring to the ENVI report,  MEP Boguslaw Sonik, report rapporteur, explained that while the document had no direct legislative power, it was very important for the future of shale gas in the European Union. In his opinion, the unconventional gas debate in Europe, which started two years ago, is based largely on myth and fear, hence the need for the European Parliament to adopt an official stance on the issue.

MEP Boguslaw Liberadzki said that in terms of the energy industry’s needs, there were three key requirements to make the environment competitive in the European Union: sustainable economic development, the cost of energy production and, most importantly, agreement among the EU member states. He suggested that shale gas could bring member states together but appealed for the debate on this issue to be less based on emotion and more based on fact. Poland, he continued, should highlight that without shale gas it would be forced to rely on nuclear energy.

Speaking about the potential problems that may arise during shale gas extraction, Professor Jerzy Majka highlighted that accidents cannot be avoided making it necessary for appropriate safety monitoring systems to be put in place. He added that exploration companies should disclose the chemical used in hydraulic fracturing fluids to authorities.

Poland has no plans to follow the example of several European countries that introduced moratoriums on shale gas exploration and will continue its efforts to tap unconventional energy sources to limit its dependence on costly Russian supplies.

The Czech Republic said on Monday it was planning a two-year moratorium on granting licences for shale gas exploration to put required legislation in place.

Countries like France and Bulgaria have already halted exploration due to environmental concerns related to a drilling method known as fracking, which uses large amounts of fresh water and chemicals to extract shale gas.

“The government is not planning any shale gas moratorium,” Tomasz Arabski, the head of the prime minister’s office, told a news conference on Tuesday before a government sitting.

Poland has granted more than 100 exploration licences to its state-controlled companies as well as global majors such as Chevron and Exxon Mobil. It has estimated its shale reserves at 346 billion to 768 billion cubic metres (bcm).

The country has so far strongly pushed the companies it controls to join forces and explore its shale gas deposits. It expects first shale gas production at the turn of 2014 and 2015.

Source: Reuters

Poland’s gas monopoly PGNiG says it has filed a lawsuit against its Russian supplier Gazprom with an international tribunal in a price dispute.

State-owned PGNiG said Tuesday that the reason was a change in the pricing within a long-term deal concluded in September of 1996. It filed the lawsuit with the Arbitration Tribunal in Stockholm. It refused to give more details.

Gazprom in January eased prices for some of its clients in Western Europe, but not for PGNiG, which has been lately asking for price cuts.

Under the current deal, Poland’s imports of Russian gas were more than 318 billion cubic feet (9 billion cubic meters) in 2011 and were to rise to 360 billion cubic feet through 2022, but the prices was not released to the public.

State-owned oil and gas company PGNIG will work with other state-owned energy producers PGE, Tauron and copper miner KGHM in shale gas exploration in Poland.

The company said it had signed three letters of intent to cooperate with the three domestic heavyweights.

The government said recently it wants state-owned companies to make a ‘strong’ contribution to developing domestic shale gas.

Shale gas could start production in 2014, according to the government.

Poland has the largest deposits in Europe estimated at 5.3 trillion cubic metres and enough to meet domestic gas needs for up to 200 years, according to some projections.

At present Poland relies for its energy supplies mainly from Russia and environmentally unfriendly but domestically mined coal.

The government is becoming increasingly interested in maximimising domestic benefits from shale gas production, hence PGNiG’s and the country’s main oil refiner PKN Orlen’s plans to ramp up cooperation with local players.

The move is important in that it indicates a shift towards greater interlinkage of domestic resources, and possibly away from a reliance on foreign majors.

PGNiG holds 15 such of about 100 shale gas exploration licenses, with global majors such as Chevron and Exxon Mobil also eager to get in on the act.

The three agreements are for exploration in the Wejherowo acreage in northern Poland.

Wejherowo is one of 15 concessions held by PGNiG and believed to be one of the largest, although exact figures have not been released, if they are known at all at this stage.

The three domestic power producers will reportedly be responsible for infrastructure works above ground.

The total investment will be somewhere between 400 million and 500 million zlotys, PGNiG said.

Tauron said it plans to build a gas-fired power plant and plans to work with PGNiG on a 600 megawatt plant at Stalowa Wola. It also plans to build an 800 megawatt plant with KGHM, both fired by shale gas.

Source: theNews.PL

A presentation at the European Unconventional Gas Summit in Poland has shown the real face of unconventional gas exploration – and is encouraging the whole world to take a look:

They were images that did look a little bit destructive, images rarely – if ever – seen at an unconventional gas conference in Europe: a huge land moving “vibrator,” equipment that was leaving a giant furrow on the farmland in its path.

The pictures belonged to Jakub Kostecki, CEO of New Gas Contracting, a provider of sourcing, landman and permitting services to the nascent oil and gas industry in Poland, who showed his pictures from the ground to attendees at the European Unconventional Gas Summit in Krakow, Poland.

“When we get to local communities and say there will be a small footprint left by what we are all doing we have to remember that they will remember this picture,” he explained. “Of course there’s nothing wrong with this as long as there’s a crew right behind the vibe to appraise the damage and another one right behind them to fix it.

He recalled that many of the communities his company worked in had seen screenshots and video of vibrators “lurking in the forests,” an image that had been played over and over on Polish television.

Kostecki explained, “Local communities will have seen these images a couple of months before seismic crews come into the area.”

“If you take the ostrich approach – hiding your head in the sand – that’s not going to work,” he continued. “Some regions of Poland are used to seismic acquisition. Others are not. In places like Ilawa in the north, which has never seen vibes, this needs to be explained to the community. They need to be told what’s going on.”

He said that the visibility of these issues would become higher as activity increased in Poland.

“Most of the acquisition in Poland has been 2D. When the 3D, 3C and VSP work starts there will be a lot more equipment and people on the ground. Next year there will be many more crews and a lot more issues.”

In terms of wellsite permitting, Kostecki said: “We provide landman services, which basically means that we help the operators enter parcels in Poland and put rigs on the ground. O&G operators will encounter serious delays in Poland because their land issues aren’t sorted properly.”

He said his company, New Gas Contracting, was in the process of securing 220,000 permits for one of the 2D programs. In addition to providing landman services and wellsite permitting, NGC was negotiating with local landowners, and gminas, on where to set up rigs.

“Many (O&G companies) go in where it’s easiest to get equipment. Others will look at the plot from a technical standpoint – where the sweetspot is,” he said. “Still others will negotiate until they get the right price.”

Kostecki explained that after 8 September local communities had seen what a well looked like. “The 10 wells already drilled in Poland have made the public aware.”

He noted that because the shale gas industry was made up of majors, supermajors, and small companies from all over using different approaches with different corporate cultures, it affected how each of them interacted with local communities.

He showed a photo of a drilling site which he considered well organized.

“We need to remember that the local authorities are the local population, so you need to tread lightly,” opined Mr. Kostecki, who said that there could be up to 300 wells drilled in Poland by 2013.

“We’re talking about a lot of land, a lot of wells. It will be a huge issue and everybody needs to have a strategy going forward.”

In terms of roads, he said access was a huge issue in Poland. “The road capacity tonnage is way too low and the way we deal with communities affects what kind of exemptions are available. There’s a lot of talk about more federal, more standardized regulation,” he said.

He added, “A lot of traffic is needed to get the seismic, drilling and fracking equipment onto a given piece of property.”

Source: Natural Gas for Europe

By the end of 2012, around 3,500 residents of small towns and villages within the Pomorskie voivodship will be able to use shale gas to heat their homes, reported Dziennik Gazeta Prawna.

The change will save them around zł.100 to zł.200 per year on their normal fuel costs.

It is estimated that shale gas will be about 20 percent cheaper for consumers than conventional gas imported from Russia.

Although the production of shale gas on an industrial scale is expected to be launched in Poland not earlier than in 2014, Polish oil and gas giant PGNiG wants to start testing production levels at its Lubocin location in the second half of 2012.

Source: Warsaw Business Journal

Jan Helge Skogen, Head of Statoil Russia, said the shale gas revolution in the US has had an enormous impact on the global gas and LNG industries and poses a challenge in a decision to proceed with the Shtokman project.

The Norwegian giant holds a 24% interest in Shtokman Development Company, the operating joint venture of the Barents Sea field, whose gas field’s account for approximately 3.9 trillion cubic metres of natural gas and more than 37 million tons of gas condensates.

Gazprom (51%) and Total (25%) are the other project partners, who will meet before the end of the year to make final investment decisions on the multibillion-dollar project.

Gas from the gas condensate field located 650 kilometers north of Murmansk will be piped to European consumers and shipped on tankers to global markets as liquefied natural gas.

The executive’s comments come as project partners await fiscal relief for the Shotkman project in the form of discounted rates of mineral extraction tax and gas export duty.

Last week a Finance Ministry official said the tax regime for the Shtokman gas field is unlikely to be decided on in time for a final investment decision. The State Duma adjourned for the Dec. 4 elections, meaning no considerations for possible changes to the tax regime applied to the multibillion-dollar project are possible this year.

Source: Natural Gas for Europe

After Pomorze in the North and Lubelskie in the Eastern part of the country, unconventional gas and oil exploration in Poland moves southwards:

3Legs Resources announced the start of exploration program on its licenses in Slask (Silesia) and Malopolska (Lesser Poland) regions. The three licenses (Glinica-Psary Bytom-Gliwice and Dabie –Laski) are controlled by the company’s subsidiary Lane Resources Poland Sp. z o. o.

According to a 3Legs announcement, the company has agreed changes to the terms of these licenses with the Polish Ministry of Environment and license amendments have been issued.

“These changes enable the company to acquire approximately 70 km of 2D and approximately 50 sq km of 3D seismic data, to be followed by the drilling of an exploration well.”

Katarzyna Terej, the press representative of the company in Poland emphasized that the licenses allow exploration activities for both oil and gas, both unconventional and conventional.

Terej said that preparations for seismic works has been finished in the area of Zawiercie and Jaworzno between Katowice and Krakow.

In addition, the local paper Dziennik Zachodni writes, that surveys will start soon in the area of Kozieglowy, between Katowice and Czestochowa.

Seismic works will be provided by Acoustic Geophysical Services. The Houston-based firm claimed to be the first foreign company to complete seismic survey service in Poland last summer.

Lane Energy Poland Sp. z o. o. holds six licenses in the North, where it has been prospecting for shale gas for two years, completing two wells and executing the first multistage stimulation of a horizontal shale gas well in Poland.

3 Legs CEO Peter Clutterbuck says, that commercial  development of the Baltic Basin remains primary focus for the company: “We are continuing to  do further analysis on the results of our two recent wells and we are engaged in a planning process for the 2012 programme”.

Source: Natural Gas for Europe

3Legs Resources has today announced an update on its Warblino LE-1H2 well, located on the onshore Baltic Basin in Poland.

The company says the well has been shut in following an initial successful flow rate of 60 to 90 thousand standard cubic feet per day (mscfd) of natural gas and over 1,000 barrels per day (bpd) of fracture fluid. The figures dropped to 18 mscfd of natural gas and 300 bpd of fracture fluid after the shut in.

A seven stage hydraulic fracture stimulation (frack) was performed on the well before the shut in, using a gelled fluid, across a 500 metre horizontal section in the deeper lower Palaeozoic shales. The well is the second of two in the region to be fracked.

The company says the suspension of activity on the well will have a twofold benefit: better weather conditions and fracture stimulation recovery at the well.

The company will perform further production testing in the spring of 2012, when it says weather conditions will be more favourable.

A statement from the company also says “that the well could benefit from being shut in for an extended period of several months to recover from the fracture stimulation and to enable the fracture treatment fluid, potentially obstructing the flow of natural gas, to dissipate.”

An analysis of the results of coring, wireline logging, production and other data is currently underway, with results expected in the first quarter of 2012.

“We have now concluded our 2011 drilling and testing programme for the Baltic Basin, which has achieved its objectives of completing two wells with horizontal sections and multistage fracks,” Chief Executive of 3Legs Peter Clutterbuck said.

“We have demonstrated that shale gas can be flowed in both wells and in different horizons, and we have gathered extensive amounts of new data with which to advance further our understanding of the production potential of the reservoir.”

Mr. Clutterbuck also said that the company expected an improvement in the levels of gas as operations continue.

“Although flow rates have been low, we expect to be able to further improve well productivity, as is often the case in other shale plays in the US at this stage of appraisal.

“Our primary focus now is on developing improvements in hydraulic fracture and completion design which will further enhance well production rates, in addition to considering the acquisition of new 2D and 3D seismic and the drilling of a number of new wells in the near term. This is critical in order to convert this very large gas in place volume into commercial reserves.

“The benefits of developing a domestic energy supply from a clean fuel such as natural gas are potentially very significant, particularly in the prevailing economic climate.”

Source: Natural Gas for Europe

According to the former CEO of Realm Energy there’s only one phrase appropriate to the newer, bigger San Leon Energy following its pending acquisition of Realm Energy: “shale powerhouse.”

In the wake of the deal, which was announced on 26th August and formally closed November 10th, James Elston, former CEO of Realm commented: “San Leon effectively becomes a shale powerhouse in Europe. The combined San Leon-Realm is so big in so many different plays that in my mind it’s almost got a ‘can’t fail’ sticker on it”

Mr. Elston, now Director of Palladian Energy Advisory, said that the broader shouldered San Leon had the likelihood of some good assets in the Paris Basin, a lot of good assets in Spain and interesting things in Morocco – that they already had – as well.

“If you combine that with San Leon’s acreage in Poland, and the fact that they’re in two plays in Poland: on one they have their JV with Talisman Energy Inc., which was the best farm out deal anyone had achieved at the time, and I think it still ranks pretty highly – San Leon got a good deal in getting Talisman in, and Talisman are brilliant shale players, so they’ve got a brilliant partner in Talisman.

“With Realm they’ve got a lot of un-farmed out acreage close by,” he continued. “So if you like Talisman are effectively going to de risk quite a lot of the combined San Leon-Realm acreage position, while San Leon keeps 100% of that – they keep the upside there and don’t need to spend that much money at the moment.

“It builds real scale in Poland,” said Elston.

On top of that, he added, San Leon had a million acres in Poland’s Carboniferous shale play.

“What’s interesting about the carboniferous is that there are lots of successful carboniferous shale plays – the Barnett, the Fayetteville and the Woodford are all Carboniferous, so the great thing about it is you know that the tiny fossil animals have formed the right kind of pore structures in the shale. You know that that’s going to work.”

In slight contrast, he said that what one might not know with the Silurian or Cambrian shale plays – like that which had been drilled in eastern Poland – is whether or not the tiny fossils in the rock provided the right kind of pore structure for shale. “That’s one of the things that we’re waiting to see with all the testing taking place,” stated Mr. Elston.

He summed up: “In Poland, San Leon now has two massive opportunities in different shale plays and it’s really augmented that with Realm.

“But in terms of what Realm brings to San Leon, there’s this JV with applications in the Paris Basin, which is the play closest to my heart. San Leon will acquire ConocoPhillips as a partner there for when they get license awards in Paris for the future time when I believe that fracking will be allowed again.”

In August, he believed that in other places Realm had made massive moves. In fact, on 21 September Realm was awarded two out of the 10 permits it applied for in Spain, with a likelihood of a further six 100% awards for concessions comprising over 1.7 million acres.

“Despite the market collapse after the deal was announced, effectively Realm shareholders who took San Leon stock or exchangeable shares will hopefully get the chance to see the rise in value over the coming months with the security at a greater scale that there is in working with the San Leon team for whom there’s a tremendous set of opportunities to exploit. They’ve got the capital, staff and systems – it’s a operationally much bigger company than Realm; they’ve got 15 people just working in Warsaw on the Polish plays.”

“For former Realm shareholders who took San Leon stock or exchangeable shares you’ve got the chance, to actually follow that through and see the upside,” he explained. “This wasn’t a cash deal that capped the upside for the Realm shareholders, it’s the opportunity to really see the growth through San Leon shares into the future, so it’s a ‘win-win’ situation.”

Regarding James Elston’s relationship with Realm, he recalled he was lucky enough to meet a gentleman called Craig Steinke (Realm Energy International’s Executive Chairman) at a conference in London in late 2008.

“We started talking, which ended up in the formation of Realm Energy, which I think was really timely because we were able very rapidly to get up the learning curve on shale in Europe, with Halliburton’s help, and quickly build a business at a time when things were getting immensely competitive. The Majors had woken up and you were up against them in a lot of jurisdictions, you had to move very rapidly.”

“In North America, with his previous vehicles he’s been an early mover in basins where coal bed methane (CBM) and to a degree shale gas have been developed” he explained of Mr. Steinke. “So he’s made his first fortunes from those plays, which was the attraction to me to get it together with him. We basically got together with another angel investor, started the company and then reversed it onto the Toronto Stock Exchange.”

Elston recalled, “I was CEO for the first year, but with the movement towards rapidly getting more operational on the ground, particularly in France (Pre the frack ban surfacing), and just bigger in general, there was a need for someone operationally more experienced in the senior management team than me. So it was the right time to move on.”

He explained Karl DeMong, Realm’s new VP of Operations, who is well versed in operating very complex shale drilling and fracking operations in Canada, was from large E&P Apache Corporation. Recently Realm strengthened their team further adding Lindell Bridges, the eminent shale geoscientist, as VP Exploration. Mr. Bridges has helped large US E&Ps EQT, EOG Resources, Inc.and Chesapeake Energy Corporation crack the shale codes in the Marcellus, Barnett and Fayetteville respectively in leading their geoscience teams in those plays.  Elston added “Lindell is probably the most renowned shale geoscientist working in Europe at the moment.”

Meanwhile, Mr. Elston said he had a mixed initial reaction to San Leon’s pending purchase of Realm Energy.

“The team at Realm was strengthened tremendously in second quarter, and I think they really had the ability to take things forward themselves. I thought Craig and the team could’ve done a lot more on their own. The two main shareholders in Realm, (one of which is Quantum, a George Soros vehicle) are also shareholders in San Leon, so I think it was shareholder driven consolidation really,” Elston explained of the merger.

“I would’ve liked to have seen Realm go on for a bit longer on its own. C’est la vie.”

Without the merger, he contended that Realm was not going to have any “drilling newsflow” for some time, but that San Leon had plans to drill a lot of wells in Poland.

As Director of Palladian Energy Advisory, James Elston now spends his time helping small energy companies raise money by working with small investment banks and private equity firms. Elston is working on several startups, as well as giving sermons as a “rational evangelist” on shale gas.

Source: Natural Gas in Europe