The prospect of recovering gas from shale in Poland might yet trigger a new energy gold rush in Poland and, some observers say, potentially alter the balance of regional relations in central and eastern Europe, dislodging Russia from its dominant position as regional energy producer.

Some geologists believe that Poland’s country-wide reserves of 400 million-year-old Silurian shale could yield up to 1415 billion cubic metres of gas over coming decades, with a market price of almost $250bn. Others are more sceptical, suggesting that the rumours of massive reserves may yet prove unfounded. Given that the Polish government has issued 70 exploration licences for shale gas, it is likely that the matter will be settled soon.

Currently, Poland imports more than 70% of its gas, mostly from Russia. Even if Poland finds itself locked into long-term supply contracts with its neighbour, a home-grown product will equip the country with a valuable exportable commodity, and security in the event of disruption of the supply from Russia.

Upbeat yet cautious

At the recent Economic Forum in Krynica, speakers were upbeat yet cautious about the prospects for shale gas. Jacek Krawiec, president of the board of Poland’s largest oil refiner, PKN Orlen, told delegates that “shale has a very attractive long-term perspective… and so expansion of shale gas extraction projects is very much included in our long-term planning”, adding that the significant development costs involved would be shared with state gas company PGNiG.

Another speaker, Janusz Steinhoff, senior adviser at Roland Berger Strategy Consultants in Poland, forecast shale gas being “a major part of the energy balance sheet of Poland" within a decade.

It is not just Polish companies that see the potential of shale. In July, Canadian oil company Talisman, a major shale gas player in Canada and the US, announced that it would be drilling in Poland too in 2012. To that effect, Talisman has teamed up with San Leon Energy, which is based in London, Dublin and Warsaw, to drill between three and six wells through a joint-venture farm-out agreement. Other players that have registered their interest in Polish shale gas by buying licences include US oil companies Marathon, ConocoPhilips, Chevron and Exxon, while oil service company Halliburton is actively involved in preliminary activities at the Markowola-1 drilling site, 120 kilometres from Warsaw.

Challenges to overcome

Hurdles will need to be cleared, however, if Poland’s shale gas potential is to be realised. As ever in the energy sector, outcomes – and appetite for risk – will depend on recovery costs, long-term energy prices, and of course overcoming the environmental challenges intrinsic to major projects in the extraction industries.

Alastair Nichol, vice-president of international new ventures at Canadian gas specialist Encana Corporation, said: “The main challenges are: environmental issues (which I believe can be managed by the government and companies); the cost structures – these types of extraction projects require large, specialised and highly trained crews, which are not yet available in Poland; and access to markets – figuring out transmission lines, distribution and where and how to sell the gas.”

Minister's caveats

At the Economic Forum, Mikołaj Budzanowski, undersecretary of state in the Polish Treasury, described the national debate over shale gas exploration as “electric”, given the implications for the country’s energy security, but he added that Poland would not be gambling all its chips on shale gas; in the medium term, a $450m liquefied natural gas terminal planned for the Baltic coast, close to the German border, would be the country’s energy priority.

Mr Budzanowski also said that, while Poland welcomed foreign participation in the nascent shale gas industry, the issue of resource sovereignty – a touchy subject in a country that has been occupied many times in its history – would be part of the national debate. He said: "We have to be certain that our American friends do not push us out of the business."