Shale Gas – Polish Perspective

1. SHALE GAS – POLISH PERSPECTIVE
Katarzyna Kacperczyk
Director
Department of Economic Cooperation
Brussels, 22 January 2013,
„Sharing Canada's Regulatory
and Industrial Experience”

2. European gas context
R. Weijermars, et.al., Unconventional gas research initiative for clean energy transition in Europe,
„Journal of Natural Gas Science and Engineering”, Vol. 3, Issue 2, Pp. 365-460 (May 2011).

3. European gas context
Supply and demand balance

4. Polish energy context
Primary energy consumption Domestic natural gas production and resources
Domestic natural gas production (bcm)
Natural gas resources (bcm)
Natural gas resources Domestic natural gas production
• High reliance on coal  ~60%
• Total dependence on imports  ~30%
• Natural gas dependence on imports  ~60-68%

5. Global shale gas resources
Shale gas – not only European phenomenon Country Tcm
China 36,1
USA 24,4
Argentina 21,9
Mexico 19,3
RSA 13,7
Australia 11,2
Canada 11,0
Libya 8,2
Algieria 6,5
Brasil 6,4
Poland 5,29
France 5,09
Norway 2,35
Ukraine 1,19
Sweden 1,16
Total 173,78

6. Shale gas in Poland
 113 concessions – granted by
Minister of the Environment from
2007 to 1 January 2013
(prospection and exploration of
shale gas fields) to 19 consortiums
 40 exploration wells completed
by January 2013
(vertical fracturing 7 wells;
horizontal fracturing 2 wells)
 309 exploration wells planned
until 2021
 First horizontal well + multi-stage
fracturing: August 2011
 Possible first potential
production: in 2-4 years (PGNiG)

7. Shale gas in Europe
United Kingdom (December 2012): The
government has given the go-ahead for
to resume hydraulic fracturing to exploit
gas in Lancashire
Additional resource potential:
Netherlands, Belgium and
Germany: (December 2012): rejection of the
Luxemburg
motions from the Green Party and Left Party
that called for banning hydraulic fracturing

8. Shale gas:
multidimensional influence
Energy Economy
security
Environment

9. Energy security
• Resource base:
 Doubling global proven gas resource base (BP 2011 – 208 tcm; ARI
2011 – 188 tcm)
 Doubling regional proven gas resource base: Europe (BP 2011 – 9
tcm; ARI 2011 – 18 tcm) where production by traditional
suppliers’ is shrinking (GB: 2000 – 108 bcm; 2011 – 45 bcm)
 Local 50 – fold increase: Poland (BP 2011 – 0,1 tcm; ARI 2011 – 5
tcm)
 Reduced import needsreduced exporters’ leverage:
Reducing  US: EIA est. 2005 demand for LNG in 2010 = 70 bcm
dominant
supplier’s US LNG import in 2012=10 bcm
leverage on  Regionally: Europe: 2010 main suppliers’: Russia (34%), Norway
importer
(30%), Algeria (15%), Qatar (10%)
 Locally: Poland’s main gas supplier: Russia (64%)
Developing
domestic
resource base  Improving market conditions:
 Globally: reducing „energy weaponization”; weakening GECF
market power
 Regionally/Locally: improving regional and local market
competition/improving importer’s bargaining power

10. Shale gas arithmetic
Moderate growth scenario Unit 2012-2018 2019-2025 2012-2025
Number of wells (new + converted) 30+65 155-270 220-300
Total CAPEX (exploration+production) USD bn 1.9 6 7.9
=shale gas investment
Total workforce (exploration+production) Thousand 2.2 6.1 4.1
= shale jobs annual av.
Shale gas output (at the end of period) m m3 1,032 3,519 3,519
Increased foreign investment scenario Unit 2012-2018 2019-2025 2012-2025
Number of wells (new + converted) 30+65 500+175 530+240
Total CAPEX (exploration+production) USD bn 1.9 9.2 11.1
=shale gas investment
Total workforce (exploration+production) Thousand 2.2 9.1 5.7
= shale jobs annual av.
Shale gas output (at the end of period) m m3 1,032 5,934 5,934
Accelerated growth scenario Unit 2012-2018 2019-2025 2012-2025
Number of wells (new + converted) 30+65 175+1000 1.030+240
Total CAPEX (exploration+production) USDbn 1.9 14.9 16.8
=shale gas investment
Total workforce (exploration+production) Thousand 2.2 15.1 8.6
= shale jobs annual av.
Shale gas output (at the end of period) m m3 1,032 11,934 11,934
Source: CASE

11. Results: shale gas impact =
impact of EU accession
• CASE study (May 2012) on economic impacts of shale
gas production between 2012-2025:
 economic growth: similar influence as in case of
Poland’s accession to the EU
- for comparison: European Centre Natolin
estimated in 2003 that membership in the EU
would add about 0.8 pp. to Polish GDP growth
annually);
 job places creation: drilling a single well lasts 60
days and requires 20-60 people working;
 generating additional tax incomes: from VAT and
CIT taxes;
- for comparison: 2013 forecasted tax incomes
ca. 300 bln PLN
 new competencies and innovations in extraction
technologies

12. Shale gas economics

13. Shale gas economics:
US example
Macro-level Micro-level
• According to the CEPE research: • Few years ago the American and Canadian
• one single Marcellus shale = 4 million industries, were at disadvantage in the
USD of economic benefits world chemical market due to high costs.
• Now, they are deriving profits from the
• 2008 job gains from Barnett shale in Texas cheap shale gas domestic production:
and Fayetteville in Arkansas were
estimated at ca. 200 000  ExxonMobil Chemical's tripled in 2010
revenues to 3.14 billion USD,
• It has been proved that economic activity  smaller Georgia Gulf Corp., reported a
associated with Marcellus shale 40% surge in sales, reaching 2.8 billion
development generated over 2 billion USD in 2010;
USD in federal, state and local taxes, plus  reopening of the factories that were shut
62 jobs per each drilled well. down a few years ago due to high world
gas prices. (the biggest American fertilizer
producers – Potash Corp. and giant Dow
Chemical)

14. Environment: challenge that can
be mitigated
• There are appropriate regulations and procedures on the Community and National
level to ensure safety of the environment.
EU level: Directive 2011/92/EU (EIA Directive ), Directive 92/43/EC (Habitats Directive), Directive 79/409/EWG (Birds
Directive) Water Framework Directive 2000/60/EC, Directive 2006/118/EC (Groundwater), Directive 75/440/EEC
(Surface water) Directive 2008/98/EC (Waste), Directive 2006/21/EC (Mining waste), Directive 1999/31/EC (Landfill of
waste), Directive 96/82/EC (Seveso II)
PL level: Environmental Protection Act, Nature Conservation Act, The Act on Providing Information on the
Environment and Environmental Protection, Public Participation in Environmental Protection and on Environmental
Impact Assessment, Water Act, Act on Waste, Act on Mining Waste, Geology and Mining Act, Spatial Planning and
Development Act, Building Act, Regulations to these acts.
• Poland has a system of administrative bodies that efficiently controls the „new
industry” and pays close attention to the environmental protection.
Ministry of Environment, State Mining Authority/ District Mining Offices, General Directorate for Environmental
Protection /Regional Directorates for Environmental Protection, Chief Inspectorate of Environmental
Protection/Voivodship Inspectorates of Environmental Protection, National Water Management Authority/Regional
Water Management Authorities
• Initial field studies indicate minimal threat of the hydraulic fraction technology to the
environment.

15. Environment: case study
Polish Geological Institute conducted a
miltidimensional research project designed
to monitor an impact of a hydraulic fraction
process in the mining plant in Łebieo
(August 2011).
Tested Study findings confirm that:
issues no seismic events have been registered;
emissions of gaseous pollutants in
ambient air comply with existing
requirements;
radioactivity of shale layers (depth of 3
500 - 4 500 m) complies with existing
requirements;
there is no impact of drilling and fracking
on ground and surfacewater aquafiers.

16. Environment: positive effect
on CO2 emissions
Fig. 2 US CO2 emissions from
Fig. 1 Fig. 3
energy consumption (million metric tons)
CO2 emissions from processing the unconventional gas are higher by 1-5 % than from natural gas. Nevertheless, they are significantly
lower than from coal used for electricity production.
Taking into account the lower CO2 emission level this allowed to bring down the US CO2 emissions by 450 million tonnes. The US CO2
emissions from domestic energy have declined by 8.6% since a peak in 2005, the equivalent of 1.4% per year. Part of this decline is
related to the switch from coal to gas in US power generation. (Fig.1)
In the first quarter of 2012, US carbon emissions hit a 20-year low. The US achieved approximately 70% of the CO2 emissions reductions
targeted under Kyoto (as compared to the 1998 EIA CO2 forecast). (Fig.2)
Gas is fast becoming the new fuel of choice for the US power sector. Appearance of cheap shale gas is responsible for a significant drop in
the consumption of coal. According to DOE in 2011, coal generation has slumped by 19% while gas generation has increased by 38%. If
shale gas were to displace coal entirely in the US, US carbon dioxide emissions would fall to 24% below 2005 levels by 2020. (Copenhagen
Summit 2009, USA pledged to reduce its GHG emissions to 17% below 2005 levels by 2020).(Fig.3)
Source: EIA

17. Cooperation with Canada
• Poland has developed extensive cooperation
with Canada to benefit from the Canadian
experience in shale gas:
 BC and Alberta experience in social dialogue and environmental aspects;
 Alberta experience in development of the regulatory system;
 Activities of Canadian companies in Poland;
 Study visits to Canada;
 Canadian experts’ visits to Poland .

18. Shale gas - summary
 Shale gas is the most important revolution in fossil fuels after WW II
 Geo-economic (and geo-political) impact already taking place on the market
 Global shale gas (and shale oil) revolution may occur at the end of this
decade, with the start of production in many countries (ex. China, India,
Argentina, RSA, Mexico)
 Shale gas sector can be economically-viable and environmentally-safe
(provided the proper technology and oversight)
– Can Europe just wait and look…
Let's get down to (shale) business!

19. Thank you for your attention!

20. Additional info:
resources estimates

21. Additional info:
gas consumption forecast for
Poland