Fears grow over politicization of Polish shale gas sector

Fears grow over politicization of Polish shale gas sector by Adam Easton, Edited by Valarie Jackson, May 11, 2012, Platts
Firstly, the main opposition party, the nationalist and populist Law and Justice, proposed introducing a minimum 40% royalty fee on future production and new legislation outlawing “undesired investors” from acquiring companies engaged in shale gas activities. … “One political party was saying to the government, ‘you’re giving away everything to foreigners.’  … In Poland, each vertical exploration well costs around $10 million and each horizontal well $15 million, up to three times the cost in the US. In January, it was reported that months of talks about a partnership between PKN and Canada’s Encana, which would see PKN gain access to Encana’s North American acreage in return for investment in its Polish shale gas concessions, were halted because of an alleged decision by Warsaw to prioritize domestic tie-ups. … In the beginning, foreign companies were made to feel extremely welcome — now there’s a lot of talk about foreign companies coming to exploit us,” the official said. … Mostly foreign operators have drilled 23 exploration wells since 2010 and are contracted to drill 49 new wells this year. None has yet proved economic, but operators are optimistic that it is only a matter of time. Although exploration costs are high, a huge incentive is the fact that gas prices are up to seven times higher in Poland than in the US. … Grabowski said a total government take of around 50% would be fair, without giving details. But that figure has already caused jitters among operators — head offices have been calling Warsaw asking whether such a tax rate is economical for them.

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