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Canada lends shale-gas support to Poland

Poland is benefitting from Canada’s experience and expertise in shale-gas development. But what does Canada want in return?

Canada has been assisting Poland with the regulatory framework it aims to establish to ensure the successful development of its nascent shale-gas industry.

Representatives from the Canadian embassy in Poland have been advising the Polish government for the past year. As well as arranging meetings between Polish provincial ministries and authorities, and representatives of the Canadian industry, they have also helped arrange visits to drilling and hydraulic fracturing (fracking) sites in Canada.

The regulations recommended by Canada include setting up mechanisms to deal with the environmental and local-community impact shale-gas production can have, as well as offering advice on a taxation and royalty framework that would attract investment from oil and gas companies. This could then be balanced by a scheme that would enable profits from the sector to be shared between governments and communities.

“We recognise there is great potential benefit with unconventional gas, but there are serious challenges, too,” said Daniel Costello, Canada’s ambassador to Poland. “To extract the resources in the most efficient, environmentally sustainable way needs a strong environmental framework.”

Tackling environmental concerns

Concern over the environmental impact of shale-gas development is the main hurdle the industry must overcome in Europe.

Earlier this month, the Canadian Association of Petroleum Producers (Capp) unveiled a framework for hydraulic fracturing (fracking) best-practice guidelines, including new regulations covering water management and the disclosure of fracking-fluid recipes.

Capp’s announcement came just a few days before EU energy commissioner Guenther Oettinger stated that the European Commission intends to draft EU-wide regulations on fracking to create a single legal framework and set of environmental guidelines. The Polish government issued a statement in response saying fracking is already sufficiently regulated.

While Canada is keen to help Poland, it does not want to appear to be interfering in the country’s domestic affairs. Costello said: “We’re trying to contribute to the discussions, but we understand that this is on its own track and that these are Polish national assets.”

Canadian companies cashing in

But the further development of Poland’s shale-gas industry would benefit the various Canadian companies hoping to tap some of the estimated 187 trillion cubic feet (cf) of recoverable reserves the country holds. The US Energy Information Administration (EIA) reckons Poland could have as much as 792 trillion cf of shale-gas in place across the Baltic, Lublin and Podlasie basins.

Canadian Talisman Energy has three shale-gas concessions in the Pomorze region and is preparing to drill a new well at a site 30 km from the regional capital, Gdansk. “We’re trying to transfer the Canadian success story to Poland,” said Tomasz Gryzowski, Talisman’s corporate affairs director in Poland. Poland is “rich in gas”, he added, but it will take five to seven years to verify this.

Talisman, which derives 30% of its turnover from shale gas, has developments in North America’s more mature plays, including assets in the US sector of the Marcellus Shale and acreage in Canada’s Montney play, in British Columbia (BC).

But Claudia Mahn, an analyst from consultancy IHS, said she found it surprising that Canada was advising Poland on shale-gas regulations, as Canada’s own industry is “not nearly as advanced” as that in the US.

According to Cedigaz, Canada’s conventional natural gas output was 5.4 trillion cf in 2010, putting it third only to Russia and the US. Canada’s shale-gas industry has yet to achieve large-scale commercial production, despite a recoverable reserves cache of 388 trillion cf, according to the EIA.

Canada’s main plays are the Horn River basin and Montney Shales in northeast BC; the Colorado group in Alberta and Saskatchewan; the Utica Shale in Quebec; and the Horton Bluff Shale in New Brunswick and Nova Scotia.

Little significant production, yet

Output from the Montney play had risen from nothing in 2005 to 376 million cf/d in 2009, according to Canada’s National Energy Board (NEB). Despite the Montney volumes, Capp admits there is still “little significant production” of shale gas in the country.

Canada’s proved conventional gas reserves have been in steady decline for some years and now stand at 63 trillion cf, according to Cedigaz. The country’s potentially vast shale-gas reserves could bolster its reserves base, but the NEB warns there is not enough infrastructure in northeast BC to accommodate increased shale-gas production beyond the next few years.

Trade enabler

The country could see benefits from its co-operation with Poland in its political and trade dealings with the EU. Costello said Canadian firms have “long recognised the advantages” of working in Poland and the embassy is clearly keen to continue promoting mutual co-operation between the two countries.

The pair have a long history of political and trade co-operation, and Poland is Canada's largest trading partner in Central and Eastern Europe. In 2009, bilateral trade between the countries totalled $989.5 million and included exports of electronic and scientific equipment, mineral ores and vehicles. Poland has co-operated closely with Canada through multilateral initiatives, including the International Security Assistance Force in Afghanistan.

Canada is in talks with the EU over the Comprehensive Economic and Free Trade Agreement (Ceta). First mooted in 2008, the agreement aims to address tariff and investment issues between Canada and the EU. If an agreement is reached, it would be Canada’s most important trade agreement after the North American Free Trade Agreement, which groups it with the US and Mexico. Ceta negotiations have been under way since 2009, with Canada hoping to finalise them by next year.

The Canadian government has stressed that Ceta negotiations are “a priority in its international trade agenda”, with the next round of talks scheduled to take place in Ottawa next month. As Poland holds the six-month rotating EU presidency, it could potentially help Canada finalise Ceta talks. A sticking point during negotiations has been EU plans to implement fuel-quality standards that would target fuels from Alberta’s oil sands.

IHS’ Mahn, however, said that while Poland could help Canada bolster its relations with the EU, she doubts it will have any effect on the Ceta talks. “I don’t think Poland could benefit Canada politically,” she said, “but with increased co-operation, Poland diversifies its relations with large global energy suppliers.”

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