Data hurdle for Polish shale-gas dream
The Polish Geological Institute says much more geological shale basin research is needed
POLAND’S dreams of becoming a shale-gas producer could be stunted by a lack of geological data. Piotr Krzywiec, a professor at the Polish Geological Institute (PGI), said the country has a long way to go before it fully understands the geological make-up of its shale basins and many new studies are needed.
“We have much more data in the Lubin basin [than in others] but there are still significant question marks,” said Krzywiec. “These are not details but basic questions which will really affect the development of shale gas. The negative impacts of what we don’t know are pretty obvious.”
Krzywiec added that the limited amount of seismic studies that have been done in Poland contain data of a “very low quality”. Higher production costs in Europe mean that if operators target the wrong areas because of a lack of accurate data, the mistake could prove very expensive, he said.
The geological evolution of the basins and the depth and distribution of the shale rocks are just some of the areas in which the PGI and operators lack knowledge.
Ireland-based San Leon Energy has six concessions in Poland, stretched across the Baltic and North and South Permian basins. Lars Hilbert, San Leon’s Poland exploration manager said certain basins in Poland, such as the Permian ones, are more structurally complex than others.
And he confirmed Krzywiec’s picture of the data. “We’re still in the very early stages of Polish shale-gas development and we don’t have much data yet,” he said. “Being able to identify sweet spots is obviously very important to make shale plays economic.”
Hilbert cited statistics that only around 30% of shale-gas wells in the US’ Barnett shale become profitable and said success rates in Poland could be similar. He added that San Leon is minimising the risk of failure in Poland by looking at unconventional opportunities in Albania and the Netherlands as well.
“We’re not putting all our eggs in one basket,” he said.
Florence Geny, a researcher from the Oxford Institute of Energy Studies, said a host of other problems could hold up development of shale gas in Europe.
Geny says production of 1 trillion cubic feet (cf) of shale gas in Europe by 2020 - the amount she says could reduce Europe’s need to import gas - is “extremely optimistic” because of a lack of an adequate service sector and inflated production costs on the continent.
Geny claims water costs alone could be 10 times higher in Europe than they are in the US and operators will have to stump up $10 million to $15 million for each shale-gas well. Tight gas production could cost even more, said Geny, with well costs potentially soaring to $18 million to $28 million per well.
But Poland has other advantages, including a low 19% rate of corporation tax and a 25% royalty quota. Operators continue to show interest in getting a stake in Polish shale-gas acreage and it is still viewed as the main potential area for unconventional gas development in Europe.
San Leon’s Hilbert said the company is taking steps to address the data issue for their own use and because of interest from other operators.
“We don’t want to be constrained by a lack of seismic so we’re shooting our own data in autumn 2011,” he said. “We believe there will be huge demand for this.”
In April 2010, Poland’s Foreign Minister, Radoslaw Sikorski, said Poland could become “a second Norway” within 10 to 15 years.
And the PGI’s Krzywiec likened Poland’s shale-gas learning curve to the one undertaken in the North Sea decades ago.
“We all know how much time and money it took to understand the North Sea basin,” he said, “We’re just starting to do the same in Poland."