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The government abandons shale gas fees

28-07-2010  News

The shale gas in Poland may only be explored by foreign investors with technology and money

Poland will not increase shale gas mining fees. The government fears that pressing the exploring companies will increase gas prices. Moreover, it might deter the investors who can swing the job market. Shale gas cannot be drilled in Poland without foreign investors. Since they are the only ones with technology and money, the government has to handle them with special care. And the costs of searching for this resource are gigantic - the whole programme can cost as much as 25 billion PLN. The check looks like this: one drilling site alone is about 30 million PLN. One licence requires a dozen or so of them. Each gas-searching companies with two or three licences may face a cost of 1 to 1.5 billion PLN. In the case of PGNiG, with 11 licences and applying for more, this amount may reach 5 billion. Polish companies cannot afford such money and do not have the technology for the job. That’s why they have to cooperate with foreign companies. Poland has already succeeded in attracting some global leaders, such as Conocophillips, Exxon or Chevron. They own ¾ of all licenses. “We cannot be short-sighted and start by demanding that the corporations pay through the nose for exploration and drilling. That would discourage them from investing in Poland", an expert from the Polish Geological Institute (PGI) told us. “The time for profits will come once the gas is found and drilled”, says Henryk Jacek Jezierski, the vice-minister of environment and the chief geologist in the country. Investors are keen on drilling in Poland as the forecasts for our market are stellar: our deposits of shale gas may be as large as 3 trillion cubic metres. If they turn out to be true, Poland will become an exporter, not an importer, of gas. Western giants are lured into our country by a vision of high profits. Since exploration companies are prioritised when excavation licences are concerned, they will benefit the most from this gas boom. They are sure to make a fortune: in the US, where the shale gas is already being produced, 1000 cubic metres now costs 180 to 280 USD. The government counts on the benefits of this gas boom to the Polish economy. That's why they agreed that the exploration and mining of shale gas, just as any enterprise, would have a low, 19-percent CIT and small licencing fees. These fees are as low as approx. 5 PLN per 1000 cubic metres of gas. This philosophy differs from the one employed in other countries that are already making money on gas. The mining taxes are higher; they can get as high as 78 per cent in Norway. But we will benefit anyway. The ministry of environment thinks that such an approach would prove risky in Poland. "If we put high taxes on shale gas, the first ones to lose will be the consumers as the prices would have to go up", says minister Jezierski. That’s why there won’t be any increased fees. The parliament is currently working on an amended mining and geological code bill, which regulates, among others, the licences for gas exploration and mining. This bill does not include any changes to shale gas exploitation fees. Today, they will be arguing their position in the parliament, as the amendment is passed to the senate commission for national economy. Paweł Poprawa of PGI claims that the state will benefit on gas anyway, even without increased fees and taxes. When mining starts, thousands of jobs will be created and local infrastructural investments will be energised.
 
Dziennik Gazeta Prawna, page: 1, 2010-07-28, author: Michał Duszczyk

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