What We Need Is Dialogue
A panel discussion organised on March 29th by the editors of the Rzeczpospolita daily, PKN ORLEN, and PGNiG [oil and gas mining group] was focused on the numerous unknowns affecting the hopes and expectations for the development of Poland’s unconventional gas market.
What were the unknowns addressed during the panel discussion at Rzeczpospolita? Panel members pointed to the lack of definite information about the size of gas reserves, the high risk involved in shale gas exploration, and the absence of clear and stable concepts of relevant legislation and taxation. Sitting on the first panel were, among other members, Beata Stelmach, Undersecretary in the Ministry of Foreign Affairs; Mikołaj Budzanowski, Minister of the State Treasury; MEP Paweł Kowal; and Marek Kamiński, Executive Director of Ernst & Young Business Advisory.
Marek Kamiński identified the factors which have the most powerful impact on decisions of investors in the high-risk exploration projects currently underway in Poland. “Investors worry about the administrative barriers, the unregulated state of the market and – the gravest concern of all – about an unknown shape of the tax regime”, he emphasised and he added that all over the world tax regimes for the extraction sector were specific, tailored to the characteristics of deposits. A linear taxation will be dangerous, he argued, because once the rate of return approaches the banking interest rate on deposits, investors will start getting out. Yet today we are still incapable of assessing correctly a future yield from shale gas exploitation.
On the second panel, OLREN Upstream’s President Wiesław Prugar also raised the matter of the evolving legal regulations. He pointed out in this context that he was counting on a dialogue between the exploration/extraction industry and government centres. “As members of the industry, all we hear is that some projects are on the drawing board and some studies are underway – for instance, on the taxation of shale gas extraction. We want to discuss these matters with the government, but such dialogue is yet to be launched”, he observed.
The issues raised included the need to conduct a broad public dialogue and to dispel the myths surrounding shale gas extraction. The panelists also spoke of the necessity to prepare the market for future gas volumes and to revise Poland’s energy policy, which has yet to allow for the possibility of unconventional resources being available on an industrial scale.
The representatives of two Polish [energy] groups disclosed their organisations’ plans for the immediate future. Wiesław Prugar said that ORLEN Upstream was planning to drill more exploration wells – possibly as many as six – in its concession blocks. “Believe me, companies such as Chevron, Marathon Oil or Talisman Energy had had their forecasts ready much earlier and the PIG [State Geological Institute] report frightened off no one. We see no reason to discontinue [exploration] work; on the contrary, we are proceeding full steam ahead with it”, he added.
author: Dominika Mackiewicz, ORLEN Upstream