Total Pulls Out of Polish Shale Scramble

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) - France's Total S.A. (NYSE:TOT) (Paris, France) has become the latest oil and gas exploration company to pull out of Poland's emerging shale gas sector.

The company has decided not to renew its single shale gas exploration license in Poland, citing results from geological and site surveys. A government spokesperson also cited new legislation that forces companies to pay for site licenses even if they are not being used.

Total is the latest company to pull out of the budding shale market in Poland. Last year, leading exploration companies Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas), Marathon Oil Company (NYSE:MRO) (Houston, Texas) and Talisman Energy USA Inc. (NYSE:TLM) (Calgary, Alberta, Canada) all exited the Polish shale sector, blaming "red tape". A series of scandals, which saw four government employees and three businessmen being charged over collusion in a bribery scheme to help companies win shale gas exploration licenses, has also hurt the country's shale plans.

"We believe that the potential of the area cannot allow us to launch a viable economic project, although the presence of gas was demonstrated by the well," a spokesman for Total told AFP. "However, we are still looking for other good opportunities in Poland."

Total has not ruled out a return to the market, which it acknowledges is in its infancy.

Pawel Mikusek, a spokesman for the Ministry of the Environment, told the news media that there was not much activity at Total's Polish site. He also speculated that the recent legislation on licensees having to pay for sites, regardless of whether or not work is being carried out, played a decisive role in Total's decision to not renew the license. Last September, Poland announced that its first shale extraction was underway at a test well in the northern part of the country. Lane Energy Poland, which is owned by U.S. energy major ConocoPhilips (NYSE:COP) (Houston, Texas), confirmed that it had been extracting up to 8,000 cubic meters of gas per day from a test well near the town of Lebork since late July - making it the largest shale gas operation in Europe. For additional information, see September 6, 2013, article - Poland Begins Shale Gas Extraction.

Poland relies on coal for more than 90% of its electricity and is under pressure from the European Union (EU) to clean up its electricity mix. Poland has estimated high shale gas reserves but its hopes for an American-style dash of gas has not happened due to legislative issues deterring full scale investment.

In December, Poland's ambitions of becoming Europe's first commercial supplier of shale gas advanced when Dublin-based San Leon Energy (Dublin, Ireland) announced successful testing at one of its wells in the north part of the country. It recorded sustained gas production at a rate of 45,000--60,000 standard cubic feet per day (scf/d) after six weeks of well clean-up. For additional information, see January 29, 2014, article - Poland Close to Europe's First Commercial Shale Gas.

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