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Soros-Backed San Leon Says Polish Shale Gas Profits to Beat U.S.

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By Marek Strzelecki

Sept. 20 (Bloomberg) — San Leon Energy Plc, the natural- gas explorer backed by billionaire George Soros and Blackrock Inc., expects its Polish shale licenses to be more profitable than U.S. deposits, the company’s exploration director said.

San Leon, which became one of the leading shale gas explorers in Poland after buying Realm Energy International Corp. for $142 million last month, seeks to profit either through so-called farm-outs with a cash component or asset sales once it develops its fields and proves they can produce gas, John Buggenhagen said in an interview in Warsaw.

Shale gas, unlocked from rocks by blasting them with sand, chemicals and water, has boosted U.S. production and delivered the lowest prices in almost a decade. Companies including Exxon Mobil Corp. and Chevron Corp. seek to emulate the U.S. boom in Poland, Europe’s biggest holder of shale.

“If you’re getting $4 for your gas in the U.S., here you’re getting $8, meaning I can produce half as much gas for the same profit,” Buggenhagen said.

Dublin-based San Leon has 14 licenses and 1.7 million acres of land in the eastern European country to explore for shale gas and conventional hydrocarbons, according to a presentation on its website. Poland has granted 101 licenses, with eight wells completed out of a mandatory 124. Test production has started on two wells.

U.S. Example

“If you look at what’s going on in North America, I mean that people are paying $10, $20, $30 an acre, and selling it for $10,000, $20,000, $30,000 an acre, that’s the kind of return that we’re looking for.” Buggenhagen said. “We would like to use our existing capital to start exploring those Realm concessions on our own, as opposed to giving away acreage through farm-outs.”

Last year, the company signed a farm-out agreement with Talisman Energy Inc., under which the Canadian gas explorer will drill one well on each of San Leon’s concessions in the Baltic basin in northern Poland in exchange for 30 percent stakes in the licenses. Talisman has an option to increase its holdings to 60 percent if it drills an additional well on each license.

San Leon was approached by three “significant oil and gas companies” and may consider more farm-outs after upcoming drillings, Buggenhagen said.

“If I come and drill the well that costs me $4 million to $5 million and if I’ve increased the value of that block 10- fold, then the value of my farm-out is that much more” he said.

Production Start

Poland may sit atop about 5.2 trillion cubic meters of shale gas, according to the U.S. Energy Information Administration. Commercial production can start in three to five years, helped by the relatively high price of Russian gas, Buggenhagen said.

The country buys some 60 percent of its gas under a long- term contract from Russia. In the second quarter the country was paying more than $400 a 1,000 cubic meters of Russian gas, according to Polish Deputy Prime Minister Waldemar Pawlak. That’s about three times today’s gas price for October delivery on the New York Mercantile Exchange.

While Poland’s almost complete reliance on coal as fuel for power generation may help boost shale production given the European Union’s push to lower carbon-dioxide emissions, the country should be cautious in increasing royalties for oil and gas producers, Buggenhagen said.

“What we’re struggling to know is how is the Polish government going to respond to success, in terms of changing royalties and income taxes,” he said. “You see that everywhere in the world — the greed factor — how much greed we will see over the next three to five years.”

Production Fees

Last month, Poland’s largest opposition Law and Justice party presented a draft law calling for output fees to be at least 40 percent of the value of the deposit. While the government argues mining fees should not be set before gas deposits are proven, in June Pawlak said the country saw Norway and its sovereign wealth fund as a model to benefit from shale gas production.

“Royalties are less than 1 percent now, so very low,” Buggenhagen said. “They will go up, for sure, But if you raise it to 40 percent you’re going to discourage the investment.”

Original Article

Proposed Shale Gas Development Stirs Passions in Poland

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Thursday, July 14, 2011

OilPrice.com
by Joao Peixe

Energy-poor Poland is about to embark upon using hydraulic fracturing to develop the country’s natural gas reserves. The practice is controversial in many countries, including the U.S., because of its potential impact on the environment, particularly groundwater. Many municipalities and counties in the U.S. have adopted stringent regulations as a result.

Poland’s Petrolinvest has formed a joint venture, Silurian-Hallwood, with the U.S.-based Hallwood Energy to begin shale gas extraction after funding is raised, Rzeczpospolita newspaper reported.

Silurian-Hallwood is currently attempting to raise $90-100 million, of which, $20-25 million will come from private investment with the remaining $70-75 million from an initial public offering (IPO) prior to the company being listed on London’s Alternative Investment Market (AIM) later this year.

Author Jacek Skorupski observed, “Shale gas is a matter of a political nature. If we treat it like any other investment, we will be faced with mounting difficulties.”

Deputy Environment Minister Jacek Jezierski ambiguously noted, “We will be able to say whether amendments to provisions regulating shale gas extraction are needed once we perform a professional assessment of its environmental impact, not an emotional one. Poland intends to control this process, not to ban it.”

Marek Kryda of the Institute of Civil Affairs emphasized, “It is necessary to look after issues related to property expropriation and lease. We can already see irregularities at the stage of test drilling.”

(Joao Peixe is Deputy Editor with OilPrice.com. The original article appears here.)

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Nexen joins Marathon to explore Poland shale gas resources.. Exxon seeks partners for its shale gas licenses in Poland.

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Source: Marathon Oil Website

Wednesday, April 27, 2011

Marathon Oil Corporation has signed an agreement with Nexen under which Nexen will acquire a 40% working interest in 10 of Marathon’s concessions in Poland‘s Paleozoic shale play. This partnership provides not only financial risk mitigation but combines the extensive unconventional drilling and completion experience of Marathon and Nexen to fully evaluate the potential of these concessions.

Marathon currently holds an interest in 11 concessions in Poland, encompassing 2.3 million acres. The shales are Lower Paleozoic and located at depths of between 8,000 and 13,000 feet. Marathon plans to acquire 2D seismic during the first half of 2011, potentially followed by the drilling of one to two wells in the fourth quarter of 2011 and seven to eight wells during 2012. Marathon will remain operator of the 11 concessions.

Poland shale gas- A Game Changer??

Poland’s Lower Paleozoic shale play may be the largest and most significant opportunity for unconventional gas in central Europe and is evolving rapidly in the wake of successful shale plays in North America. Natural gas demand in the large and growing European market is approximately 50 to 55 billion cubic feet per day, with imports from outside the European Union accounting for approximately 50% of total gas requirements.

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Source: Marathon – Howard Weil 2011 Energy Conference

In the last three years, Poland had issued more than 70 licenses for shale gas exploration which could make Europe less dependent on supplies from Africa and Russia. However, extraction of resources in Europe is more complex than in the US because of population density. Poland has 5.3 trillion cubic meters of shale natural gas, equal to more than 300 years of the country’s annual gas consumption, the Energy Information Administration of the U.S. Department of Energy said in a report. The companies are now drilling in Poland, but it will take at least a year to determine if shale gas production will be commercially feasible.

Lots more available on Poland table??

Poland’s shale resources are being targeted by Majors like ExxonMobil, Chevron, ENI, ConocoPhillips, Marathon, and Talisman as well as small independents like San Leon Energy, Realm Energy and BNK Petroleum. The following tables show the list of Poland shale gas deals.

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Source: Derrick Petroleum E&P Transactions Database

As the companies’ interest towards shale gas exploitation in Poland is heating up, few companies are calling for partners to give them a helping hand. Below is the list of Poland assets available for sale!!

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Source: Derrick Petroleum Deals In Play Database

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Polish Delegation Attends First Multilateral Meeting of the Global Shale Gas Initiative

24 August 2010

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The first multilateral meeting of the Global Shale Gas Initiative (GSGI) took place in Washington on August 23 and 24, hosted by the U.S. Department of State’s Coordinator for International Energy Affairs David L. Goldwyn.  Poland and sixteen other countries sent representatives to attend the GSGI Conference to discuss the importance of shale gas as a lower-carbon fuel option that can help reduce CO2 emissions while ensuring energy security and economic development in the 21st century.  Dr. Piotr Litwa, President of the State Mining Authority, Director Ewa Zalewska of the Ministry of Environment, and Counselor Katarzyna Kacperczyk of the Foreign Ministry represented Poland at the Washington conference.  “Poland has emerged as a leader in supporting shale gas exploration.  The Polish delegation brings to Washington a set of lessons and experiences – best practices – from which other countries can learn,” said U.S. Ambassador Lee Feinstein.  “Our common goal is to deploy U.S. technology and investment to develop cleaner, more secure energy resources.  The GSGI conference the latest in a series of cooperative efforts aimed at just that.

While visiting Krakow in July, Secretary Clinton said, “We think that Poland, in particular, has a very good opportunity to be a leader in a full range of energy issues, including shale gas… At the political and national level, this is a very good sign of Polish leadership in the energy sector, because energy security and independence is one of the most important aspects of national security in today’s world.”

In April, Secretary Clinton and Foreign Minister Sikorski established a high-level dialogue to build deeper public and private cooperation on regional energy security.  U.S. investment in “shale gas” exploration holds the promise of converting Polish dependence on imported natural gas into an alternative, secure Polish supply of natural gas exports for the region.  The U.S.-Poland Shale Gas Working Group brings our two governments together to support the safe, successful introduction of U.S. shale gas extraction technology into Poland.

Countries have been selected to participate in GSGI based in part on the known presence of gas-bearing shales within their borders, market potential, business climates, geopolitical synergies, and host government interest. Within GSGI, countries are categorized into Tier 1 and Tier 2. Tier 1 countries have the greatest potential for benefiting from GSGI opportunities. Tier 2 encompasses a broader set of countries that have expressed interest and meet GSGI criteria. To date, partnerships under GSGI have been announced with China, India, and Poland.

The Department of State (DOS) launched the Global Shale Gas Initiative (GSGI) in April 2010 in order to help countries seeking to utilize their unconventional natural gas resources to identify and develop them safely and economically.  Shale gas is one of the most rapidly expanding trends in onshore U.S. oil and gas exploration and production. According to Energy Information Administration (EIA), during the last decade, U.S. shale gas production has increased eight-fold; it now accounts for 10% of U.S. gas production and 20% of total remaining recoverable gas resources in the U.S. By 2030, EIA projects that shale gas will represent 7% of total global gas supplies, providing the reserve base necessary for expanded consumption in a business as usual scenario.

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