Market Report, "Poland Oil & Gas Report Q4 2013", published

Although we still expect shale gas to start contributing to Poland's gas output from 2019, below-ground challenges in shale gas extraction have led us to downgrade our forecasts of the rate of gas production growth in Poland. The future of its shale gas production within the decade will also be highly dependent on the industry's reception and assessment of the risks and rewards offered by a pending shale gas law that was being drafted at the time of writing.

The main trends and developments we highlight for Poland's oil and gas sector are:

* Undeterred by the Polish Geological Institute (PGI)'s downward revision of its recoverable shale gas estimates - to 0.346-0.768trn cubic metres (tcm) - Poland is sticking to Prime Minister Donald Tusk's late 2014/early 2015 schedule for the commercial production of shale gas. This target is looking increasingly unattainable as Poland's significant below-ground challenges to shale gas extraction are made known from early exploration efforts.
* Shale gas exploration in Poland continues to present a mixed picture. ExxonMobil pulled the plug on the search for shale gas in June 2012, after two test wells in the Lublin and Podlasie Basins failed to flow commercial quantities of gas, and Talisman Energy and Marathon Oil will also be exiting the country. Chevron has warned that industry interest in Poland's unproven shale gas potential would be highly dependent on the outcome of its draft hydrocarbons bill, which would decide the risks and rewards of engaging in Polish shale plays.
* Poland's treasury has called for refiner Grupa Lotos SA to expand its non-refining portfolio, particularly in the upstream segment, mirroring a trend in the country where the government is pushing state-owned firms into the development of its shale gas resources. A consortium consisting of PGNiG, copper miner KGHM and utilities companies Polska Grupa Energetyczna, Tauron and Polska Energia is considering a shale gas joint venture (JV).
* An increase in conventional gas production will contribute to the upward trend in Poland's gas outlook in the short term; we forecast that gas production will grow from 6.25bn cubic metres (bcm) in 2013 to 6.70bcm in 2017. We only expect shale gas to make a real impact on total output from 2019, assuming that more final investment decisions (FID) on projects will only be made from 2016 and projects take three years to be developed, given the current rate of exploration and discovery. As such, we forecast gas production to hit 13.0bcm by 2022. This is a downgrade of our previous forecasts, as we pare down our expectations of shale gas production in Poland.

Full Report Details at
- http://www.fastmr.com/prod/712817_poland_oil_gas_report_q4_2013.aspx?afid=301

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