INTERVIEW-Poland plans to revive shale gas hopes with new laws

Fri Feb 22, 2013 3:06pm GMT

* Draft on shale gas tax seen in days -environment minister

* New law on shale gas to be implemented within months

* Sees no prospect for backloading compromise on CO2

By Agnieszka Barteczko and Pawel Bernat

WARSAW, Feb 22 (Reuters) - Poland hopes to revive the waning enthusiasm around its drive to become Europe's shale gas powerhouse by passing a set of laws that would make it easier to explore and extract unconventional gas, the environment minister said.

Poland had counted on an expected abundance of shale gas sitting underneath large swathes of the country to boost growth and reduce its reliance on Russian oil and gas.

But investors, already jolted by the government's conservative revision of shale reserves estimates, have grown concerned about its protracted work on a tax and regulation regime announced in October.

"We are changing the regime so that it will be as friendly to investors as possible, and I think as a result they will intensify their activities in Poland," Environment Minister Marcin Korolec said in an interview.

"Adopting all of the new regulations should be a question of a few months," he said.

Poland wants the new regime to lighten the many bureaucratic obstacles to exploration, including environmental limitations, and will create a state operator to take part in energy consortia.

It also aims for a tax rate of about 40 percent of the sector's gross profits from 2015, which officials say is lower than those levied on energy production by countries such as Norway and the United Kingdom.

In several days, the finance ministry should present its tax proposal, which should not vary much from what the environment ministry already flagged, Korolec said.

Some shale gas exploration firms had feared that Poland, seeking to keep a lid on its budget deficit, could seek to extract more cash from shale gas production.

Disappointed by the results from its test wells, ExxonMobil has already decided to abandon its Polish plans, although other global players such as Chevron and ConocoPhilips remain determined to extract unconventional gas in Poland.

Poland handed out more than 100 explorations licenses to companies, which also include gas monopoly PGNiG and other government-controlled companies.

The Polish Geological Institute estimates the European Union's largest eastern member may have 346 billion to 768 billion cubic metres of unconventional gas, far less than the 5.3 trillion metres predicted by the U.S. Energy Information Association in 2011.

Test wells have also suggested Polish shale beds could be much deeper than in the United States.

BACKLOADING

As for the carbon market, Korolec said Poland does not see any prospects for a compromise on backloading, the EU plan to withdraw 900 million emission permits from the bloc's emissions trading scheme and reinsert them later.

"This is a one sentence regulation, which would allow the Commission to intervene in the market. I also do not see why we should be proposing something in exchange, since the system was agreed on in 2008," Korolec said.

Poland, which relies on carbon-intensive coal, has been the biggest opponent of European Commission proposals for backloading and other measures to rescue the carbon market, where prices have fallen so low that they no longer encourage low-carbon investment.

The environment committee of the European Parliament gave its support to the backloading plan but said it needed time to decide on a possible mandate for negotiations on the wording of legislation.

The committee members are now expected to decide next week whether to take the discussion straight to a plenary session of the European Parliament, expected in April, or whether to speed up the process by kicking off legal haggling between the parliament, Commission and member states before then.

"The issue requires a discussion on the plenary session. The decision to support the plan was not unanimous," Korolec said. (editing by Jane Baird)

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