* Exxon quits Poland shale gas exploration
* Comes days after govt shelved draft shale law publication
* Europe's biggest shale plans, 112 exploration licences
* Poland's reserve estimates slashed by 90 pct in March
By Maciej Onoszko
WARSAW, June 18 Europe's most ambitious shale
gas plans were in disarray on Monday after U.S. major ExxonMobil
announced it would pull out of exploration projects in
Poland's lucrative reserves had spurred hopes of
transforming Europe the way a shale boom has left the United
States brimming with supplies, potentially turning the Poles
into net gas exporters.
That was until March, when a government report revealed the
country's likely reserves were about one-tenth the size of
At the weekend, Exxon, which earlier this year cautioned
that commercial production of Polish shale was at least five
years away, said it would not go forward with exploration.
"The move is not surprising given that Poland's shale
potential is still unclear," JBC Energy analysts said in a note
A spokesman for Exxon in Poland said the company has not
decided yet what it would do with its exploration licences. It
controls four and jointly holds two with France's Total
Poland has granted 112 shale exploration licences to
ExxonMobil, Chevron and other firms, even as some
countries, including France and Bulgaria, have banned shale
exploration pending further environmental studies.
The Poles are keen to wean themselves off their heavy
reliance on coal and imported Russian gas, partly due to
environmental commitments they face as a European Union member
"Exxon realised that commercial extraction was not possible
with currently available technology. This is a general problem
in Poland that shale rocks are too tight to allow extraction,"
an industry source said, asking not to be identified.
Abundant shale gas production in Poland poses a potential
threat to Russia's supremacy in Europe, where it supplies a
quarter of the gas used in the EU.
Yet Russian gas export monopoly Gazprom has repeatedly
played down the threat and on Monday Sergei Komlev, head of
contract structuring and price formation at Gazprom Export, told
a conference in London that Polish gas would struggle to achieve
the low prices of U.S. shale rivals.
"In Poland the price for shale gas will be above $15 per
million British thermal units, over three times than in the U.S.
where prices will rise to $5-10 (from a current $2.50) once they
export gas," Komlev said.
Last Wednesday, the government abruptly called off a
presentation of a legal framework for the development of shale
gas resources, disappointing industry players eager for more
clarity before committing further to investing in the sector.
"If this draft was published and Exxon later declared it was
leaving the country, it would most likely have been a disaster
in terms of the country's image," said Piotr Spaczynski, partner
at law firm Spaczynski, Szczepaniak & Wspolnicy, w hi ch advises
foreign oil companies investing in Polish shale.
The government now plans to unveil the draft law by the end
of the month, and has said it will cover exploration and
extraction of oil and gas from both conventional and
unconventional sources, including taxation, licensing and
"If I were the government, I would scrap all drafts and let
companies work, or publish a draft supporting exploration and
not one directed at excessive taxation," Spaczynski said.
Poland had high hopes for shale after a study by the U.S.
Energy Information Association in 2011 estimated Polish reserves
at 5.3 trillion cubic metres, enough to cover domestic demand
for some 300 years.
The government's study in March slashed estimates for
recoverable shale gas reserves at 346 to 768 billion cubic
Despite Exxon, the world's most valuable energy company, to
deciding to scrap exploration, other firms said they remained
"(Our company) continues to remain extremely optimistic
about the outlook for Polish shale gas," said John Buggenhaggen,
exploration director at UK-listed San Leon Energy Plc.
(Additional reporting by Henning Gloystein and Dmitry
Zhdannikov in London; editing by Michael Kahn and Jason Neely)