Shale Licence Reshuffle Raises Stakes For San Leon


Talisman and Marathon Oil have join ed ExxonMobil in announc ing a complete farm-out from their Polish shale acreages. While these decisions create further doubts about the country's actual potential, San Leon's bullish behaviour continues to fuel expectations that unconventional gas could remain a large upside risk to our forecasts.

In early May, two independent oil explorers, Talisman Energy and Marathon Oil , revived worries about shale gas prospects in Poland. While the country remains unequivocally determined to see commercial production from 2015 and begin to escape the heavy reliance on Russian gas imports, it appears that private oil companies are progressively turn ing bearish on the likelihood of this scenario finally occurring.

This echoes the earlier farm-out of ExxonMobil in 2012. At the time, the international oil company (IOC) explained that its reason for exiting the Polish exploration game was based on a lack of commercially viable hits after two wells were drilled ( s ee our online service, June 06 2012, 'Shale Hopes Dented By Exxon's Departure') . Marathon Oil is offering a similar explanation for its farm-out decision. Both companies have withdrawn from Poland citing two factors that make shale exploration much more c hallenging than it has been in the US and Canada:

  • Below ground, Polish shales tend to be deeper and therefore more difficult to access than North American shales.

  • Above ground, Poland is a much more densely populated area than shale producing acreage in the US . This creates need for more rigorous and numerous tests.

Talisman Energy offers a different perspective. The company notes that drill ing results in its acreages were promising, but it has decided to focus on prospects in the Americas and Asia Pacific. The company owned 30% stakes in the Gdansk W est , Braniewo S outh and S zczawno concessions of the Northern Poland Baltic Basin and drilled one well in each.

Long-Term Dream
Polish Gas Production & Consumption, 2000-2022 (bcm)

Love It Or Leave It

One interesting consequence of these farm-out s is the fact that they further increase San Leon 's exposure to the Polish market. The company is acquiring Talisman's Polish subsidiary Talisman Polska and announced it was ready to drill the Lewino-1G2 well in the Gdansk W est concession as soon as permits were issued.

San Leon is already the main player in Poland's shale exploration. The company signed a deal with Halliburton in March in order to further assess the potential of the southern Poland Wschowa, Gora and Rawicz concessions. While the oil field service company was aiming to complete some test works by the end of Q2 2013, the results of the planned diagnostic fracture injection test (DFIT) , had not yet been published at the time of writing (see ' Halliburton Move Gives Credibility To Shale Exploration ' , March 19 2013 ) .

Uncertainty over such tests may have prompted Marathon and Talisman to move forward with their exits. Nonetheless, we believe that San Leon's extremely bullish behaviour toward Poland's below- ground potential signal s that all test s conducted by the company so far have been positive. San Leon is betting large stakes on a European shale boom ; it has also, for instance , acquired assets in Spanish shales despite regional opposition to hydraulic fracturing (see ' San Leon Dodges Regulatory Bullet And Moves Eastward ', April 29 2013 ) . Accordingly, rewards will be large if the company manages to produce commercial shale from the continent.

This article is tagged to:
Sector: Oil & Gas
Geography: Poland

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