Polish auditors slam government for slow pace of shale gas development

Jan. 15, 2014 at 12:07 AM
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WARSAW, Poland, Jan. 15 (UPI) -- Poland's national auditing agency this week criticized the slow place of developing the country's shale gas industry, blaming government inefficiency.

The Supreme Audit Office, or NIK, Monday issued a report warning that high hopes for establishing shale gas as a viable Polish industry by 2015 are being imperiled by "irregularities" in awarding concessions and the painfully slow establishment of a law governing the sector, Polish Radio reported.

In the meantime, several foreign energy firms that came into Poland seeking to tap its shale gas potential, such as Exxon Mobil, Marathon Oil and Talisman Energy, have pulled out due to mixed exploration results and the uncertain regulatory landscape.

At the current rate, it will take 12 years before Poland's shale gas potential can be properly tapped, the NIK said.

"In order to carry this out, it would be desirable to have about 200 wells," the report asserted, but so far, only a small proportion of the territory deemed to have potential has actually been explored.

"The reason for the slow pace of operations stems not only from the changing economic and financial situation but also from improper government action," the auditors said, noting it takes an average of 130 days to secure a license when the process should last just 30 days.

It accused the Poland's Environment Ministry of being "unreliable" and not acting swiftly enough, warning of the potential for corruption in the arbitrariness and unequal treatment in the awarding of exploration well contracts.

For example, the ministry at times has agreed to consider incomplete applications as well as those that did not fully allow for checking the economic credibility of the applicant. Justifications for decisions, it said, didn't consider "the relevant facts and evidence underlying the request."

At the same time, the government "could not properly organize the work of the Environment Ministry despite its declaration of the exploration of shale gas as a priority."

Tomasz Chmal, a Warsaw attorney and energy industry expert, told Polish Radio the report confirms the complaints of companies seeking to establish shale gas operations in the country.

"Allegations of flawed license renewal proceedings and a defective administration are indisputable," he said.

NIK also took the government to task for the slow pace of establishing a draft law governing shale gas and determining how the industry would be taxed, resulting in nervousness among potential investors.

Polish Prime Minister Donald Tusk promised in his 2011 election campaign that work on the provisions would be completed quickly, but they were soon delayed and revisions were stalled at the inter-ministerial level, the Polish daily Gazeta Wyborcza reported.

Polish Environment Minister Maciej Grabowski, who replaced Marcin Korolec in November, said a draft law would be ready by the end of the year, but that deadline passed without anything forthcoming.

"Further extensions may result in the reduction of the scale of the business or planned geological work and capital expenditures incurred on such activities, as well as a reduction of interest on their part exploration of unconventional gas deposits in Poland," NIK warned.

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