SHALE GAS – POLISH PERSPECTIVE Katarzyna Kacperczyk Director Department of Economic Cooperation Brussels, 22 January 2013,„Sharing Canadas Regulatory and Industrial Experience”
European gas contextR. Weijermars, et.al., Unconventional gas research initiative for clean energy transition in Europe, „Journal of Natural Gas Science and Engineering”, Vol. 3, Issue 2, Pp. 365-460 (May 2011).
Polish energy contextPrimary energy consumption Domestic natural gas production and resources Domestic natural gas production (bcm) Natural gas resources (bcm) Natural gas resources Domestic natural gas production • High reliance on coal ~60% • Total dependence on imports ~30% • Natural gas dependence on imports ~60-68%
Global shale gas resources Shale gas – not only European phenomenon Country Tcm China 36,1 USA 24,4 Argentina 21,9 Mexico 19,3 RSA 13,7 Australia 11,2 Canada 11,0 Libya 8,2 Algieria 6,5 Brasil 6,4 Poland 5,29 France 5,09 Norway 2,35 Ukraine 1,19 Sweden 1,16 Total 173,78
Shale gas in Poland 113 concessions – granted by Minister of the Environment from 2007 to 1 January 2013 (prospection and exploration of shale gas fields) to 19 consortiums 40 exploration wells completed by January 2013 (vertical fracturing 7 wells; horizontal fracturing 2 wells) 309 exploration wells planned until 2021 First horizontal well + multi-stage fracturing: August 2011 Possible first potential production: in 2-4 years (PGNiG)
Shale gas in EuropeUnited Kingdom (December 2012): Thegovernment has given the go-ahead forto resume hydraulic fracturing to exploitgas in Lancashire Additional resource potential: Netherlands, Belgium andGermany: (December 2012): rejection of the Luxemburgmotions from the Green Party and Left Partythat called for banning hydraulic fracturing
Shale gas:multidimensional influence Energy Economy security Environment
Energy security • Resource base: Doubling global proven gas resource base (BP 2011 – 208 tcm; ARI 2011 – 188 tcm) Doubling regional proven gas resource base: Europe (BP 2011 – 9 tcm; ARI 2011 – 18 tcm) where production by traditional suppliers’ is shrinking (GB: 2000 – 108 bcm; 2011 – 45 bcm) Local 50 – fold increase: Poland (BP 2011 – 0,1 tcm; ARI 2011 – 5 tcm) Reduced import needsreduced exporters’ leverage: Reducing US: EIA est. 2005 demand for LNG in 2010 = 70 bcm dominant supplier’s US LNG import in 2012=10 bcmleverage on Regionally: Europe: 2010 main suppliers’: Russia (34%), Norway importer (30%), Algeria (15%), Qatar (10%) Locally: Poland’s main gas supplier: Russia (64%) Developing domestic resource base Improving market conditions: Globally: reducing „energy weaponization”; weakening GECF market power Regionally/Locally: improving regional and local market competition/improving importer’s bargaining power
Shale gas arithmeticModerate growth scenario Unit 2012-2018 2019-2025 2012-2025Number of wells (new + converted) 30+65 155-270 220-300Total CAPEX (exploration+production) USD bn 1.9 6 7.9=shale gas investmentTotal workforce (exploration+production) Thousand 2.2 6.1 4.1= shale jobs annual av.Shale gas output (at the end of period) m m3 1,032 3,519 3,519Increased foreign investment scenario Unit 2012-2018 2019-2025 2012-2025Number of wells (new + converted) 30+65 500+175 530+240Total CAPEX (exploration+production) USD bn 1.9 9.2 11.1=shale gas investmentTotal workforce (exploration+production) Thousand 2.2 9.1 5.7= shale jobs annual av.Shale gas output (at the end of period) m m3 1,032 5,934 5,934Accelerated growth scenario Unit 2012-2018 2019-2025 2012-2025Number of wells (new + converted) 30+65 175+1000 1.030+240Total CAPEX (exploration+production) USDbn 1.9 14.9 16.8=shale gas investmentTotal workforce (exploration+production) Thousand 2.2 15.1 8.6= shale jobs annual av.Shale gas output (at the end of period) m m3 1,032 11,934 11,934 Source: CASE
Results: shale gas impact = impact of EU accession • CASE study (May 2012) on economic impacts of shale gas production between 2012-2025: economic growth: similar influence as in case of Poland’s accession to the EU - for comparison: European Centre Natolin estimated in 2003 that membership in the EU would add about 0.8 pp. to Polish GDP growth annually); job places creation: drilling a single well lasts 60 days and requires 20-60 people working; generating additional tax incomes: from VAT and CIT taxes; - for comparison: 2013 forecasted tax incomes ca. 300 bln PLN new competencies and innovations in extraction technologies
Shale gas economics: US example Macro-level Micro-level• According to the CEPE research: • Few years ago the American and Canadian• one single Marcellus shale = 4 million industries, were at disadvantage in the USD of economic benefits world chemical market due to high costs. • Now, they are deriving profits from the• 2008 job gains from Barnett shale in Texas cheap shale gas domestic production: and Fayetteville in Arkansas were estimated at ca. 200 000 ExxonMobil Chemicals tripled in 2010 revenues to 3.14 billion USD,• It has been proved that economic activity smaller Georgia Gulf Corp., reported a associated with Marcellus shale 40% surge in sales, reaching 2.8 billion development generated over 2 billion USD in 2010; USD in federal, state and local taxes, plus reopening of the factories that were shut 62 jobs per each drilled well. down a few years ago due to high world gas prices. (the biggest American fertilizer producers – Potash Corp. and giant Dow Chemical)
Environment: challenge that can be mitigated• There are appropriate regulations and procedures on the Community and Nationallevel to ensure safety of the environment.EU level: Directive 2011/92/EU (EIA Directive ), Directive 92/43/EC (Habitats Directive), Directive 79/409/EWG (BirdsDirective) Water Framework Directive 2000/60/EC, Directive 2006/118/EC (Groundwater), Directive 75/440/EEC(Surface water) Directive 2008/98/EC (Waste), Directive 2006/21/EC (Mining waste), Directive 1999/31/EC (Landfill ofwaste), Directive 96/82/EC (Seveso II)PL level: Environmental Protection Act, Nature Conservation Act, The Act on Providing Information on theEnvironment and Environmental Protection, Public Participation in Environmental Protection and on EnvironmentalImpact Assessment, Water Act, Act on Waste, Act on Mining Waste, Geology and Mining Act, Spatial Planning andDevelopment Act, Building Act, Regulations to these acts.• Poland has a system of administrative bodies that efficiently controls the „newindustry” and pays close attention to the environmental protection.Ministry of Environment, State Mining Authority/ District Mining Offices, General Directorate for EnvironmentalProtection /Regional Directorates for Environmental Protection, Chief Inspectorate of EnvironmentalProtection/Voivodship Inspectorates of Environmental Protection, National Water Management Authority/RegionalWater Management Authorities• Initial field studies indicate minimal threat of the hydraulic fraction technology to theenvironment.
Environment: case study Polish Geological Institute conducted a miltidimensional research project designed to monitor an impact of a hydraulic fraction process in the mining plant in Łebieo (August 2011). Tested Study findings confirm that: issues no seismic events have been registered; emissions of gaseous pollutants in ambient air comply with existing requirements; radioactivity of shale layers (depth of 3 500 - 4 500 m) complies with existing requirements; there is no impact of drilling and fracking on ground and surfacewater aquafiers.
Environment: positive effect on CO2 emissions Fig. 2 US CO2 emissions fromFig. 1 Fig. 3 energy consumption (million metric tons)CO2 emissions from processing the unconventional gas are higher by 1-5 % than from natural gas. Nevertheless, they are significantly lower than from coal used for electricity production.Taking into account the lower CO2 emission level this allowed to bring down the US CO2 emissions by 450 million tonnes. The US CO2 emissions from domestic energy have declined by 8.6% since a peak in 2005, the equivalent of 1.4% per year. Part of this decline is related to the switch from coal to gas in US power generation. (Fig.1)In the first quarter of 2012, US carbon emissions hit a 20-year low. The US achieved approximately 70% of the CO2 emissions reductions targeted under Kyoto (as compared to the 1998 EIA CO2 forecast). (Fig.2)Gas is fast becoming the new fuel of choice for the US power sector. Appearance of cheap shale gas is responsible for a significant drop in the consumption of coal. According to DOE in 2011, coal generation has slumped by 19% while gas generation has increased by 38%. If shale gas were to displace coal entirely in the US, US carbon dioxide emissions would fall to 24% below 2005 levels by 2020. (Copenhagen Summit 2009, USA pledged to reduce its GHG emissions to 17% below 2005 levels by 2020).(Fig.3) Source: EIA
Cooperation with Canada• Poland has developed extensive cooperation with Canada to benefit from the Canadian experience in shale gas: BC and Alberta experience in social dialogue and environmental aspects; Alberta experience in development of the regulatory system; Activities of Canadian companies in Poland; Study visits to Canada; Canadian experts’ visits to Poland .
Shale gas - summary Shale gas is the most important revolution in fossil fuels after WW II Geo-economic (and geo-political) impact already taking place on the market Global shale gas (and shale oil) revolution may occur at the end of this decade, with the start of production in many countries (ex. China, India, Argentina, RSA, Mexico) Shale gas sector can be economically-viable and environmentally-safe (provided the proper technology and oversight) – Can Europe just wait and look… Lets get down to (shale) business!