Departure of major E&D companies a “blessing in disguise”?

Ilya Ponomarev
Ilya Ponomarev - Keynote Speaker

The departure of major oil and gas companies from countries like Poland, Ukraine, and Romania, might be a blessing in disguise – according to Ilya Ponomarev, an Opposition Member of the Russian Parliament and a keynote speaker at the Central and Eastern Europe Shale Gas and Oil Summit in Warsaw, Poland.

In the last year, nearly all major players left Poland – once the most hyped-up shale destination in Europe – with Chevron also leaving Ukraine and Romania, quoting political unrest and poor drilling results respectively.

Yet, according to Mr Ponomarev, the presence of multinational exploration companies in these countries was more beneficial to the politicians than the oil and gas industry. Looking at the example of the U.S. – as well as some other countries around the world – he pointed out that it was not the majors that were behind the successes in unconventional gas and oil exploration but rather small and agile independent service providers.

“So, as [the majors] are leaving Poland, as they’re leaving Ukraine, as they’re leaving other locations, it creates new opportunities to pick up the initial exploration that was done, to pick up the initial efforts that were developed to create the whole new system of independent smaller oil producers who are capable to start producing and achieve precise results,” Mr Ponomarev explained.

We can already see early signs of such development – Mr Ponomarev argued. Ukraine is a good example; despite the ongoing war, the country has managed to successfully produce hydrocarbons from national deposits. Out of 55 billion of cubic feet of gas that Ukraine consumes annually, 20 billion is from national production, and out of this twenty, two million are from unconventional resources.

This has been possible despite unprecedented difficulties; the war, the tough economic conditions, and even taking into account that the fiscal regime in Ukraine before the recent revolution in Kiev was much tougher than it is in other European states like Poland or Lithuania.

“It’s a very important lesson that was learned during these years,” Mr Ponomarev said, “that the issue of developing service systems of the smaller producers is healthier than trying to develop any kind of exclusive deals with major companies.”

What’s more, there has been considerable evidence that rather than forwarding the cause of unconventional resources, exploration giants and NOC’s feel increasingly threatened by the new and robust shale industry.

“Instead, what we see is that majors were actually coming to disrupt the new production. Of course the leader among those disruptors would be Gazprom, which is financing the environmentalists not only across Eastern Europe but also within shale production in the United States,” said Mr Ponomarev.

The issue of the Russian state giant financing anti-fracking movements worldwide has been flagged up before – most notably by NATO Secretary General Anders Fogh Rasmussen, who during a speech last June at Chatham House, in London, said that it is in Russia’s interest to maintain the dependence of Western Europe on Russian gas and sabotaging the work on the production of shale gas. He referred to disinformation campaigns as “sophisticated”

In his address, Mr Ponomarev, seconded Mr Rasmussen’s view, saying:

“We see very capable recruited lobbyists – some of them former senators of the United States, some of them Congress-people, high-profile artists, high-profile actors, high-profile media people, who are propagating the idea of dangers associated with fracking – and they are successful.

One of the most successful media arms of the Kremlin – the media channel Russia Today – dedicates a substantial amount of its media time to the dangers of shale production.

One of my friends; a U.S. Congressman, was actually complaining to me, he said: “You know what, we are building a new pipeline which is leading to the Atlantic shore to create an LNG terminal there, I don’t know why but people are actually railing against this pipeline although it goes in parallel to the existing one so there are no ecological dangers or environmental hazards which are coming with this pipeline, but people are protesting against it.

And I was wondering where they’re getting their information about this pipeline, and they brought to me some leaflets that were distributed in the region, the origin was Russia Today.

So, this is an example of how Russian media channels and Gazprom are trying to disrupt any kind of new types of production as well.”

Interestingly, Mr Ponomarev believes that, unlike shale production, the coming online of LNG imports to Europe are not seen as a threat by Gazprom, which believes that they are likely to displace current imports from Qatar.

Overall, he believes that the departure of the majors, along with the currently low oil prices will be beneficial to the development of shale gas in Europe – Eastern and Central Europe in particular.

“The media people are usually trying to say that with the downfall of oil prices shale production in Europe will be by far unsustainable – I think that the situation is actually the very opposite. The gas and oil professionals recognise the internal rule of the power industry; when the prices are low they diversify, when the prices are high they produce; so now there is a need to diversify,” he said in conclusion to his address.

“And I expect that Eastern European states will be able to provide the comfortable entry in terms of fiscal and legal environment for those producers and we’ll see more and more of those companies coming to our countries.

They will be coming even to Ukraine, despite the war, because of the attractive geological conditions. They will be coming definitely to Poland, they will be coming to Romania, they will be coming to other countries as well.”

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