ConocoPhillips – last major to leave Poland

Drilling rig
Source: DollarPhotoClub

On Friday U.S. oil and gas giant ConocoPhillips became the last E&P major to abandon Polish shale exploration after reportedly investing around $220 million in Poland since 2009. The company – operating in Poland through its subsidiary Lane Energy – quoted disappointing results as the reason for its departure.

“We understand the disappointment surrounding this difficult decision,” Tim Wallace, ConocoPhillips country manager in Poland, was quoted as saying in a statement. “Unfortunately, commercial volumes of natural gas were not encountered.”

ConocoPhillips also said it expected a charge related to the Poland withdrawal of approximately $90 million pre-tax, and around $30 million after-tax.

In leaving Poland, ConocoPhillips follows the likes of Chevron Corporation, Exxon Mobil, Total and Marathon Oil, who have all departed from Poland over the past three years.

This is a serious blow to Poland, who counted on its reportedly large shale reserves to free itself from its dependence on Russian gas – currently the country imports 60 per cent of its gas from Russia.

Back in 2011 Poland’s then Prime Minister Donald Tusk said that he expected the first commercial shale gas in 2014. Unlike in many other European countries, such as France, Germany or the UK, where anti-fracking movements gained a lot of popularity, there was considerable public support for Polish shale exploration, with the media touting Poland as “the new Kuwait”.

There are those, however, who argue that the departure of the majors does not necessarily spell the demise of the shale industry. It might, in fact, be a “blessing in disguise”. Speaking at the Central and Eastern Europe Shale Gas and Oil Summit in Warsaw, back in March, Ilya Ponomarev, an Opposition Member of the Russian Parliament, argued in his keynote address that the presence of multinational exploration companies in countries like Poland, Romania, and Ukraine 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.

It is true that the departure of ConocoPhillips, while dealing a serious blow to Polish shale exploration, is unlikely to extinguish Polish ambitions with regard to unconventional gas and oil. Polish state-run gas distributor PGNiG and the refiner PKN Orlen are still committed to shale exploration, admittedly with far less funding than that of the likes of ConocoPhillips and Chevron.

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