PGNiG and PKN Orlen pick up Polish licences abandoned by San Leon

San Leon fracking Lewino well
Source: San Leon website

San Leon Energy, announced today a reduction in its Polish licences. In a statement published on its website, the company said the decision was a part of its new long-term strategy, announced in June this year, to reduce the exploration component of its portfolio and focus on appraisal, development and production. The move is to secure near-term operational cash flow. However, the abandoned licences were immediately picked up by the Polish state-owned company PGNiG, which intends to continue exploration in the area with PKN Orlen – in cooperation that was also announced today.

In order to reduce costs, four Polish licences were removed from San Leon’s portfolio (in Czersk, Budzów, Iława and Praszka), as well as eight blocks in the Bieszczady mountains that have been taken over by PKN ORLEN, who have assumed past and future benefits and liabilities.

In a statement, Oisin Fanning, San Leon Executive Chairman, said that as well as following the company’s new strategy, the decision also came as a “result of the introduction of significant yearly licence fees in Poland over the past couple of years.”

He assured that San Leon “remains committed to its remaining acreage in Poland, which includes the Baltic Basin shale licences and the recently announced gas discovery at the Rawicz field.”

“This portfolio adjustment is just one of a number of actions the Company will be taking over in the coming months to execute the new strategy and we look forward to updating shareholders in due course,” he concluded.

Following the departure of the likes of ConocoPhillips, ExxonMobil, Marathon Oil, Chevron, Talisman Energy, Total and Italy’s ENI, the majority of shale exploration rests in the hands of Polish companies.

Poland’s largest gas company PGNiG and the country’s oil refiner PKN Orlen have announced today their cooperation in the search for gas and oil deposits in the Bieszczady stretch of the Carpathian Mountains. In a joint statement, the companies said “the aim of these operations is the exploration, appraisal and production of crude oil and natural gas in the Carpathians.”

“As a result of the agreement, ORLEN Upstream aquired 49 percent of shares in 8 concession blocks grouped under the joint name ‘Bieszczady’ Project.”

The joint exploration will take place on the eight concession blocks abandoned today by San Leon (437, 438, 456, 457, 458 and partially on blocks number 416, 417, 436).

“They all cover an area of over 3500 sq.km and have been issued for 2.5 to 5 years by the Ministry of the Environment.” – the joint statement says, adding: “Currently, geological works are being conducted, aiming at identification of further locations for exploratory wells, together with preparations for hydraulic fracturing.”

Zbigniew Skrzypkiewicz, deputy chairman of the board for PGNiG’s Exploration and Production wing, said that the company has had a long-standing interest in the Bieszczady area.

“I believe that gaining a new partner who offers both co-financing and experience in acquisition and interpretation of geological data, will open for us new perspectives in this area,” he said.

Despite the departure of the majors, Polish companies seem determined not to give up on the country’s shale deposits. Last week it became known that a memorandum of cooperation is expected to be signed in the space of a couple of months between Poland and China to facilitate collaboration on shale development.

The exchange of knowledge and experience between the two countries is said to involve exploration know-how – acquired by the Chinese while drilling in formations that are not unlike the Polish ones – as well as best practices in environmental protection.

“[The Chinese are] interested in Poland’s stringent environmental regulations resulting from our membership in the European Union,” The Deputy Minister of Environment and Poland’s Chief Geologist, Slawomir Brodzinski explained.

Meanwhile – also last week – The European Commission approved Poland’s plans to grant nearly $830 million in grants to nine different gas projects to advance a “true energy union” by creating more connections to regional economies.

Margrethe Vestager, the European Union’s commissioner in charge of competition policy, said the grants were an encouraging testament of sensible public spending.

“Interconnections enable energy flows between countries, improve cross-border connections and allow diversification of gas supply sources,” she said in a statement.

Polish government continues in the efforts to diversify the country’s supply of natural gas and break its current reliance on Russian supplies.

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