An Excerpt From:
K&L Gates Global Government Solutions ® 2011: Mid-Year Outlook
July 2011
Energy and Environment
Shale Gas May Transform Poland’s Energ y Sector
tsunami disaster in Fukushima—is the
construction of two nuclear power
plants, expected to supply a total of
approximately 6,000 MW of power (the
first one to be in operation in 2022).
A third factor, which may dramatically
alter Poland’s energy outlook, is shale
gas. Various reports, including those
compiled for the U.S. Department of
Energy, suggest that Poland may possess
the second largest supply of shale gas
in Europe, perhaps more than five trillion
cubic meters. These reserves may exist
in two major areas—the Gdansk Basin
and the Lublin Basin. As of May 2011,
73 concessions have been granted for
shale gas exploration, on terms generally
considered favorable to investors. Initial
results of the first exploratory drillings
are expected later this year, with a more
detailed analysis anticipated in two
years’ time. If the resources prove to be
as promising as expected, the output
of gas at an industrial scale could be
expected about 10 years from now,
subject, of course, to factors such as
oil prices, local output costs, and the
availability of expertise and equipment.
Every Polish government in power over the past two decades has sought to
address the safety and security of Poland’s energy supply. Until recently, such
efforts have shown little success, but that appears to be changing.
Poland’s energy security has been
understood to depend upon, among
other things, the diversification of
sources of energy. Traditionally, the
Polish energy sector has been very
much dependent on hard coal, which
Poland has in abundance, as the EU’s
largest producer of coal. But given the
high level of pollutants that result from
its use, this situation is at odds with
the EU’s very ambitious goals for CO2
reductions. Only about 30 percent
36
of the country’s needs can be met
from domestic sources, leaving Polish
companies and households at present
highly dependent on gas from Russia.
Several initiatives are underway to
address this vulnerability. The first is the
construction of the first LNG terminal
on the Baltic Sea, in Swinoujscie,
which should be operational by 2013.
The second—presently at a very early
stage and commenced at a somewhat
unfortunate time due to the Japanese
K&L Gates Global Government Solutions ® 2011 Mid-Year Outlook
Poland’s Geological and Mining
Law, which is currently being revised
to come into conformity with the EU
Hydrocarbons Directive, establishes the
principal terms of the legal and licensing
requirements for gas exploration and
exploitation. Key components of this
regime include the following:
•A
s in most European countries, almost
all natural resources, including all of
significance to the national economy
(e.g., hard coal, lignite, oil, gas, and
metals) are owned by the State.
• F or the purpose of allocation of
concessions, territory is divided into
blocks and a particular concession
may be granted for several blocks, or
part of a block.
Energy and Environment
Various reports suggest that Poland
may possess the second largest supply
of shale gas in Europe.
• The amended geological and mining
law, following the relevant EU directive,
will provide that hydrocarbon concession
grants should be based upon tender
results. This rule, however, will be subject
to historical exemptions for investors
already having exploratory concessions.
The scope and terms of concessions
are defined by law, and for exploratory
concessions, these requirements extend
to, among other matters, the area and
term of the concessions; rules regarding
various phases of exploration works,
including the number of wells to be drilled
and their depth; and a list of prohibited
actions (e.g., no works in environmentally
protected areas like the Nature 2000
European Ecological Network, and no
use of explosives).
U.S.-Polish business relations—a fact of
which both governments are aware of.
On March 2, 2011, a Memorandum
of Understanding was signed between
the U.S. and Polish governments on
Cooperation in Clean and Efficient
Energy, naming unconventional
natural gas as one of the main areas
of cooperation. These efforts were
continued in May 2011 when, during
President Obama’s visit to Poland, shale
gas developments in Poland were one of
the topics for discussion.
Tomasz Dobrowolski (Warsaw)
tomasz.dobrowolski@klgates.com
A party that (i) has completed the block
exploration stage and (ii) delivered to
the relevant authority the documentation
of exploration works then admitted to
state geological documentary archives,
and plans to start the exploitation of that
block, may demand—within five years
following such admission—that the State
conclude a mining usufruct agreement
necessary for commencing this operation.
This priority right, which is considered as
investor’s security in case of dispute on
usufruct terms, may be enforced in court.
Shale gas-related investments may
become a new important factor in
K&L Gates Global Government Solutions ® 2011 Mid-Year Outlook
37
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