Polish Hydrocarbon Concessions: No More First-Come, First-Served?

The Ministry of Environment has advised oil and gas explorers, that as of the 1st of January 2012, licenses for exploration and production of hydrocarbons in Poland will be granted only through tender.

Piotr Wozniak, who was appointed new Chief National Geologist and Deputy Minister of Environment only three weeks ago, informed the companies that the change has been introduced under the new Geology and Mining Law.

The previous bill did not require obligatory bidding for licenses. Over the last five years, over one hundred of exploration concessions have been issued on the first-come, first-served basis. From now on, each exploration concession will be subject to a compulsory tender process.

The horse have have bolted the stable, so to speak, as there is not too much room left for newcomers seeking to acquire gas exploration acreage in Poland. However, the new regulations will become more signifciant when the first production licenses are applied for.

Licences will be awarded for a period of up to 50 years, on the basis of work programme, technical, economic and other criteria.

The Ministry of Finance is preparing draft legislation in respect of the royalty and taxation regime for shale gas production. This week, Maciej Grabowski the Deputy Finance Minister, suggested that the state will be satisfied with the taxation level of around 50%.

The revised Geology and Mining Law still leaves a way out of obligatory concessions, as the government can exclude some areas from the system. The ministerial paper underlines that the government is not designating any areas of this type at the moment. 

Some experts also note that the bill gives an exploratory license holder, who successfully discovers and validates a deposit,  priority over other applicants in the award of a production licence.