Polish Shales: The Chicken or the Egg?

Poland’s shale gas industry waiting for enough vital equipment

It’s tough to say just when a critical mass of shale gas infrastructure, drilling and stimulation services is likely to appear in Europe. But that did not stop a group of representatives from the industry from offering their perspectives on the subject at Shale Gas Results in Europe 2011 in Warsaw, Poland.

Rob H. Gales, Vice President of Unconventional Resource Projects at Weatherford Laboratories, began the discussion. He said: “From our standpoint the first thing is an understanding of the requirements and the timing of that. We go through a mobilization period to look at the capital expenditure and what kind of ROI we’re going to get. For the infrastructure to evolve, the service companies have to understand how big the plays are.”

It was about the opportunity to deploy such equipment at low risk, according to Allen Gilmer, Chairman and CEO of Drilling Info International, who recalled one natural gas driller in Cisco, Texas, that did things one their own, with their own equipment. He commented: “I wouldn’t be waiting around to see if things are going to get moved here from overseas. Their homegrown ability counted on as well.”

“There are a good number of Polish service providers that we need to collaborate and work with,” recommended Adrian Topham, Reservoir Evaluation Product Line Manager at Baker Hughes. “These are going to be costly wells and it’s about gaining reservoir knowledge. If we’re going out in the public domain on this, it’s got to be right.”

“Economics drive everything,” said Witold Domek, Vice President at CDM Poland, who explained that it was about the certainty of the social, political and environmental spheres. “Once we get that we can reduce the risk part of the analysis - where we put the equipment can be justified. There’s a lot of uncertainty in the regulation on the equipment side, and the people it takes to operate it is critical, while the EU has intense labor relations – so lots of things need to be addressed to make it a viable play.”

A participant in the audience related that it was their experience in the Fayetteville, that it didn’t produce initially. Only later did service companies chose to move in to central Arkansas.

“We will move into the situation when we see the opportunity to get a return on investment,” explained Weatherford International’s Rob Gales. “Service companies do an evaluation of the investment and the decision is made how much equipment and people are deployed.”

Adrian Topham suggested focusing upon the advantages of drilling for communities. “It’s about engaging the stakeholders and showing ‘where is the money coming in to me?’ In Europe the funds percolate down to people. We need to talk to local inhabitants about why it’s important that we come here and do this.”

“It’s not only European problem,” commented Witold Domek. “When we’ve expanded to new bases, operators say ‘we want you here and we’re willing to make a commitment.’ So it’s a gamble from both sides.”

Certainty was key, according to one delegate in the audience. “In the Fayettville shale there was an immediate alliance with Schlumberger. What role would they envision for an alliance for producers here?”

“Speaking on behalf of a small chemical company,” said Rob Gales, “we’re very open to collaborating with a local company that understands the local regulations and labor law. We can provide them with expertise, which makes good collaboration in my mind.”

Drilling Info’s Allen Gilmer said the company had experienced many of the same issues in Argentina as in Europe regarding waiting around for infrastructure and equipment. “It’s about getting production companies together and making a fixed commitment as to what we’re going to expand. There’s nothing like waving $1 billion dollars around as an incentive. The reality is here – for big companies and small - if there were an alliance to bundle their purchasing power and make a commitment. The oil companies have a lot of power in this issue,” he contended.

Gilmer continued: “In the US we spend so much money on land. One of the big problems is ownership of the minerals by the state, so the benefit to the people you’re bothering is removed. Unless it’s against the law, why not give them a royalty stream, why not get the locals involved? It’s worked elsewhere.”

The representative of a Polish service company piped in, noting the lack of operators in attendance at this conference. “We wanted to hear of their future plans, and needs in the future,” he explained. “The question is where to direct our future investments? Small companies are not able to invest in every direction. You all know that Polish manpower is cheaper, so the key is to connect with that technology from America,” he said.