Exxon’s Polish Fracking Plans Hit an Air Pocket
Exxon Mobil (NYSE:XOM) announced that the gas flow from its two exploratory wells drilled in Poland did not justify bringing them into production. [1] Analysts have speculated that the technical challenges associated with shale exploration in the country made it commercially non-viable to explore the resources. The results could be a major setback for Exxon’s plans to expand shale exploration in Europe as Poland has some the best shale prospects in the region and the government has been eager to exploit the resources to reduce dependence on Russian gas. Competitor Chevron (NYSE:CVX) is also drilling exploratory wells in the country.
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Setback to plans
Exxon has been particularly interested in exporting the shale gas expertise it gained with the acquisition of XTO Energy in 2010 to foreign shale deposits. In Europe, shale exploration is facing stiff resistance from environmentalists, who have succeeded in banning the process of hydraulic fracturing in countries like France. Poland, which sits on enough shale deposits to meet domestic gas demand for more than three hundred years, has been more open to exploration to reduce dependence on imported gas. [1] Presently two thirds of the country’ gas demand is met by imports from Russia, at prices nearly six times the U.S. benchmark for natural gas.
Despite high gas prices, shale exploration in Poland is hit by the cost of exploration. While the government has offered attractive terms to companies, lack of rigs, equipment and scarcity of water have hit exploration plans of the companies. [1] Exxon has not yet revealed whether it would continue with its drilling plans in the country. The company and others have experienced similar setbacks in Poland and Hungary. However, the large resources are still attracting interest from explorers, who are looking to crack the technological challenges posed by the geology of the country to make production feasible. Successful exploration of shale deposits in Europe could result in a major boost for Exxon’s gas production volumes.
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Notes:- Exxon Shale Failure in Poland May Lengthen Gazprom’s Shadow, Bloomberg [↩] [↩] [↩]