Poland's natural gas monopoly PGNiG SA plans to invest about
27 billion zlotys ($9.8 billion) through 2015, over half of which will be spent
on ramping up the company's exploration and extraction of conventional and
unconventional hydrocarbons.
Under a revised strategy, PGNiG, or Polskie Gornictwo Naftowe i Gazownictwo, is
aiming to increase annual domestic production of natural gas by 9% to 4.5
billion cubic meters and to double domestic crude oil production to 1 million
metric tons, while continuing to expand exploration and extraction activity
abroad.
"Single-product companies like PGNiG or [German gas trader Verbundnetz Gas
AG or VNG] don't have a future," Chief Executive Michal Szubski said at a
news conference Thursday. "So we're looking for new sources of
revenue."
PGNiG's classic business has been buying natural gas from Russia's Gazprom OAO and selling it to companies and households in
Poland at prices set by a national regulator.
State-controlled PGNiG plans to "focus on exploration and extraction of
hydrocarbons [in Poland], as it sees this as the most attractive and profitable
course of action," the company said. "The search for unconventional
gas, especially shale gas, as well as conventional gas deep underground, will
be especially important new initiatives."
The company reiterated its goal to increase its domestic and foreign production
of natural gas to 6.2 billion cubic meters and of crude oil to 1.8 million tons
a year and has earmarked PLN14.7 billion for upstream capital expenditures to
achieve this.
PGNiG plans to continue drilling test wells to deepen its knowledge of whether
and how the extraction of shale gas from its 15 Polish concessions will be
commercially viable. The company plans to drill three shale gas test wells in
2011, with one already completed in Wejcherowo in northern Poland.
It will devote "as many resources to this goal as will be necessary,"
the company said, adding that the cost of one well ranges from PLN10 million to
PLN100 million.
PGNiG, in which the Polish government holds a 72.43% stake, is hoping to play a
leading role in the country's embryonic shale gas industry, based on a resource
Prime Minister Donald Tusk has called a "great chance" for Poland. The
unconventional gas industry, while still in its infancy in Poland, could create
thousands of jobs and, eventually, export revenue. If it turns out to be
economically viable to extract, it would free Poland, and perhaps much of
Europe, from dependence on Russian natural gas supplies.
To capitalize on booming demand for drilling services from western companies
that have also rushed into Poland in search of shale, PGNiG plans to list one
of its subsidiaries, drilling contractor Poszukiwania Nafty i Gazu Jaslo, on
the Warsaw Stock Exchange, PGNiG executives said.
PGNiG isn't giving up on its activities abroad, however, "mainly in Norway,"
where it expects extraction to start on the Skarv field in the second half of
2011.
At current market prices, PGNiG plans its sales from extraction in Norway to
reach $500 million in 2012, if extraction reaches about 90,000 tons of crude
and about 100 million cubic meters of gas in 2011, as forecast.
Following Japan's Fukushima nuclear disaster and Germany's decision to close
all of its reactors, PGNiG sees the outlook for gas-fired power generation as
bright, especially as it complements renewable power sources such as wind and
solar and is less emissions-intensive than other fossil fuels, including the
coal on which 95% of Polish power generation is based.
Gas-fired power plants can be quickly turned off and on, enabling them to
fill-in during lulls of wind or little sunshine.
PGNiG's role in this sector will be both as a gas supplier and an investor. The
company plans to spend about PLN2.9 billion on power-related investments
through 2015.
Beyond its updated 2011-2015 strategy, PGNiG sees overall spending on capital
expenditures from now through 2020 at PLN50 billion, Deputy Chief Executive
Radoslaw Dudzinski said.