A number of people have asked for my views on Poland in the light of ExxonMobil saying, in passing, during a conference call that two wells they drilled there had gas (good) but at non-commercial rates (bad).

I can appreciate how impatience is building in Poland, but the sector, like oil and gas plays in frontier provinces anywhere, are long term plays. Someone will certainly come in with a gusher, so perhaps a portfolio approach is the conservative way forward. Taking  money out would be counter productive.

The geologists have absolutely no doubt that Poland is a gas rich province in a number of plays. Petroleum engineers are those who get it out of the ground in commercial quantities.  If we go back to the past in the Barnett Shale, we can understand the present in Poland more easily.

The early efforts weren't always fruitful, but Mitchell took advantage of the ongoing drilling in better-known formations as a way to conduct regular tests in the Barnett and gather data.

 One example of Mitchell's persistence was the company's first exploratory well in Denton County. The well was supposed to test whether the shale there was good enough for the company to continue to lease more land.

Eventually the company extended 36 wells into the Barnett to try out different mixes of fracturing fluids and different drilling techniques, Steward said. Many were barely commercial enough to cover the costs of completion....\

 ...So the team ran casing into the well and tested it further. It didn't have enough gas to be commercial, but provided additional data which, when swapped for readings from a different company's well, convinced Mitchell to expand into Denton County. Today the area is considered a core area of the Barnett.

Mitchell said he spent $7 million to $8 million experimenting on the wells, trying to make shales work.

This isn't going to take twenty years, there are multiple spokes on the wheel that don't need to be re-invented. But there isn't a one size fits all, no name brand of fracking that works in Texas or China or Paris or your backyard.Nothing will replace experimentation and experiments inevitably fail sometimes. If investors can't understand that, they should get out of hedge funds and go open a laundromat or something.

Let's look at Poland again and look past the Chicken Little school of investing who see woe in the Poland headlines.  One guiding principle of mine is to look below the headlines.  

 It may be too early to draw any firm conclusions from Exxon’s drilling failure, said Pawel Poprawa, who specializes in shale at the Polish Geological Institute in Warsaw.

“If we look at the experience from the U.S. or Canada, no single well can provide the answer if the basin has potential or not,” he said. “Low flows seem to be a technological problem.”

Marathon Oil said today that it’s evaluating data after finishing its first well in a Polish shale formation. The Houston-based company said in a statement that it intends to drill three more wells during the next few months and withdraw rock samples for testing. Marathon plans a total of six to seven Polish shale wells this year, according to the release.

One thing the chickens rushing without their head to get their money out could easily forget because they were'nt present at the creation, or at least three years ago,  in shale is that ExxonMobil and the majors are not the sources of brand name expertise here.

Exxon and other major North American energy producers have been lured to explore shale prospects from Germany to Argentina after largely missing out on the boom in shale extraction in the U.S. that began in the middle of the last decade.

Smaller explorers came to dominate the U.S. shale industry by default as the biggest international companies focused on locating billion-barrel offshore crude fields in places like the  Gulf of Mexico and West Africa.

Investors new to the sector need to remember that the existence of big boys in a play is no indication of future success.  Europe is in desperate need of the same wildcatter mentality that the US companies provided.  We're stuck now  between conservative money who seek returns and a lack of US style drillers who could make a fortune in Europe, although they could also lose it all.

Although some of the people are leaving the US, the money isn't following them as much as it should, often due to conventional opinion from discouraging investment analysts whose bread is also buttered by far bigger investments in conventional energy dinosaurs. 

These are early days and patience is going to be ultimately rewarded.Smart money would buy into Poland and Europe while dumb money is taking theirs out.


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  • This may have added to some market unease as it coincides with the announcements in the US from Chesapeake and Conoco about cutting back drilling, selling assets and reducing production due to the glut. Obviously that is going to be temporary, as were similar phases in the early times of the oil business. In fact that prior experience should help to keep the industry on an even keel.

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