Fact box: Population: 38 million (9 in Europe, after Ukraine and before Romania)

Poland: Fracing on the Rise?

June 16, 2010 | 0957 GMT

Summary

Lane Energy of Canada is the latest energy company to announce it will begin using a technique known as fracing to drill for natural gas in Poland. While the interest in Poland’s natural gas reserves (estimated at 1.5 trillion cubic meters) may help alleviate Poland’s reliance on Russian natural gas imports, there are still a number of unknowns that will have to be cleared up before the technique becomes a viable source of natural gas for the country.

Analysis

According to Polish daily Rzeczpospolita, on June 15 Lane Energy of Canada is set to begin drilling for unconventional shale gas deposits using a technique called hydraulic fracturing — also known as fracing — in northern Poland in the geological formation referred to as the Baltic Depression. A Lane Energy spokesman said the company is optimistic and results should be available in three months. Lane Energy’s is the latest in a string of recent announcements by major energy companies beginning to develop Poland’s unconventional gas deposits, which energy group Wood Mackenzie estimates to be around 1.5 trillion cubic meters.

Fracing is a technique by which unconventional natural gas deposits are extracted from rocks. Such “source rocks” may over time produce conventional deposits — gas released over time and then trapped by an impermeable substance such as limestone or a layer of salt — but those rocks often hold much larger concentrations of gases, trapped in small pores and narrow cracks that restrict the original gas migration. Such unconventional formations can exist in tight sands, coal beds and shale. Fracing essentially involves drilling down to source rock and then pumping “slick water” (water mixed with sand or another granular material) at high pressure to prop up the cracks and fractures that are formed by drilling so the gas can seep into those cracks and then into the well.

Technological advances in drilling techniques in the United States, combined with the rising price of natural gas in the mid 2000s, made the adoption of fracing possible. The combination of fracing and horizontal drilling, which extends the point of contact across the field, allowed U.S. fields such as the Barnett Shale producing region in north Texas — long thought exhausted — to be revitalized for production. Adoption of these techniques has boosted the U.S. proven natural gas reserves by about a trillion cubic meters to around 7 trillion cubic meters. The idea of applying these fracing techniques to Europe is appealing, especially in Eastern and Central Europe, where the former Soviet bloc countries still largely depend on imported natural gas from Russia for domestic consumption.

Poland consumed 13.7 billion cubic meters (bcm) of natural gas in 2009, of which 4.1 bcm was produced domestically and around 9.6 bcm was imported via pipes, with Russia specifically accounting for 7.1 bcm and Uzbekistan 1.5 bcm, although the latter also came via Russian-controlled routes. These import numbers are set to rise sharply, with Russia and Poland signing a new natural gas contract in February 2010 that will see long-term Russian gas imports rise to 11 bcm annually.

While reliance on Russian natural gas imports is considerable, Poland actually relies on domestically produced coal for nearly all of its electricity needs. However, in order to meet European Union greenhouse gas emission standards, Poland is planning to switch a substantial part of its electricity production from coal to natural gas. The planned Polish liquefied natural gas regasification facility at Swinoujscie, with an import capacity of 2.5 bcm per year, will help alleviate dependency on Russia, but the contract signed with Russia illustrates Warsaw’s expected rise in natural gas usage, with natural gas-fired power plants already in the works. In fact, deals like it could be the standard, unless something like fracing can shift the equation.

However, several uncertainties remain. First, geologically speaking, not all countries will benefit from the application of these potentially revolutionary techniques. For example, Italy and the Netherlands, which have had considerable domestic natural gas production over the years, have the majority of their production offshore, but fracing can only be conducted from an onshore site because it requires immense amounts of freshwater to be pumped down the well. However, Romania, Poland and Germany all have existing — and depleted — wells that are onshore and near water sources that would potentially be suitable for development.

That said, it is impossible to predict how much of the unconventional deposits will be recoverable until well after the drilling starts, which is why it is crucial that foreign energy companies with the technology begin exploratory work. Poland has currently seen the most activity of foreign companies with ConocoPhillips, ExxonMobil, Marathon, Chevron, Talisman, Lane Energy, BNK Petroleum, Emfesz, EurEnergy Resources, RAG, San Leon Energy and Sorgenia E&P all involved at some level in exploratory work. Quotes on potential Polish reserves range from 1.5 to 5 trillion cubic meters, indicating that it is still unclear what the numbers really are.

The second problem is that energy majors looking for fracing action in Europe are not necessarily the companies with the greatest expertise or incentive. Fracing was largely innovated in the United States by smaller energy companies willing to take risks to get to deposits in fields considered to be depleted. These smaller firms hung on to plots, sometimes for decades, trying successions of innovative techniques to squeeze out every last drop of hydrocarbons and in the process becoming extremely familiar with the geology of their fields. On the other hand, energy majors — especially those working in a foreign environment — do not want to invest as much time and effort into their fields since they have other investments around the world. This means that while there will undoubtedly be some successes from the exploration, it is not likely to see the kind of runaway output that the United States has experienced, at least not any time soon.

Poland, Russia: Resetting Relations

April 7, 2010 | 2222 GMT – NOTE, this was written before the Smolensk Air crash.
A woman visits the memorial museum for the Katyn massacre near Smolensk, Russia

Russian Prime Minister Vladimir Putin hosted Polish Prime Minister Donald Tusk at a ceremony to commemorate the World War II massacre of Polish officers in the Katyn Forest near Smolensk, Russia. At a later news conference, the two leaders called for improved bilateral relations.

Tusk’s presence shows that Poland and Russia are indeed working at “resetting” relations.

Putin first reached out by accepting Tusk’s invitation to attend ceremonies Sept. 1, 2009, commemorating the 70-year anniversary of the German attack on Gdansk that began World War II. Notably, Putin called the Molotov-Ribbentrop Pact, which paved the way for the German-Soviet invasion of Poland, “immoral” in a much publicized column in Polish Gazeta Wyborcza published a day before that visit.

The Katyn massacre is at the center of Polish-Russian tensions. During Soviet times, the Kremlin denied Moscow’s involvement, accepting responsibility for the mass killings only in 1990. Many in Warsaw believe Russia should go much further, however, and open the official archives into the crime — especially the so-called “Belarusian list” of 3,800 Polish officers thought to have perished in prisons in Belarus.

How far Warsaw should push Moscow on the issue is becoming a proxy for a debate between two political visions in Poland, one that opposes Russia and one that seeks collaboration. With presidential elections approaching in Poland, the hard nationalist line of incumbent President Lech Kaczynski will face Tusk’s more accommodating line toward Russia, represented in this election by Civic Platform candidate Bronislaw Komorowski (Tusk will not be running, as he needs to maintain control over the Civic Platform from the more hands-on position of prime minister).

Already, Tusk has faced domestic criticism for concluding a natural gas deal with Russia that will see Moscow increase the amount of natural gas it sells Poland and gain greater control over the transit infrastructure that pipes Russian gas to Germany via Poland. Tusk does not see an aggressive policy toward Russia as positive for Polish national security or business, nor does he think it helps Warsaw’s standing within the European Union. He also is sensitive to Russian and German concerns, understanding that an overly aggressive policy toward Russia will not make him friends with Berlin, which is enjoying very close relations with Moscow.

This will open him up for further criticism from the Polish right, however — which is exactly what Russia wants. Russia needs Poland wholly consumed domestically, especially on issues of little geopolitical import such as Katyn, so Warsaw cannot assume a leadership role in the European Union’s Eastern Partnership policy, which ostensibly intends to draw Belarus and Ukraine further within the EU sphere. With Moscow acting cordially, it is difficult for Tusk to stand firmly behind an aggressive Polish foreign policy that would push back Moscow’s influence in Central Europe — especially when this will not make Tusk any friends in Germany or France.

Warsaw's Reality on the North European Plain

August 14, 2009 | 2142 GMT

GERMAN CHANCELLOR ANGELA MERKEL will travel to Sochi, Russia, on Friday to meet with Russian President Dmitri Medvedev, one day after her personal intervention seems to have pushed a deal on German auto maker Opel to a Russian-backed bid. General Motors Corp. reportedly agreed in principle on Thursday with Canadian auto parts manufacturer Magna International to sell its stake in the troubled Opel unit. The Magna bid is backed by state-owned Sberbank, Russia’s largest bank, and would include close cooperation between Opel and GAZ, the second-largest Russian car manufacturer.

While GM was worried that the deal would transfer U.S. technology incorporated into Opel to the Russians, Merkel personally lobbied for the deal, spurning GM’s delay and pressuring the U.S. company to accept the Canadian-Russian bid over a rival Belgian offer. The agreement is only one of a number of recent business deals that illustrate the burgeoning economic relations between Russia and Germany.

For Germany, the business deals with Russia are a way to increase demand for German exports, particularly for automobiles and heavy machinery that account for the majority of German manufacturing. Since exports account for 47 percent of Germany’s gross domestic product, the Russian market is an important part of Berlin’s strategy to get out of the current recession. For Russia, the deals are meant both as a means of modernizing the Russian economy and as a way to increase Moscow’s political influence with Berlin. As the trade links crystallize, Berlin and Moscow will not be tied together solely by natural gas exports.

This is undoubtedly going to make Poland uncomfortable. If a newly assertive Germany, which for 60 years has not been allowed to have an opinion in matters of foreign policy, chooses not to be hostile to a resurgent Russia, then the situation for Poland becomes difficult. Warsaw is located on the North European Plain — Europe’s superhighway of conquest — directly between Berlin and Moscow. As such, the Poles are categorically fearful of a Russian-German alliance.

Given its geography, Poland historically has had only two foreign policy strategies. The first, employed when Warsaw is in a powerful position, is to use the lowlands of the North European Plain to its own advantage and expand as much as possible, particularly into Ukraine, the Baltic States and Belarus. This is the aggressive Poland of the Polish-Lithuanian Commonwealth, which in the 16th century was one of the most powerful and largest countries in Europe. As an example of its power, it was only through the intervention of Polish King Jan III Sobieski that Vienna, and thus Europe by extension, was saved from the Ottomans in 1683.

The second strategy, favored when Warsaw feels threatened, is to find an ally outside of the region determined to guarantee Polish independence. This was the case with Napoleonic France in the early 19th century and with the United Kingdom between the two world wars. This is also the situation today, with Poland hoping that the United States will commit to it with the ballistic missile defense (BMD) installation. BMD, from Poland’s perspective, would mean having U.S. troops on its soil, which would extend the alliance between the two countries past what Warsaw sees as nebulous guarantees of NATO.

However, the United States currently is not looking to challenge Russia overtly. Washington is concentrating on Iran, and the last thing the United States wants is for Russia to counter American moves in Poland by supporting Iran through transfer of military technology, nuclear or conventional.

This makes Warsaw nervous: If Poland cannot employ one of its two favored strategies, it tends to cease to exist as a country. The various partitions of Poland, all in the late 18th century, are still fresh in Warsaw’s collective memory. At that time, a rising Prussia and a surging Russian Empire (along with Austria) broke Poland bit by bit until it no longer existed on the European map. The same situation, also well remembered, was the consequence of the Molotov-Ribbentrop agreement, which led to the combined Nazi-Soviet invasion of Poland on Sept. 1, 1939.

That historical event will bring the current leaders of Poland, Russia and Germany together on Sept. 1 in Gdansk, Poland. Polish Prime Minister Donald Tusk has invited Merkel and Russian Prime Minister Vladimir Putin to ceremonies mark the 70-year anniversary of the World War II invasion.

The meeting is indicative of the balancing act that Warsaw is forced to play, lacking a clear signal from the United States on its commitment to Poland. It is also a signal to Washington that, although the invasion occurred 70 years ago, Poland is still stuck in the middle — between of Moscow and Berlin — on the North European Plain.