Poland plans to postpone the collection of tax on shale gas production by five years and improve regulation to ensure investors continue exploring for the fuel in the eastern European nation.
“The law on hydrocarbon taxes will come into force in 2015 but taxes won’t be collected until 2020 to encourage investors to explore for the fuel,” Finance Minister Jacek Rostowski said today at a conference in Warsaw.
Poland granted more than 100 permits to investors including U.S. and Canadian companies to drill what was billed as Europe’s richest shale-gas deposits and cut dependency on imports from OAO Gazprom, the Russian supplier of about two-thirds of the fuel to Poland. At the current pace of drilling, decades may pass before the 300 needed to indicate whether the country can possibly be self-sufficient.
Of 39 wells planned for 2013, just two were drilled by May, Environment Ministry data show. Earlier this month Talisman Energy Inc. (TLM) pulled out of Poland and Marathon Oil Corp. (MRO:US) decided to look for options to dispose of its 11 licenses.
The government last October announced plans to require that explorers take a state-run company as a production partner. It has also proposed raising taxes, while promising to cap the fiscal burden at 40 percent. The measures, which haven’t become law, would increase the government’s take to almost 80 percent of profit, according to Ernst & Young estimates.
Poland is working on regulations that will convince investors to continue exploring, Prime Minister Donald Tusk told reporters in Brussels today.
“Yesterday I told the Environment Minister very clearly that I expect him to prepare regulations that won’t scare investors away,” Tusk said. “He must either acknowledge that this project requires a business-oriented mindset or someone else will take over the task.”
Investors’ biggest concern is being guaranteed the rights to pump the fuel after they’ve invested in exploration, according to Tusk.
Shares of Polskie Gornictwo Naftowe i Gazownictwo SA, the Polish company that has 15 licenses to explore for shale gas, increased as much as 3.1% to 6.03 zloty, the highest level in more than two months, after today’s announcement. They closed at 5.95 zloty, the most since March 18.
While many explorers including Chevron Corp. (CVX:US) remain and say they expect their projects to run for years, others such as Exxon Mobil Corp. (XOM:US) pulled out of the country and exploration has slowed amid complex permitting procedures.
“The pace of exploration depends on the final shape of regulation,” Marcin Zieba, general director of the Polish Exploration and Production Industry Organization, said by phone today. The group represents explorers including Chevron, ConocoPhillips (COP:US) and PKN Orlen SA.
The postponement in taxing hydrocarbons applies to both unconventional and conventional deposits, Kaja Zalewska, a Finance Ministry adviser, said today by telephone.
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