Poland's Red Tape Main Headache For Shale Gas Industry

By Marynia Kruk

WARSAW--Exxon Mobil Corp's (XOM) decision to pull the plug on its efforts to explore for shale gas in Poland isn't what's dousing its local rivals' enthusiasm for the unconventional resources prospects in the central European country, it's the bureaucratic apathy, industry participants said Tuesday.

The industry's frustration with Poland's red tape is palpable as people accustomed to the friendly and expedient regulators of North America collide with government bodies which haven't completely shaken off the mentality of central planning.

"In North American we drill on Christmas, New Year's and Easter," said John Buggenhagen, Exploration Director of San Leon Energy PLC (SLE.LN). "Here the regulator says they'll get back to us on Monday."

The Polish government hopes to replicate the energy bonanza the U.S. is currently experiencing, especially since it offers the chance to free Poland from imports of what it sees as over-priced natural gas from Russia.

But official high-level declarations jar with the day-to-day challenges those drilling test wells face in the former Soviet satellite country that made the jump to a market economy 23 years ago. The Polish Environment Ministry, which is responsible for handling concessions, wasn't immediately available for comment.

Delays in feedback from regulators cost hundreds of thousands of dollars as the few drilling rigs operating in Poland sit idle or have to be dismantled and moved to another site until the regulatory issue is resolved and drilling can resume in the original location.

A particular irksome bottleneck is the Environment Ministry's practice of asking license holders to resubmit applications and repeat environment impact assessments if they want to drill deeper than stated in the original application, said Mr. Buggenhagen, who would like to see the ministry increase its staff to more quickly serve companies such as his.

Still, unlike Exxon, San Leon is sticking around for now. In May, the company said it had been awarded an exploration license in southern Poland, expanding its acreage in the country and increasing its conventional and unconventional oil and gas prospects.

Write to Marynia Kruk at [e-mail]