Europe's most ambitious shale gas plans were in disarray on Monday after U.S. major ExxonMobil announced it would pull out of exploration projects in Poland.Reuters also has a report on Exxon's disastrous experience with shale gas in the US - Exxon CEO says low U.S. natgas prices not sustainable.Poland's lucrative reserves had spurred hopes of transforming Europe the way a shale boom has left the United States brimming with supplies, potentially turning the Poles into net gas exporters.
That was until March, when a government report revealed the country's likely reserves were about one-tenth the size of previous estimates.
At the weekend, Exxon, which earlier this year cautioned that commercial production of Polish shale was at least five years away, said it would not go forward with exploration.
"The move is not surprising given that Poland's shale potential is still unclear," JBC Energy analysts said in a note on Monday.
A spokesman for Exxon in Poland said the company has not decided yet what it would do with its exploration licences. It controls four and jointly holds two with France's Total .
Poland has granted 112 shale exploration licences to ExxonMobil, Chevron and other firms, even as some countries, including France and Bulgaria, have banned shale exploration pending further environmental studies.
The Poles are keen to wean themselves off their heavy reliance on coal and imported Russian gas, partly due to environmental commitments they face as a European Union member nation.
"Exxon realised that commercial extraction was not possible with currently available technology. This is a general problem in Poland that shale rocks are too tight to allow extraction," an industry source said, asking not to be identified.
Abundant shale gas production in Poland poses a potential threat to Russia's supremacy in Europe, where it supplies a quarter of the gas used in the EU. ...
Poland had high hopes for shale after a study by the U.S. Energy Information Association in 2011 estimated Polish reserves at 5.3 trillion cubic metres, enough to cover domestic demand for some 300 years.
The government's study in March slashed estimates for recoverable shale gas reserves at 346 to 768 billion cubic metres.
U.S. natural gas prices are too low to allow the energy industry to cover the cost of finding and producing new supplies, the head of top producer Exxon Mobil (XOM.N) said on Wednesday.Record production, thanks to new technologies that tap natural gas trapped in shale rock formations, pushed U.S. natural gas prices to 10-year lows below $2 per million British thermal units (mmBtu) in April, though prices have since rebounded.
"The cost of supply is not $2.50. We are all losing our shirts today," Rex Tillerson, chief executive officer of Exxon Mobil, said in a presentation at the Council on Foreign Relations.
Gas prices have risen over 50 percent since April's lows, and were up more than 5 percent on Wednesday to nearly $2.95 per mmBtu.
Still, prices remain well below the $4-$5 level that makes drilling in pure natural gas fields profitable. Most producers have moved over to more lucrative oil and liquids-based plays to fetch higher prices, which has begun to put a slight dent in U.S. gas production.
