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Ireland's political and cultural magazine
— October – November 2013
I
RISH oil and gas exploration firm San
Leon Energy is under pressure to prove
that its drilling operations did not cause
the collapse of a church tower and
damage to local buildings following drilling
operations in Otyń, Poland last year.
The collapsed tower and damage to local
buildings has been brought to
light by Marek Kryda from the
independent Civil Affairs Insitute.
Mr Kryda had been invited to a
conference in the town of Otyń
earlier this year to address local
concerns about fracking oper-
ations. “I asked when it had
happened to the church”, he told
Village magazine. “The people
said it had fallen down in early
August . Drilling had started
towards the end of July ”.
Three months later, Kryda
returned to the area with a crew
from Dutch TV station NCRV.
Alerted to the crew’s arrival, the
priest in Otyń locked the church.
Kryda found that an investiga-
tion into the cause of the collapse
had been halted. The priest had
received one million zloty from
the Minister of Culture with
unusual haste, and there was
speculation that San Leon had
also given money to help the
re-building.
Village put questions to San
Leon in writing and by phone
about its role in the collapse of
the church, but San Leon did not respond.
In Ługi, the priest at the th century
Church of Saint Lawrence was more accom-
modating. He and his congregation first
observed cracks developing in the church
during seismic testing around the drill site.
“The people had seen these cracks develop
for almost a year”, said Kryda on the phone
from Gdansk. “When they learned that the
church tower collapsed in Otyń, they got
really scared. Around the town, cracks has
also appeared in older buildings. The priest
raised the alarm with the preser-
vation authorities”. The company
was forced to temporarily sus-
pend drilling operations.
Kryda approached Otyń’s
major, who refused to meet the
crew from Dutch station NCRV.
In journalist Piet De Blaauw’s
report, Kryda explains that “The
national government is pushing
shale gas so much that she is
afraid as a local mayor if she asks
too many questions about shale
gas, she can have problems with
funds. She can also face problems
at the next elections”.
This situation in Otyń – of
local authorities afraid to defy
the fracking juggernaut – is being
replicated across Poland. With
the political apparatus, state
agencies and national media fully
behind the shale gas industry,
few people have been willing to
question the wisdom of Poland’s
headfirst leap into fracking. For
the last four years, Polish prime
minister Donald Tusk has been
one of the main believers, but the
fracking industry needs to deliver
some results for him, and soon. The problem
is that the wells seem to be dry.
When Mr Tusk was running for re-elec-
tion in , he promised to put the state’s
resources behind developing Poland’s
massive reserves of shale gas. The first gas,
Tusk assured the public, would be flowing by
. Soon after that, he said, tax revenues
from the gas would be paying the country’s
pensions. Now, on the cusp of , the
wells drilled so far have failed to tap commer-
cial quantities of Poland’s suddenly elusive
shale gas.
Spectacular figures – claiming that Poland
had . billion cubic metres of recoverable
shale gas – originated from the high-pow-
ered international public-relations agencies
retained by oil and gas companies. In ,
the US Energy Information Administration
released these figures, which were dutifully
reported by Polish state agencies and media.
Investment poured into the Polish energy
business, and the government began issu-
ing licences across the country, promising
jobs and money.
The news was received with delight in
Poland. On his blog, independent expert
Andrzej Szczęśniak noted that American
think tanks such as the Heritage Foundation
and the Baker Institute developed and pushed
visions of US expertise liberating Poland’s
shale gas and have catastrophic consquences
Frack cracks in
Poland
Speculating Irish firm San Leon may be atop a
bubble, and has questions to answer about a
collapsed church. By Ronan Lynch
INTERNATIONAL FraCKing
Hundreds
of millions
of euros
is being
directed
into
shale gas
exploration
that could
be better
spent on
developing
renewable
energy in
Poland
“
Collapsed
church
tower,
Otyn
for Russia and Gazprom. Poles looked for-
ward to giving two fingers to Russia and
strengthening ties with the USA.
“There is so much propaganda”, says
Marek Kryda. “Right now the government
is spending millions on promoting shale gas
and no-one is counting the cost”. According
to Kryda, hundreds of millions of euros is
being directed into shale gas exploration that
could be better spent on developing renew-
able energy in Poland.
Last year, the Polish Geological Institute
released new figures, suggesting that Poland
may have about billion cubic metres,
one-tenth of the American estimates. This
downer was followed by an announcement
that Exxon had pulled out of Poland, citing
poor results at its first sites. It was soon fol-
lowed by the departure of Marathon Oil and
Talisman.
“They discovered that the gas was not
worth pursuing”, said Kryda. “In the US,
the shale gas is in predictable layers of rock,
metres underground. In Poland, the
gas is in unpredictable layers, and it’s ,
or , metres down. That requires a lot
more drilling pressure”. Drilling to these
lower depths required massive increases in
pressure. “They discovered that the cost was
three times the cost of doing the fracking in
the USA”, said Kryda.
In their rush to get fracking going, Polish
authorities overlooked some important infor-
mation that investors would scrutinise, such
as the existence of enough available water
for the water-hungry process. “A Polish daily
wrote that half of the concessions have no
confirmation of water capacity”, said Kryda.
“They wrote that investors should know about
this. Geologists responded that they will need
another ten years to collect this information.
How can the government give out permits
without knowing that water is available?”.
Despite the withdrawal of the more estab-
lished and experience exploration companies,
minors such as San Leon have elected not only
to stay, but to take over some of the conces-
sions left behind.
San Leon was founded in and is run
by Oisín Fanning, a former stockbroker who
fronted collapsed MMI stockbrokers and
who ran Smart Telecom until his resigna-
tion as CEO in . Poland is central to San
Leon’s plans and it holds licences for almost
, square kilometres in four different
regions in Poland. While the earthquakes
in Otyń may yet have repercussions for San
Leon, they have other major problems. The
hype about massive gas reserves in Poland is
beginning to look precisely like that: hype.
To the Polish press, San Leon’s creden-
tials looked impressive. The company’s
director of exploration John Buggenhagen
appeared in documentaries predicting a
great future for gas in Poland. Their Polish
board included Conor Lenihan, the former
Irish minister who oversaw the issuing of
exploration licences for unconventional gas
in the last days of the Fianna Fáil government
in . Polish public records indicate that
Mr Lenihan served on the board of San Leon
(Poland), one of the San Leon subsidiaries in
Poland, from December until October
. Mr Lenihan currently serves on the
board of San Leon’s Iraqi subsidiary. San
Leon has two high-profile investors, George
Soros’s Quantum Partners and Blackrock
Investment Management. According to Oisín
Fanning, San Leon have already proved
to trillion cubic feet of recoverable gas
in their Polish blocs – twice Poland’s annual
imports.
Independent expert Andrzej Szczęśniak
has been delivering accurate summaries of
the state of play of fracking in Poland for sev-
eral years, and he’s not widely loved by the
industry. He believes that a lot of the current
activity is rent-seeking: speculative activity.
He is waiting to see commerical flows.
Kryda agrees. “San Leon is not an expe-
rienced company”, said Kryda. “They have
not produced any specialised reports. Why
are they buying the concessions? Probably
the aim is not to exploit the resources. The
aim is to win on the stock exchange”.
Is there any truth in the idea that the
shale gas ‘boom’ is another speculative bub-
ble? “Exxon don’t earn money on shale gas in
America”, says Kryda. “For every five wells,
only one or two are profitable”. Several recent
reports from the US claim that shale gas is in
fact sitting atop a speculative bubble. One
report by the Energy Policy Forum in the USA
claims that the shale boom has been largely
driven by Wall Street and that analysts and
investment bankers emerged as the most
vocal proponents of shale exploitation.
Andrzej Szczęśniak has been puncturing
illusions about fracking in Poland for several
years on his website http://szczesniak.pl. He
is not opposed to fracking and believes there
may be some recoverable unconventional gas,
along more conventional gas, even if noth-
ing like in the quantities suggested in recent
years. He would like to see it done slowly, with
Poland developing its own technical exper-
tise, rather than relying on the international
businesses, and creating jobs in Poland.
The cheap prices available for gas conces-
sions in Poland – at less than $ an acre, as
opposed to prices of upwards of $, an
acre in America – raise the possibility that
companies buying up large acreage stand
to be able to sell on those concessions at
far greater prices if large flows of gas can be
delivered that would attract further invest-
ment. This summer, Mr Fanning was telling
the Financial Times that “Poland is still at
the beginning – the investment hasn’t really
even arrived yet”.
With the continued run of poor drilling
results, the investment may have already
come and gone.
Former
Minister
Lenihan
(right)
now on
board
