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Poland, Romania, and Ukraine are considered the top three European countries for shale gas investment opportunities with Poland placing first, a recently released KPMG report stated.
The main story in Central and Eastern Europe is the drive of many countries to reduce their reliance on Russian gas and gain energy independence, according to Steven Butler.
Butler, director of business at KPMG, an auditing, advisory and tax firm, was one of two speakers in the June KPMG webinar “Central and Eastern European Shale Gas Outlook,” in which he discussed the possibility of Central and Eastern Europe (CEE) countries becoming a stronger market for unconventional gas in the coming years.
KPMG recently released a report ranking CEE countries in terms of best investment opportunities in shale gas, with Poland placing first. Romania and Ukraine are considered to be the next best primary countries, with Lithuania, Hungary, and Bulgaria falling into the secondary shale market category. “I think one of the key findings we’ve found is it does come down to the commercial viability of shale gas production,” he said.
Of all the criteria taken into consideration for the rankings, KPMG grouped the information into three general categories.
“The first, of course, is the potential size of each country’s shale reserves,” Butler said.
According to the US Energy Information Administration, Ukraine has an estimated 1.18 Tcm recoverable. However, KPMG’s report states that the country’s “uncertain legislative environment” has been a discouraging factor preventing foreign investors from entering the market. Poland has up to an estimated 768 Bcm of recoverable resources, followed by Romania whose joint reserves with Bulgaria and Hungary total approximately 538 Bcm.
“The second main criteria was the potential for domestic demand for gas, so in some parts of the region there is strong domestic demand for gas and in others there has historically been little gas use in the power sector or industrial use,” he continued. He also suggested the possibility of countries exporting their shale gas to develop neighboring markets, or westward where there is better pricing.
“The third broad criteria that we considered was the experience of domestic oil and gas production. Are there people and equipment in that country where they are prepared to move ahead from, say conventional gas over to unconventional gas such as shale?” Butler said.
However promising CEE countries appear to be, there are still many obstacles, according to Macin Rudnicki, partner at KPMG in Poland.
“Shale gas development is only in its early stages in Central and Eastern Europe. There is a big knowledge gap and other challenges, such as uncertain legal and tax regulations, various and varying country risks and typically tougher geological conditions,” he said.
Although CEE’s future in unconventional development is still in the early stages, progress is imminent.
“Poland will be the first to unveil its regulatory and tax legislation and that’s due to come forward any time now. And when it does, I think there’s the potential that it could be a template for other markets in the region,” Butler said.
Rudnicki agreed: “Given all these trends, the opportunities to exploit shale gas, which is there, lying beneath the peoples’ feet -- not thousands of miles away in the Ural region or Siberia -- are simply fantastic. As such, the decision to overcome the challenges and tap these deposits can only be a matter of when, not if,” he concluded.