Shale gas corruption arrests 'unsurprising'

“It has been known for years that the process of granting shale gas licenses was pathological, making a laughing stock of the Polish state amongst the [sector] community,” Grzegorz Pytel of the Sobieski Institute told thenews.pl.

“Now it looks that the state stepped in and is trying to restore its reputation and authority. This is a step in the direction of restoring control over the management of exploration licenses in Poland.”

Only two Polish companies own shale gas concessions, PGNiG and Orlen, both big state-owned companies with little or no technical knowledge about shale gas.

Both have or plan to enter into partnerships with (mainly) large north American majors.

A popular way of linking local and foreign firms is via ‘farm ins.’ Such practises are industry standard business solutions, but are not easy to implement in Poland.

Pytel says that, legally, “no license that has been awarded can be just shared with anyone, it cannot be split into what are essentially equity stakes in a new enterprise. Companies have been trying to solve this by keeping one licence, or very few licenses, per one registered subsidiary of the mother firm and then sharing the shareholding out at the subsidiary level. This may lead sometimes to ownership ambiguities.”

About 100 licenses have been granted.

Seven people, including government officials were arrested this week on charges of corruption in relation to the process of granting of licences for shale gas exploration.

Waldemar Tyl of the Warsaw Appeals Prosecutor’s Office, who announced the charges, said bribes of tens of thousands of zlotys had been handed over in the second half of 2011 alone.

Three Environment Ministry officials, an employee of the state Geology Institute and three representatives of companies involved in shale gas exploration were arrested.

Industry insiders argue that because the shale gas industry is relatively new in Poland there are still a lot of unknowns and the regulations – or lack of them – the room for ambiguity is wide.

After more or less all of Poland’s concessions (licenses granted by the state to explore for gas) the next stage - of concession trading - is taking place and this is so far poorly regulated.(jh)