61tGE4aWURL  SL500 SY344 BO1204203200 Very exciting news from Poland this morning, via San Leon Energy’s announcement of significant gas flows from a vertical well. When it can be scaled up and replicated from a horizontal well, this, along with anticipated results of horizontal drilling already under way in the nearby BNK concession should provide confirmation of the commercial viability of Polish shale gas within the next few months.  

That will not only be excellent news for Poland, but also provides great news for the European shale industry.  Poland was the first European target back in 2007/08 when companies like San Leon, BNK and Three Legs started checking out the potential to replicate North American shale plays and target number one was the Gdansk Basin in north west Poland.We saw ExxonMobil exit from the Lublin Basin, and ENI left from the east only last week. But with similarities to how Cabot Oil and Gas fought through pretty thin times to make the the Marcellus work in Bradford and Susquehanna counties in Pennsylvania, Poland shows perseverance is the key ingredient. Green opponents all over Europe have derived a great amount of pleasure at what they, and much of the conventional wisdom, saw as the failure of Poland’s shale efforts. They may not want to smile any more. Let’s not forget that the US shale experience was the result of constant experimentation, but in San Leon’s case it was third time lucky in the same well by achieving the correct combination of the frac design to unlock the resource. This from United Oilfield Services: 

“The recovery of gas so early in the flowback of frac fluid is highly unusual and very positive.  It suggests to me that the formation really wants to flow gas.  In the upcoming horizontal well we can use the success from the frac design from the upper Ordovician to target the whole of the Ordovician, as I think that the lower Ordovician only flowed back during the early stages and then closed up.  This lower formation layer may well have been the source of the very early gas, and our knowledge of what works from frac 3 should enable us to keep it open in future wells.  I look forward to the horizontal with great anticipation as it stands a strong chance of proving up this play.”

It’s also significant how this is also a result of hard work by United Oilfield Services.  UOS is the just the type of company that Paul Stevens in the New York Times last week told us didn’t exist:

Capital markets were willing to provide risk finance for oil and gas operations, and the industry was dominated by a network of small, entrepreneurial companies, supported by a dynamic and highly competitive service sector.….Virtually none of these characteristics are present in Britain.

Yet in Poland, UOS, founded by Dennis McKee from Oklahoma, is investing $250 million in two drilling rigs and a fleet of frack trucks. That’s a lot of money for something that won’t work. Allegedly. It also needs pointing out the early, and loyal, investors in San Leon and BNK, include George Soros’ Quantum Fund, who have stayed through thick and thin as anyone can see from share prices. 

Conventional wisdom in Europe says that the lack of oil majors proves shales aren’t serious, despite  the history of the US showing how it was smaller players who proved the plays up.  We’ve seen encouraging early stage, i.e. small, investments in the UK from Centrica, GdFSuez and Total. We’ll see later stage investors sitting up and noticing Poland.  BP, Shell, Statoil and even ExxonMobil having been kicking the tires in the data rooms lately.All Polish players, recently including PgNiG for the first time, are also sharing information on well results and frack techniques.  SLE seems to have cracked the secret sauce first, but it won’t stay secret for long. News like this travels fast. Let’s hope it travels far,  all the way to Texas and Oklahoma, from where we need investment and expertise in shale all over Europe.  

If you aren’t kindly disposed towards shale, seeing it as threat to both alternative gas supply or other far more expensive energy technologies, any hiccoughs along the way are liable to be held up as negative example.  In the oil and gas business,  problems are learning experiences. In this respect, continuous improvement and new technique is no different in what is looking to be like the gas factory than in any other manufacturing process.

The results arose after SLE’s hard work and experimentation over years in Poland.  The figure of 45 to 60,000 scfd is especially noteworthy at this stage. Production like  this from a few meters of vertical in a well that had not been properly “cleaned up” bodes very well for actual production when the horizontal will extend to 1,500 meters.

Going back to the SLE release the interpretation of the frack designers, Colorado based Sigma3 is very significant:

Based upon frac and flowback data SIGMA3 calculates the likely achievable rate of the fully cleaned-up well is in the range 200,000–400,000 scf/d.  This models the well with the fracs as they have been performed; in other words, with no additional optimisation of design.  The well would have been expected to clean up given additional time, as occurs on the vast majority of comparable shale fracs.  The 200,000–400,000 scf/d figure is also based solely on the upper Ordovician flowing.

Further, SIGMA3, San Leon and UOS are in agreement that the current production most likely comes almost entirely from the upper Ordovician only.  The upper Ordovician was the secondary target for the well and was fracced with frac 3 only because the lower Ordovician already had a frac and re-frac within it (albeit with very low proppant concentrations).  Indeed the upper Ordovician was only a contingent target during frac planning.  Modelling indicated that the lower Ordovician had insufficient proppant concentration for its fracs to stay open once the well was significantly drawn down – something which all technical parties believe can be addressed in the planned horizontal well programme.

The true revolution of modern shale was the combination of fracturing and horizontal drilling, which connects far more contact to the well bore. 

Following the highly-encouraging testing results from the Lewino-1G2 vertical well, San Leon is preparing to drill a 1,500 metre horizontal well with a multi-staged frac programme.  Successful developments of shale in Poland will likely use wells of this design.  Long horizontal multi-fracced wells have  a number of advantages over vertical wells in terms, not only  of higher production rates and recovery, but also of their physical ability to clean up after fraccing, and for that clean up to be performed in a far more economical manner.

What does this mean in English? It means that this well looks set to produce anywhere from seven to thirty times that from the vertical bore. Using a mid range of theSIGMA3  (300,000 scfd) times 15, gives 4.5 million cubic feet of gas per day, a very respectable number at this stage of the game.  Any US well over 2.5 mcfd a day is thought commercial and there are many which do far less.  Kamlesh Parmar of 3 Legs mentioned 2.5 as the figure he was looking for in Poland at a conference in Warsaw late November.  This could make a very significant contribution to Poland, and European, gas security if replicated in the rest of the Gdansk Basin.  Again, back to the SLE release:

In the US, horizontal wells typically yield 7–30 times the production rate and recovery of vertical wells in the same formation, especially after optimisation and learning over time.  It is also generally accepted that production rate and recovery of wells drilled later in the development learning curve significantly outperform early wells, suggesting further material upside

So the geology appears to be there after all.  As UOS show, we can forget about the lack of a service industry holding things up in Poland.  We can also forget about the lack of infrastructure  that naysayers often hold up: The field is only 12Km from the main trunk pipeline. I mischievously point out here that the pipeline is full of Russian gas heading to the German border less than a hundred miles away.

As for economics, the well costs far less than the huge sums some have proposed, with costs competitive to the US, but the real killer number is the $10mmbtu plus gas price. Successful as the actual results are, the price provides the icing on the cake. But as San Leon go on to note, there’s even a cherry on top of that:

In addition to the gas flow, 20 bbl of condensate per mmscf gas was observed.  This would be expected to add around 20% additional revenue to future gas sales.  The gas itself is ”rich” and has very low CO2 and N2, and no measurable H2S.

The other alleged drawback, public acceptance, is not an issue in Poland. The local area has always had very strong support for drilling as has the national government.  What has been problematic has been the difficulty of getting relatively quick  planning permission, a problem that Exxon Mobil, Marathon, Talisman and ENI all mentioned in their exit interviews. However, those problems seem to belong in the past, and SLE now expect permission in February or March, with an almost immediate start shortly afterwards.

So, in English, and Polish, this looks like the most significant news from Poland, and European shale yet. It is theoretically possible, but geologically unlikely that the horizontal will disappoint.  San Leon and others have a large  amount of seismic information and they tell me this morning they are planning to drill straight down the line of one of the seismic lines further lowering geological risk. 

Over the next few months, some people  will rejoice, some will keep their fingers crossed and some will start reaching for their checkbooks. One thing for sure, some will start reaching for their atlas, but you needn’t  bother


The conventional wisdom says this was never meant to happen. Just as the US was never meant to happen. What we can now see is that we are moving further from hope and more towards reality and that Poland’s success will mean favourable results throughout Europe, and beyond.

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  • Grizzle

    Great article on agreat day for SLE and euro shale.<br />Thanks

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