Exxon's Shale Exploration Project Dashed
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) --
Exxon Mobil
(XOM) - Get Report
has announced that the gas flow from its two exploratory wells drilled in Poland did not justify bringing them into production.
Analysts have speculated that the technical challenges associated with shale exploration in the country made it commercially non-viable to explore the resources. The results could be a major setback for Exxon's plans to expand shale exploration in Europe as Poland has some the best shale prospects in the region and the government has been eager to exploit the resources to reduce dependence on Russian gas. Competitor
Chevron
(CVX) - Get Report
is also drilling exploratory wells in the country.
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Exxon has been particularly interested in exporting the shale gas expertise it gained with the acquisition of XTO Energy in 2010 to foreign shale deposits. In Europe, shale exploration is facing stiff resistance from environmentalists, who have succeeded in banning the process of hydraulic fracturing in countries like France.
Poland, which sits on enough shale deposits to meet domestic gas demand for more than 300 years, has been more open to exploration to reduce its dependence on imported gas. Two thirds of the country's gas demand is currently met by Russian imports priced at nearly six times the U.S. benchmark for natural gas.
Despite high gas prices, shale exploration in Poland is costly. While the government has offered attractive terms to companies, the lack of rigs, equipment and scarcity of water have hit exploration plans of the companies.
Exxon has not indicated whether it will continue with its drilling plans in the country. The company and others have experienced similar setbacks in Poland and Hungary. However, the large resources are still attracting interest from explorers, who are looking to crack the technological challenges posed by the geology of the country to make production feasible. Successful exploration of shale deposits in Europe could result in a major boost for Exxon's gas production volumes.
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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
