Poland's Shale Gas Dream

Polish leaders think they've found a path to energy independence, but their high hopes could prove premature.

WARSAW — About a year ago, Poland lit what it calls the "Flame of Hope," the first flare to burn over a shale gas well in the country. Its photo ran as a full-page ad in Gazeta Wyborcza and Rzeczpospolita, Poland's leading newspapers. "Don't put out the flame of hope," the caption read, urging readers to express their support for shale gas development. In a deeply Catholic country, the religious subtext was hard to avoid: Poland was the cathedral and this huge flame was a candle of prayer -- a prayer for energy independence.

Ever since the U.S. Department of Energy's April 2011 announcement that Poland may hold enormous quantities of shale gas -- 5.3 trillion cubic meters, enough for 300 years of consumption -- hydrocarbon fever has swept the country. Even when the Polish Geological Institute and the U.S. Geological Survey reduced those figures by 90 percent in early 2012, the faith in shale remained unshaken. Nowhere else in Europe has shale gas generated so much enthusiasm among both politicians and the public. The government has already granted 111 exploration concessions on an area of 35,000 square miles, or about a third of the territory of Poland, while polls from last year suggest that 73 percent of the country's nearly 40 million people back developing shale.

Shale gas, the official narrative goes, would bring in billions of dollars in foreign investments, generate hundreds of thousands of jobs, give a boost to the chemical sector, and even make Poland an exporter of natural gas, "a second Norway" in the words of the foreign minister, Radoslaw Sikorski. But the real reason shale gas has made such a stir in Poland is buried deep in the emotional sediments of history, where Russia embodies the perpetual nemesis, the perpetrator of the greatest crimes against the Polish nation. The hope is that shale gas would reduce Poland's reliance on Russian fossil fuels, while bringing the country closer to its ally the United States, a pioneer of shale gas extraction. "After years of dependence on our large neighbor, today we can say that my generation will see the day when we will be independent in the area of natural gas and we will be setting terms," Prime Minister Donald Tusk told his compatriots when the "Flame of Hope" was first lit.

Yet Poland is relatively energy independent and already working towards more tangible solutions to diversification. Gas constitutes just 13 percent of its primary energy supply, a third coming from Polish conventional wells. The government is also trying to diversify gas routes by investing in a new liquefied natural gas terminal on the Baltic Sea, expanding gas storage facilities; reverse-flow pipelines with the Czech Republic and Germany have already been completed. In addition, there are plans to build a 3 gigawatt nuclear power plant by 2023 and double that capacity by 2030. While the push for renewables has been sluggish, as prices of solar and wind generation continue to plummet, growth in that area is starting to speed up.

Most importantly, as the world's ninth largest coal producer (and the second largest in the European Union) Poland generates about 90 percent of its electricity from domestic coal, of which it has a supply that could potentially last hundreds of years. Poland's energy import dependency is accordingly one of the lowest in the EU, according to Eurostat. The country would have to start moving away from coal to reduce its carbon emissions, but a 2011 study by Cornell University suggest that shale gas, though often advertised as cleaner, might not have significantly lower carbon footprint than coal when looking at the complete cycle of production.

None of this has deterred the Polish government, which has aggressively pushed for development, dismissing all objections, as shale gas has become a powerful ideological tool, central to Polish foreign policy. "For many years the Polish government underestimated energy policy," says Agata Hinc, an energy analyst with demosEuropa, a Polish think tank. "This has changed mostly because of shale gas. Our foreign policy was mostly about conventional security, but now it's more about creating and connecting new markets."

New markets, in this case, means markets beyond Russia: a country whose investments in Poland are increasingly unwelcome. Early this year, the Polish parliament passed a politically motivated resolution against a Russian bid for the heavily indebted Lotus Group, the country's second largest oil refiner. Then, in May, last-minute maneuvering thwarted a bid by the Russian company Acron to acquire Tarnow, a large fertilizer plant and a major consumer of gas, and the company had to settle for a minority stake. As Reuters reported in October, of 1,621 major foreign companies active in Poland, 389 are from Germany, while only five come from Russia.

Economically, energy is the last significant link between the two countries. Russia currently supplies nearly all of Poland's oil and two-thirds of its gas, or about 11 billion cubic meters per year. Poland's largest oil-and-gas company PGNiG has an expensive long-term contract with Russia's Gazprom, the world's largest supplier of natural gas. The disputes between Russia and Ukraine in 2006 and 2009, and Russia and Belarus in 2010 over gas pricing, which led to shortages in Europe, have further convinced Polish politicians that the country's energy security lies in diversification away from Russia. Shale gas, the reasoning goes, would offer if not complete independence, then at least a potential bargaining chip for lowering the price of Russian gas imports.

"Russians probably understand that the era of selling gas for whatever price they wish is over," says Piotr Wozniak, the Chief National Geologist of Poland at the Ministry of the Environment.

But the shift in Polish foreign policy -- and the focus on shale gas -- has come not only as a response to Russia, but also to prompting by the United States. In April 2010, the U.S. State Department launched the Global Shale Gas Initiative (since renamed Unconventional Gas Technical Engagement Program) to "achieve greater energy security, meet environmental objectives and further U.S. economic and commercial interests." The program, which aims to provide technical and regulatory assistance to selected countries, has become an administrative tool of U.S. foreign policy in the global battle over energy resources and the recalibration of political alliances. Despite the lack of a scientific consensus on the benefits and drawbacks of shale gas in the United States, the State Department has nonetheless initiated engagement programs all over the world, from Jordan to India to China; cooperation with Poland has been especially close.

Hoping to emulate the U.S. "energy revolution," Poland has come to rely on the United States to show the way. President Barack Obama, on his visit to Poland in May last year, made a special point of endorsing shale gas. After the failure of the Bush-era missile defense, a proposed antiballistic missile shield to be based in Eastern Europe, shale gas has become perhaps the most significant project in U.S.-Polish relations. And though much smaller in scale than the missile shield, both symbolize the same idea: a U.S. deterrent of Russian foreign-policy interests in Central and Eastern Europe.

Despite the project's importance, shale gas in Poland seems to be headed the way of the missile shield, which the Obama administration scrapped because of Russian objections in 2009. Difficult geology, an uncompetitive service sector, poor infrastructure, and lack of rigs have hampered development. Poland has a venerable oil and gas sector, but most of the transmission pipelines are based in the southwest, while major shale gas areas are in the northeast. Strict EU environmental laws, as well as unclear regulatory and tax frameworks have further eroded prospects. And while exploration has been going on for a few years now, only 33 wells have been drilled, with just eight of them fracked (at least 200 would have to be drilled in the exploratory stage, just to assess the actual size of reserves).

Preliminary results have not been encouraging, either: This summer, resource giant ExxonMobil withdrew from Poland after the failure of commercial gas flows, while its competitor ConocoPhillips decided not to exercise its 70 percent option in three concessions in northern Poland. Overall, costs per well have increased to $15 million, according to interviews with industry officials, roughly three times the cost in the United States.

Some, like Cezary Filipowicz, the business development manager of United Oilfield Services, a Polish shale-gas service company, have suggested that Poland should lower its expectations. "For many reasons -- resources, ecology, the areas where production is possible -- the revolution in gas supplies that happened in America will never happen in Poland. Whoever expects that we'll be an exporter of gas for the European market is dreaming," he says.

Unlike conventional gas, however, shale gas requires significantly larger number of wells and economies of scale for production to be economically viable. Without that, both industry representatives and energy analysts agree, it's hard to imagine costs coming down any time soon. Profitable, small-scale shale gas extraction is an oxymoron. Even the higher retail price of gas on the European market might not be enough to make up for production costs. Gazprom added another obstacle in October, when it significantly lowered the price of its exports to Poland, further limiting the country's financial incentives for developing shale gas. "If Polish shale gas is more expensive than the gas from Russia, then it's not viable to produce. That's the normal way of the market," says Marcin Zieba, general director of the Polish Exploration and Production Industry Organization, an umbrella association of shale gas companies.

Government officials optimistically prophesy production in a year or two, but a 2011 report from the International Energy Agency expects real development starting "no sooner than the early 2020s," in the best-case scenario. In a dynamic world, where political and economic changes occur so rapidly, that might be too long to wait. And even if production starts, there is the danger that increasing the share of gas in Poland's energy supply could lock the country in an even greater dependency on Russia, if Polish shale reserves prove short-lived.

Despite the economic and environmental realities, both politicians and the public in Poland continue to believe in the potential of the country's unconfirmed, unconventional resources. Whether the Polish government and private companies will manage to start production, or whether shale gas is just a foreign policy tool to needle Russia, boost U.S. presence in the region, and increase Polish visibility within the EU, remains unclear. The Flame of Hope, in the meantime, has begun to sputter out.



From Bread Lines to Front Lines

In the latest phase of Syria's civil war, civilians have become the targets.

ALEPPO, Syria — Jamila Hijali initially shied away when I approached her in one of the many lines outside Aleppo's bread factories and bakeries. But after a moment she motioned me over to vent her frustrations. "We are tired of the revolution because before women never stood in line for bread like this," the 39-year-old widow with six children complained. "But now it is my primary occupation in life. Bread line. Sleep. Bread line. Sleep."

The 21-month long Syrian revolution is taking its toll on residents of the country's largest city. With everything from medicine to firewood in scarce supply, and with winter bringing temperatures down to near freezing, people here are struggling to cope with a war they just hope will end. But with fighting on urban fronts deadlocked, they admit their wishes are unlikely to be filled any time soon. Instead, the civilians of Aleppo are trapped in a violent stalemate, left to endure a war whose suffering and hardships grow larger with every passing day. Though NATO Secretary-General Anders Fogh Rasmussen recently boasted "it's only a question of time" before the Syrian regime of Bashar al-Assad collapses, people in Aleppo fear they are stage players in a war with no end in sight.

At the Military Bread Factory, once owned and run by the government, Muhi al-Din Saka, 37, is busy overseeing the conveyor line as a dozen pita loaves trickle over the belt and fall into a large receptacle. Ever since fighting in Aleppo broke out in July, the factory's manager of operations spends almost all his time at the plant, mostly to troubleshoot problems.

Chief among them is the slowdown in bread production. The factory has two machines that can produce about 20 tons of bread a day. But a shortage in filtered diesel has forced the plant to rely on poorer quality diesel to fuel the machines, which results in one machine shutting down every day as built-up sediment clogs the pipes. "It's a hassle to start and stop all the time," says Saka.

Before the revolution, the factory sold a kilogram of bread for nine Syrian pounds, roughly 20 cents. Today that same kilogram costs 15 pounds. But while the cost of bread has increased by 67 percent, it has lagged far behind the cost of fuel -- which has skyrocketed from seven pounds a liter to 180 pounds. To keep bread affordable, the Free Syrian Army (FSA) rebels have covered the shortfall, essentially replacing the government as the subsidizer of the basic staple in Syrians' diet. 

Outside the factory, civilians are less concerned with the economics of bread production and more focused on why they have to wait for up to seven hours for a three-kilogram bag of pita loaves. "Why do we have to stand here for almost half the day?" asks Faras Sido, 33, as squirts of rain pelt his beige jacket. "Haven't they learned how to make bread after all these years?"

Though they have tried to make the best of a distribution system they are ill-equipped to deal with, the FSA is still blamed for its failures. "I am here to protect these people," says Muhammad Nasr, a fighter from Mara, a small town some 20 miles east of Aleppo. "But when the machines shut down, they accuse us of stealing the bread."

At 10:45 p.m., FSA fighters begin handing out numbers -- much like at a Brooklyn deli -- to the 700 or so people waiting in line. An hour later, a small window opens and the slow process of bread distribution begins. Around dawn, the lines thin out as the people disappear to their houses with their bag of precious pita.

At the Military Bread Factory, the process functions fairly smoothly. But at the hundreds of bakeries throughout the city where bread is still made by hand, the lines are anything but calm. People shove and jockey for better position as FSA fighters argue with customers. A fighter occasionally fires a shot to call the crowd to order, but no one pays attention. "We are people not cattle," notes Firas Bibsi, 48, as he watches the jostling from his makeshift fruit stand in the neighborhood of Fardus. "But this war is slowly killing our humanity without a shot ever being fired at us."

Increasingly, however, shots are fired at customers. The regime has frequently bombed crowded bread lines staffed by rebels because they are easy targets -- even for the most inexperienced fighter pilots. On Sunday, Dec. 23, dozens of civilians were killed when a fighter jet made several bombing runs over a bread line in the city of Halfaya, in the central province of Hama.

And war has brought more pedestrians concerns as well; it is not just the cost of bread that has skyrocketed. The price of everything from cooking gas to meat has doubled -- and in some cases even quadrupled -- since the regime withdrew from Aleppo when fighting broke out in July, taking its robust state subsidy system along with it. Though regime forces quickly ceded the eastern part of the city, they hunkered down in western sectors and clung to intelligence headquarters and military bases in the northern areas. Today, the balance of forces has changed little. Though some neighborhoods, such as Karam al-Jabl, have been destroyed, most quarters bear the scars of war from fierce fighting or random shelling.

Though patient residents eventually get their bag of bread, many are not as lucky when it comes to other necessities, including the medicine they need to treat common ailments. At a makeshift clinic in the neighborhood of Bustan al-Qasr, Dr. Faysal Habun is examining an infant diagnosed with whooping cough. The disease is usually curable with simple antibiotics, but the fighting has disrupted the routine delivery of basic medical supplies. And since the regime bombed the Dar al-Shifa hospital in November, physicians have had a particularly hard time providing care for their patients. "We just don't have the communications and means we had before," Habun says. Syrian aid groups have cropped up to provide the needed supplies, but none of the major international aid groups operating in the country has entered rebel-held areas. The result is that volunteers with no experience are desperately scrambling to solve a crisis they are in no way prepared to handle.

Muhammad Jadu wishes time could move backward. The electrician does not understand what the rebels are fighting for, nor does he care. He merely knows the war has dealt a death blow to his business; the city has not had electricity for several weeks. Today, Jadu spends his time at a friend's wheel and rim shop, drinking tea and smoking an endless string of cigarettes. "This war has made everything worse and nothing better," Jadu laments. "Why do we need it? We have enough problems in Syria."

In the poor neighborhood of Sukari, where buildings stack up on one another, Bakari Kajaji is performing his nightly prayers. The flickers of an oil lamp provide just enough light to illuminate his red prayer rug. Near the bed along the other side of the wall, auburn embers in a small barbecue grill supply a consistent stream of heat that keeps Kajaji and his wife from shivering. With no power and heat, the 58-year-old spends most of his day in the dark, mumbling to his wife about topics ranging from the wet staircase to his desire to buy a new transistor radio. Though he has not worked at his laundromat for two months -- one of his bosses was killed by shelling and the other fled to Egypt -- and his savings are almost exhausted, Kajaji is not complaining. "It is better to starve a thousand days with no electricity and heat than to endure one more day of Assad. We have everything we need."

It is rare to find residents who share Kajaji's dogged faith. While many support the rebel fighters, they are nevertheless quick to share their tales of hardships. The trauma of war has scarred them.

At a cemetery in the northeastern neighborhood of al-Halooq, Ahmad Jani, 31, is burying his younger brother, Hamdi, who died when a shell landed on the street he was scurrying across. Whether it was an errant shell targeting fighters in nearby Bustan al-Pasha, along the front lines, or merely another of the regime's indiscriminant bombings in civilian neighborhoods is of little concern to Jani. Though fighting rages daily less than a mile away, his family is too poor to flee for safer havens. The clan operates a small supermarket that carries consumer products ranging from soap to sponges. Shuttering its doors would mean drying up the family's sole source of income.

Most stores have closed in Bustan al-Pasha. The only cars driving through its streets shuttle fighters to empty buildings that have been converted into frontline bunkers. Nearby -- often around the corner or even in windows overlooking the rubble -- regime soldiers are in position. There is no movement in these vacant streets. The two sides are locked in a chess game in which neither player wants to make the next move.

Hamid Shloni is on this stalemated front line. He's 27, and once worked in a cement factory; he joined the fighting last spring, when men began mobilizing in his village. Every 20 minutes or so, he pokes his Kalashnikov out the window and lets loose a barrage of bullets. "Need to keep them awake," he says with a beaming smile that reveals a wide gap between his teeth. "They are not here for a vacation from Damascus." Fighters sitting on the floor appear not to hear Shloni's routine wakeup call and the commentary he offers to justify it. Utter boredom, or the cold, has paralyzed these men, who huddle around a cell phone looking at pictures of famous female Arab singers.

Bustan al-Pasha is one of a dozen fronts in Aleppo where fighters spend most of the day doing everything but fighting. They brew tea, forage through houses to find wood for heat, and smoke constantly. Their battle in the city has largely reached a standstill. The winter cold and the rain that has come with it have them merely looking for the next desk to break down to heat the shelters they call home. In these remote buildings on a quiet front, all the fighters have is time.

They are still confident they will prevail. But the optimism that pushed them to take up arms to oust an oppressive regime has been replaced by a quixotic hope that their perseverance will eventually wear down the government to the point of collapse. "War is not as easy as we first thought," admits Hilal Bradi, a 24-year-old day-worker. "It seemed so simple when we started fighting. But I never expected it to take this long."