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Position of the LNG and other unconventional resources within the Visegrad Group

The world conventional resources are keep draining and demand for energy is rising - this undeniable fact caused growth in searching of new energy source. Development of technologies and science allow people obtain energy from nontypical fossil fuels as shale gas, tight gas, coal bed methane or clathrate hydrate, and moreover transport it in liquid form. The technological revolution let carry natural gas further than before without using specific infrastructure as for instance pipelines.
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Under definition of unconventional gas resources implies this type of natural gas that cannot be extracted economically with conventional methods. Among it can be recognized mentioned before type of resources:

  • Shale gas - nowadays is the most popular type of unconventional gas resources through shale revolution in U.S. in 2007. This is type of gas which is trapped into shales- sedimentary rocks with high share of organic matter and low rate of porosity and permeability. With its composition it does not differ from conventional natural gas.
  • Tight gas - this type of natural gas is located deeper than shale gas- is about 4,5 km and more- what makes it harder to exploit. Additionally, similarly to shale gas it feature with very low permeability. This requires some combine methods of extraction- hydraulic fracturing and horizontal drilling.
  • Coal seam gas - is kind of gas contained in coal seams and is associated with normal coal extraction, what can be dangerous for miners (underground explosions of methane). Within this category it can be singled out:
    • AMM- abandoned mine methane- coming from defunct mines
    • CBM- coal bed methane- deriving from mining intact area
    • CMM- coal mine methane – methane is emitted during normal activity of mine [1]

Often in available data,  there is no divide into these groups- for purposes of this report is used name “coal bed methane”.

  • Methane hydrates (or clathrate hydrates)- methane is contained in crystalline form consisted of molecules of water and methane. Its resources are mainly located under deep seabed.

Moreover, presented report is focusing of LNG situation in V4 countries. To clarify, liquefied natural gas (LNG) is form of natural gas in liquid phase, produced in liquefaction process. Before transmutation gas has to be purified from water and carbon dioxide. Subsequently, gas is cooled, transported by LNG carrier under temperature approximately -160 ⁰C , and submitted for regasification what means that is heating. It allows to reduce a volume over 600 times.

The objective of this report is to highlight current position of the LNG and mentioned unconventional resources in V4.

 

Usage of natural gas in Poland

Polish energy mix now is based mainly on hard coal and lignite. Natural gas constitutes 15.9% of all consumption of primary energy and it will keep increasing as is observed on the basis of data from previous years. Production of natural gas in Poland is declining from 3,884 million ton of oil equivalent in 2005 to 3,726 Mtoe (Million ton of oil equiwalent) in 2014 in contradistinction to gross inland consumption which increase from 12,2 Mtoe in 2005 to 13,4 Mtoe in 2014. The remaining demand for natural gas is covered mainly from the East. In 2014 Poland imported 11,8 bcm (billion cubic meter) of natural gas of which 8,9 bcm is coming from Russia, particularly from Gazprom which was signed a long-term contract with. The other part of imported gas is also originally coming from East direction. Foregoing facts indicate that Polish gas sector is dependent on supplies from Russia Federation. Below are presented directions of gas import:

Polish LNG infrastructure

In the world are located approximately 100 LNG terminals of which 23 are in Europe.  Polish LNG terminal was launched in 2015. Its capacity is equal 5 bcm per year- what constitutes 1/3 of the Polish demand for natural gas- and it is planned to increase to 7,5 bcm/a. These amounts will facilitate in the future to meet the demand for this raw material. Construction of the LNG terminal in Swinoujscie is a strategic decision that allows for diversification of gas supplies and thus increase the energy security of Poland. Furthermore, it may be used in the future as point of transmission for Central Europe and Baltic countries. The new infrastructure enables to flow of gas from any location. In 2009 Poland signed a twenty-year long-term contract with Quatargas for the supply of one million tons of LNG. The first delivery was planned for 2014. However, due to delays in the realization of the terminal, it took place in 2015. Currently growing Polish negotiating position in the framework of agreements with Gazprom, which is noticeable in the statements of the government. Polish government announced that do not want to renew contract with Gazprom SA which will expire in 2022. Simultaneously, highlighted that in the event of a satisfactory price contract may be extended. Polish LNG terminal is also part of the plan PGNiG and Gas Transmittion Operator Gaz-System SA called The North-South Gas Corridor.

The project envisages the construction of connections between the countries of the Visegrad Group using LNG port in Swinoujscie, Baltic Pipe and the proposed LNG port Adria. Main advantages of this solution are considered as access to new sources of blue fuel to East Europe, enhance security of supplies or integration of regional gas markets. In 2013 European Commission marked this plan as a „Project of Common Interest” (PCI)

Shale gas perspectives

Since 2007, gradually increased the importance of unconventional source of gas which was shale gas. Visible results and profits in the US resulted in surge of interest in shale gas exploration on other continents. Reports created in 2011, the EIA and 2013 by ARI, estimate that in Poland resources of gas contained in the shale formations can be as high as 5.3 tcm in the first and 4 tcm in the second of the above mentioned reports. Resource assessment of shale gas and shale oil released by the the Polish Geological Institute is significantly different. The document projects that the greatest possible resources are approximately 1.92 tcm, and after taking into account certain parameters, most likely amount to 346-768 bcm. These anticipated quantities of shale gas are 2.5 to 5.5 times larger than conventional gas deposits (145 bcm).

After the first promising forecasts regarding shale gas in Poland, the involvement of foreign companies in exploration has increased. The year 2012 was a record year in terms of the number of licenses for the exploration of gas accumulated in the shale - force then 115 concessions. Hitherto it has been done 72 exploratory holes, and in 25 were carried out hydraulic fracturing. Currently obtain 31 concessions belonging to 9 companies.

The decreasing number of concessions is result of bunch of factories. First and foremost is falling gas prices on the global market that makes the drilling and gas extraction unprofitable. Additionally, according to supreme audit institution has occurred a number of omissions related to the issuance of exploration permits.

Coal bed methane

Methane is often a component of hard coal seams, on which currently polish energy sector is based. This type of gas poses a major danger of explosions in coal mines, owing to the fact that a mixture of methane and air at a concentration of 4.5 to 15% is explosive[2].  CBM is considered as unconventional gas because of  dedicated methods of extraction. [3]

Polish documented resources of CBM are located predominantly in the area of Upper Silesia. Other ones as the Lublin coal basin or Lower Silesian Coal Basin have insignificant proved resources. According to data from 31.12.2015 documented balance resources amount to 90 772,84 mcm and are disposed in 60 seams. Industrial resources form 27 seams are equal 5818,78 mcm. In 2015 mined 320,49 mcm of coal bed methane and 522,62 mcm was emitted with mines ventilation systems.[4]

Tight gas

Prognostic tight gas resources have been estimated by the Polish Geological Institute in a report from 2014  and fall within the ambit of 1528 to 1995 bcm. Taking into account the use of existing deposits of tight gas in the world plausible extraction technically recoverable resources accounts for 10% of geological resources what means 153-200 bcm. Such a low rate is associated with the currently available technology. Moreover, the extraction of tight gas is very expensive due to the necessity of an hydraulic fracturing and high depth prevalence of deep sandstone[5].

Conclusions

Poland has the highest perspectives for exploitation and usage of unconventional gas resources what situates this country as a leader in V4. However, although the Czech Republic consumption and import of natural gas in the last 10 years is observed decline in consumption from 44,2 mtoe in 2005 to 39,6 mtoe in last year.

Although higher percentage share in consumption in comparison to Poland, the Czech Republic use less natural gas- 6,5 mtoe than Poland- 15,1 mtoe. Nevertheless it is significant component of energy consuption mix, given the fact that the country is planning to decrease a fraction of coal in TPES ( total primary energy supply). Furthermore, Czech Republic is a net exporter of electricity and intend to maintain this position.

Production of natural gas in 2014 was equal 0,21 mtoe what provides only circa 3% of consumption. The other demand is covered by import from Russia and Norway. Practically, whole imported gas is coming from the East direction.[6]  Below is presented the fraction of natural gas import by country[7]

The Czech Republic

The Czech Republic is not able to build its own LNG infrastructure, however can make an investment in another country. Thereupon was held a meeting between the Czech trade and industry minister and Iran’s energy minister relevant to import natural gas from Iran[8]. Moreover it is planned that  LNG gas will come via North-South Corridor. Therefore, in 2012

Shale gas

The International Energy Agency in its report form 2011 mentioned about reserves of shale gas in Czech Republic but did not estimated how big they are. Hitherto two companies, the BasGasEnergia Czech s.r.o. and Cuadrilla Morava s.r.o., were applied for three license for exploration. Initially approved licenses for two areas was canceled April 10, 2012 due to protests of local communities municipalities and NGO (Stop HF). Residents of the area were concerned about possible negative effects of hydraulic fracturing, such as groundwater contamination, land degradation and decline in tourist attractiveness. Accordingly, Ministry of Environment announced preparing a moratorium of shale gas exploration. The main cause of a moratorium minister gave legal uncertainty associated with acts such as the Mining Act, the Geological Works Act and flaws of IEA laws. [9] Meanwhile moratorium, according report of The Kosciuszko Institute, should develop a public debate on shale gas in the Czech Republic. This would allow the diversity of arguments for and against the exploitation of certain areas. In addition, 2-year suspension of the search should be dedicated to increase awareness of the extraction of blue fuel from shale formations among residents and local authorities, as well as develop activities related to the initial non-invasive research, licensing and the determination of the risk extraction.[10]

Coal Bed Methane

The main type of unconventional gas which is mined in the Czech Republic is coal mine methane- type which is emited from black coal mines. In 1990 this country had emission from coal mining activities at the level of 7,6 MtCO2e while in 2010 it decreased to 4,4 MtCO2e. Furthermore, EPA (Environmental Protection Agency) predicts that until 2030 it will have reduced to 4 MtCO2e.[11] By this time has launched 11 projects which use AMM ( 5 projects)  and CMM (6 projects) in energy production.[12] Most of them is based on CHP units. The company has launched 4 CHP units, each 1,6 MW and one 0,8 MW in mine ČSA, Lazy and Orlova area. As quote Green Gas DPB, the main producer in the Czech unconventional gas market, it allows to mitigate 1,3 MtCO2e by destruction CH4 annualy. Moreover this units provides annually 54100 MWh of electricity for local network and 19400 MWh of heat for mine own purposes.

Hungary

Taking into account percentage usage of primary energy by source Hungarian gas demand is the highest from Visegrad Group countries, what according IEA data for 2012 amounted 10,2 bcm. Over the course of recent 6 years (2008-2014), demand in Hungary declined about 40%. Natural gas production in 2014 totaled 1,8 bcm what represents only 20% of national demand. The other 80% is covered with import from East direction. The contract between Gazprom and Hungary was prolonged in 2015 to 2019.

Slovakia

Slovakia, Polish southern neighbor, is the fourth state in the V4 for natural gas consumption. Having said that, this energy source is predominant in total primary energy consumption, what is presented below.  According to Eurostat data in 2014 total import of blue fuel was coming from Russia.

 

[1] https://www.pgi.gov.pl/docman-dokumenty-pig-pib/docman/publikacje-2/przeglad-geologiczny/2013/lipiec-1/1863-metan-pokladow-wegla/file.html

[2] https://www.min-pan.krakow.pl/Wydawnictwa/PE164/14-IV-art-10-kaliski-wojciechow.pdf

[3] https://www.pgi.gov.pl/docman-dokumenty-pig-pib/docman/publikacje-2/bilans-zasobow/3845-bilans-zasobow-2015/file.html

[4] https://www.pgi.gov.pl/docman-dokumenty-pig-pib/docman/publikacje-2/bilans-zasobow/3845-bilans-zasobow-2015/file.html

[5] http://www.pgi.gov.pl/docman-tree/prasa/2955-informacja-prasowa-gaz-zamkniety-marzec-2015/file.html

http://www.pgi.gov.pl/docman-tree/prasa/2995-raport-prognostyczne-zasoby-gazu-ziemnego-w-wybranych-zwiezlych-skalach-zbiornikowych-polski/file.html

[6] https://www.iea.org/media/freepublications/security/EnergySupplySecurity2014_TheCzechRepublic.pdf

[7] eurostat

[8] http://www.naturalgaseurope.com/czechrepublic-interested-to-import-iranian-gas-27683

[9] http://www.academia.edu/2235492/SHALE_GAS_IN_POLAND_AND_THE_CZECH_REPUBLIC_Regulation_Infrastructure_and_Perspectives_of_Cooperation

[10] http://docplayer.net/6986803-The-development-of-the-shale-gas-sector-in-poland-and-its-prospects-in-the-czech-republic-analysis-and-recommendations.html

[11] https://www3.epa.gov/climatechange/EPAactivities/economics/nonco2projections.html

[12] http://projects.erg.com/cmm/projects/ProjectFind.aspx

 

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