Thursday, October 30, 2014

2030 Energy Security | Brussels | Dec 10th
Drew EGC Report

Delay Expected in Polish Hydrocarbon Bill

The long awaited details of the new Polish gas and oil bill is not expected to emerge in the coming weeks.

According to the schedule for 2013, Environment and Finance Ministries will be writing up new hydrocarbon law in the first quarter.

Preliminary assumptions for new regulations were presented on October 16th.

According to draft proposals, apart from a flat 19% company tax, producers will pay a royalty tax of 5% for gas and 10% for oil, a new 25% “special hydrocarbons tax” on the difference between revenues and expenditures.

In addition, the current so-called exploitation or extraction fee, will be increased from around 5 zlotys per 1000 cubic meters to an amount ranging between 20-24 zlotys (around 7 dollars) per 1000 cubic meters .

The new law also provides for the creation of a state-owned operator, NOKE (National Energy Minerals Operator) which is to participate in shale gas projects and oversee activities of the companies.

The government assures that a new legal framework will seek to find a balance between state's interest and revenues of the companies.

Polish PM Donald Tusk and other ministers have promised that the government will create a reliable, stable and fair legal framework to attract continued investment to develop the country’s shale gas reserves, which are considered crucial for the country’s energy security.

However, the organization representing the shale gas industry in Poland criticized the assumptions as premature and too restrictive.

In the opinion of the OPPPW, the government did not take into account an exceptionally capital intensive nature of unconventional projects. In addition the OPPPW fears that proposed taxes will exceed the 40 percent level of the total tax burden and in effect slow the pace and scope of exploration works.

“ Investors are under the impression, that someone is trying to reach deeply into their empty pockets, when it is not even certain there will be anything there to take” – the General Director of the lobby group Marcin Zieba argued in the special letter.

Commenting on the OPPPW concerns, the Head Geologist and deputy Minister for Environment assured that total levies on the oil and gas sector would not exceed 40% of gross profits.

Piotr Wozniak indicated that the doors are open for dialogue and suggested that tax proposals are negotiable.

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