[note per Stick we might want to consider using the phrase "hydraulic fracturing" in place of "fracking"] [i'd recommend

also reviewing the poland net assessment, it helps] Proposal: What are we saying: ne of Poland's strategic imperatives is to try and !ecome as economically unreliant on direct neigh!ors as possi!le" Poland's investment in shale gas is #ust one of the tactical ways Poland is trying to achieve that imperative" Poland is trying to get tight with the $%, and one of the things they have to do to make the $% happy is adhere to emission cut&off guidelines" 'his means lessening their use of coal" (ronically, that makes getting integrated with the West more difficult !ecause one of the only ways Poland has to compensate for losing the energy from coal is !y importing natural gas from )ussia" Shale gas then for Poland is strategically important, and it means they are willing to pay a premium for getting it up and running" Why are we saying it*what does it add+ (nstead of looking at the technical possi!ility of shale gas ,though we will touch on those factors- we are putting Poland's pursuit of the technology into geopolitical conte.t" 'imeliness+ /ot super urgent, !ut the trigger is that last week Poland undertook some test drills" 0oes this advance or challenge net assessments*narratives+ (t advances our Poland net assessment in particular and fits into the narrative of former 1S% states trying to ward of )ussia's influence" 0iscussion 2: Poland is at a critical point in its energy make&up" 3s part of its rapprochement with the $%, Warsaw is trying to adhere to emission cut&off guidelines ,not to mention that car!on permits are e.pensive-" Which means it is shifting away from coal, its traditional source of energy" 'his signifies a higher dependency on natural gas for heating, industrial power and electricity generation" 3 significant portion of Poland's current ,and pro#ected- natural gas imports comes from )ussia" 'his scares Warsaw, who doesn't want to !e dependent on 4oscow and !e su!#ect to its energy games" 3 factor ,which no one in the 4S4 has put together- is that the /ord Stream pipeline is coming online at the end of the year" 'his takes 5erlin away from !eing downstream of the 6entral $uropean pipelines, and gives it a direct link to )ussia" /ord Stream means that now )ussia can go !ack to more aggressive energy politics ,cuts, price hikes etc- without angering the 7ermans ,a significant factor of why they've !een nicer in the past 8 years-" Poland needs now, more than ever !efore, to diversify its natural gas supply" (t can achieve this !y either importing it from somewhere else or drilling its own" 1or importing, it can only really get the supply it needs from the 6aucasus, via /a!ucco or some similarly implausi!le massive pipeline pro#ect" therwise, it can import 9/7 & this is actually something they'll !e doing" 3s for domestic production, Poland sits on one of the world's largest shale gas deposits" %nconventional hydrocar!on deposits that re:uire hydraulic fracturing ,a"k"a" fracking- to

recover" 'he re:uirements for shale e.ploration are: shale reserves, water, technical know&how and capital" Poland has the first two and is importing the latter ones !y encouraging e.ploratory work !y foreign firms" 'here are concerns in the industry that shale gas fracking in Poland won't !e as profita!le as it was in the %S ,Peter has a good list of why-" Stratfor lacks !oth the engineering and technical e.pertise to make a call on the !usiness profita!ility of shale gas ventures in 6entral $urope, plus it's not what we do" What we can ,and should- say is that pricing matters less than what people think" /atural gas diversification is a strategic imperative for Poland, one that it is willing to pay for" (n the short to medium term, no one will !e a!le to offer cheaper natural gas than )ussia ,the infrastructure is already in place-" ;owever, Poland will pay a premium for its independence" 'his translates into incentives to shale gas e.ploration ventures that, given the current "newness" of the technology in 6entral $urope, could possi!ly take a decade to reach positive ) (" 3s Peter mentioned, !eyond the inherent costs of a new technology, Pomerania & where the shale is & is not too well connected to e.isting gas grid&lines, which means an additional cost of creating a pipeline link in the region" 3 :uestion )odger ,( think- raised, was how much is Poland willing to pay for that energy independence+ ;ow much can they pay+ While it's a valid :uestion, ( don't !elieve it can !e answered" f course Poland has a spending limit & they would love to fund /a!ucco !y themselves !ut ain't gonna happen & !ut the fact remains that, as with their defense paradigm, the country is stuck with a lot of !ad ,and e.pensive- choices" Shale gas drilling is one of the least !ad options and one they are sure to aggressively pursue" (n the long term, there is little dou!t that Polish shale gas will !e productive" With the current estimates, it is even likely that Poland could !ecome a pretty !ig regional e.porter in the decades to come"

0iscussion 8: Polish state energy firm P7/i7 plans to start large&scale test drilling this month in the country's north to develop the country<s shale gas deposits" Polish, $uropean, )ussian and 3merican media have !een !u==ing with discussions a!out the implications of a Polish >uwait arising and the impact it would have on regional geopolitical and economic dynamics"

(ts somewhat o!vious why the Poles are interested in shale gas" 6entral $uropean states are all heavily dependent upon )ussia for their energy supplies, and with the /ord Stream pipeline from )ussia to 7ermany coming on line later this year, Poland is a!out to use its transit leverage over 4oscow"

Shale gas is a relatively new development in the %nited States, !ut it has remade the 3merican energy e:uation" 'raditionally shale despots cannot !e developed as the costs of getting to the natural gas is simply not attractive" 5ut with recent advances in hydraulic fracturing ,fracing- and hori=ontal drilling these deposits can !e accessed" (n the last decade these advances have drastically increased the volume of %"S" natural gas production and all !ut halted natural gas imports" 'he Poles< thinking is that if they can replicate 3merican successes, then they can at least partially escape the )ussian energy grip"

(t<s a nice dream, and it may !ecome reality, !ut not any time soon"

3 shale gas effort that generates revolutionary results re:uires five things" 2- the deposits have to !e in a high enough concentration to make their development economically via!le && the new technologies lower the threshold, !ut you need a lot of help from the local geology && these test drillings are a!out discovering #ust how helpful that geology will !e?there should !e some initial findings !y years< end

8- a lot of freshwater & each well re:uires the in#ection of million gallons of fresh water && here Poland is actually in a !etter position than some 3merican sites, such as the $agleford in southern 'e.as @- a lot of money to fund all the capital investment 'he %nited States is the most capital rich country in the world with the most advanced energy comple." Sure Poland is in $urope, !ut its hardly one of the richer $% states" 'he e.pense of techni:ues such as hydraulic fracturing and hori=ontal drilling is e.pensive and despite that Poland sees this as a national security :uestion, Poland only has so many financial resources to apply to the pro!lem"

A- a lot of small companies" (ts simply an issue of si=e: a single large firm in charge of a large tract of land will only drill where the output is e.pected to !e highest and the costs lowest" 5ut smaller producers familiar with small tracts will aim to e.tract every molecule of natural gas they can, resulting in massive sudden production increases when viewed from a national scale" Poland lacks this small company mentality" Poland only achieved functional independence with the Soviet withdrawal in 2BCB, and since then P7/i7 has ran the entire shop" 1oreign e.pertise can help of course && and it is and will && !ut you still shouldn<t e.pect the e.plosive output increases that the 3mericans have seen !ecause the corporate structure is so different"

D- fourth and most importantly, a radical shale gas success story re:uires a pree.isting natural gas distri!ution*gathering system the %nited States had !een using natural gas for decades !efore new technologies unlocked shale gas && Poland hasn<t Poland is near the !ottom of $uropean states in terms of natural gas usage per capital && in 8E2E the country only used natural gas for 8F of its electricity supplies?BEF of their electricity comes from coal

So even if the Poles were to discover that their Pomerania region holds large volumes of natural gas, they<d need to !uild a few tens of !illions of euro in gathering infrastructure, pipelines, chemicals factories and power plants to take advantage of it && that<s a process that will !e measured in years, not months

riginal sitrep: n C*28*22 G:@D 34, 5en#amin Preisler wrote: Poland to !egin shale gas Hfracking< P) dla Iagranicy Polands state gas company PGNiG has announced that it will begin its test drilling for shale gas in northern Poland this month. PGNiG president Micha Szubski told the !zeczpospolita daily he was "cautiously optimistic# that the wells in Pomorania could be producing gas on an industrial scale by the middle of $%&$. 1inding an independent source of gas could help wean Poland of its reliance on )ussian energy sources" Professor Stanislaw /agy, a geologist from the %niversity of Science and 'echnology in Warsaw told the newspaper, however, that there is still no certainty that shale gas production will !e profita!le" J$verything will depend on how much gas will flow during the tests,K he says" 'he prospect of tapping into $urope<s largest deposit of shale gas has had the world<s !iggest multinationals :ueuing up to set up test drilling sites in Poland" 'he %S $nergy (nformation 3dministration released a report in 3pril concluding that Poland could have the largest and most accessi!le shale gas reserves on the continent" n his visit to Warsaw this year, %S President 5arack !ama said the %nited States is eager to cooperate with Poland in producing shale gas" 4any green protestors, however, are concerned that a rush to tap into Poland<s shale gas deposits could !e ruinous for the environment" 1rench 4$P and radical green Lose 5ove said in Lune that, Jthere are tens of thousands of rural Polish families who will !e affected and who will !e driven away from their homes due to shale gas e.ploration"" 1rance !anned hydraulic fracturing for shale gas in 4ay this year, a practice long used in the %nited States where!y water is pumped deep underground at high pressure to e.tract gas from rock" 7reens claim that this Hfracking< spreads chemicals and contaminates the ground near the process, creating a health risk" %S $nergy Secretary Steven 6hu convened a panel of e.perts thus summer to look at ways to improve the safety of hydraulic fracturing"