FX Energy points to alternative gas supply
By Kamil Tchorek
FX Energy Inc. (NASDAQ: FXEN), the international oil and gas exploration company that specializes in Poland, will begin drilling at the Zaniemeysl-3 well in October. Thomas B. Lovejoy, FX Energy's Chief Financial Officer, has also announced that the company has commenced several new geophysical projects in the 'Fences I' and 'Fences II' exploration areas of Małopolska, using new processing techniques.
At the First International Oil and Gas Conference in Warsaw on September 24-25, Tomasz Bartoszewicz, of the Infrastructure Ministry, Political Advisor to the Deputy Prime Minister, argued that Poland will be "...threatened by gas shortages - or at least serious price rises of Russian gas - in a significantly short period of time. We must find alternative sources of supply."
Currently, around two-thirds of gas consumed in Poland comes from Russia, whilst the remaining third is from fields in Poland with a small amount from Western Europe, mainly Germany. Bartoszewicz raised the question of whether Norwegian Gas is a viable alternative - a Norway to Poland gas pipeline on the Baltic floor has been seriously considered - given that, as he says: "The EU is well aware that North Sea Gas is running out."
According to gas expert Jerzy Szymczak, Project Leader of the Boston Consultancy Group (Poland), "There were many concessions for exploration firms in the nineties, such as Apache, Medusa and Conoco. Observation of geological structures indicated that the structures that characterize the North Sea gas fields extend across Denmark and Northern Germany into Poland. After exploration some firms withdrew, thinking that there was less promise."
But new technology and a new energy price environment after the Kyoto protocol enforces pollution taxes on the least environmentally-friendly fuels boosting demand for "clean" natural gas has created new interest in the prospect of new gas finds in Poland.
The future of Polish gas, according to experts, is not as an alternative source to the massive Eurasian gas supply, but as a commodity that, if sold at the right time and for the right price, will bring in high revenue for Poland. Aside from this, Szymczak says that local gas supply "...is particularly attractive to national gas-powered energy plants, in that the price hike caused by transportation is avoided.
In co-operation with the Geophysical Center in Torun FX Energy's Technical Advisory Panel, the company will build on research and exploration already undertaken in Poland, using a contractor in Houston for the modeling technology to determine where new gas fields lay. "Because of the extensive amount of data (already) available in the Fences area," said Lovejoy in a press statement, "...we can accomplish this work for a relatively small amount of money and it will greatly enhance the value of our exploration acreage when farmed out to a partner in accordance with our current business plan."
According to stock analysts, for the six months ended June 30, 2003, FX energy's revenues rose nine percent to $1.2 million. Results reflect higher average oil prices, partially offset by an increase in lease operating costs and higher interest expense.
