Oisin Fanning's €130m-valued San Leon Energy looks set to produce Europe's first gas "fracking" production after passing a "major milestone" as testing at one of its Polish wells was successful.
Natural gas flowed from its Lewino well in a shale formation in the Baltic Basin in northern Poland at as much as 60,000 cubic feet per day during recent testing.
AIM-listed San Leon, which is backed by billionaire George Soros and BlackRock Inc, is headquartered in Dublin. It was set up by former MMI stockbrokers and Smart Telecoms boss Mr Fanning. Hedge fund Toscafund is also a major shareholding, boosting its stake to 20 per cent.
The firm is planning to start drilling a more productive horizontal well this summer, according to Dennis McKee, the chief executive officer of United Oilfield Services Sp. z o.o, which worked on San Leon's Lewino well.
"We're confident we can show real commercial flow rates," Mr Fanning told Bloomberg last week. "If you can prove the shale play in Poland, it will open up in other countries."
The European Union's biggest eastern economy, the region's largest holder of shale gas, has sought to revive exploration after foreign investors including Marathon Oil Corp and Talisman Energy Inc withdrew amid regulatory constraints and plans to increase taxation in Poland.
The promising testing results from the Lewino well are a "major milestone in the process of commercialisation of shale gas in Poland," Mr McKee told reporters at a briefing in Warsaw last week. San Leon may bring the well to commercial production by October after it conducts flow tests, he said. United Oilfield Services is the nation's largest provider of hydraulic fracturing, also known as fracking.
"This is the best vertical frack to date," said Mr Fanning. "There's read-across to the whole of the Baltic Basin. This is good for San Leon, and it's good for everybody drilling in Poland."
Shale gas is produced by injecting rock formations with a mixture of water and chemicals at high pressure, a process known as hydraulic fracturing. Gas begins to flow out of the fractures created in the rock and through the well once the pressurised fluid is removed.
San Leon became the sole owner of three permits in northern Poland after Talisman's exit, including the Gdansk West licence where the Lewino well is located. Lewino produced gas almost immediately after clean-up and had done so continuously when the well was open, the company said on January 13. United Oilfield, based in Lowicz in central Poland, was also bidding in tender for seismic services for Chevron Corp in Ukraine, Mr McKee said. The unrest in the country, where Royal Dutch Shell Plc, Chevron and Exxon Mobil Corp agreed to help develop shale, would slow down the search, he said.
Countries including Poland, the UK, Ukraine and Romania are keen to develop shale gas resources as a way to lower energy costs and reduce imports. Europe must get a grip on energy prices to protect growth and reduce the cost gap with the US, where a shale-gas revolution has cut prices, European Union Energy Commissioner Guenther Oettinger told a conference in Berlin earlier this month.
(Additional reporting by Bloomberg)