The Explorer Keeps on Exploring
San Leon’s Buggenhagen “boldly going where no man has gone before”
The potential of a shale gas bonanza in Europe is drawing oil and gas explorers from the New World to New Europe, explorers like John Buggenhagen. He is Director of Exploration at San Leon Energy Plc., an international group of companies focused on the exploration and production of oil and gas projects in Europe and North Africa.
Buggenhagen, who manages San Leon’s exploration office in Poland, said that most of his career has been related to exploration, starting with processing seismic data. A geophysicist from Colorado, he moved to Alaska to work for ARCO, where he was a prospect generator. But a company merger urged him to move on to explore new frontiers which lead him to Central and Eastern Europe.
“I offered to move to Hungary, and worked there for Aspect Energy, LLC for three years,” he said. “The result was that I was a major contributor in building their subsidiary Hungarian Horizon Energy from concept to reality. Eventually, I felt the entrepreneurial spirit and was able to set off on my own, starting off in Poland.”
Buggenhagen explained, “My last year at Aspect Energy had me running around Europe looking for new projects, and learning about all the basins. I liked Poland and the people and was naturally drawn here. It is business friendly, but the bureaucracy is the same (as in Hungary), yet people are friendly and helpful.”
“It had great geology and all my experience with the bureaucracy paid off because I came with a lot of experience to go to Poland: ‘Just take a deep breath and follow the rules.’”
He said that, consequently the learning curve for him in Poland much quicker.
The rest is history – now San Leon has 7 exploration concessions in Poland, with Buggenhagen at the helm.
Prospects for shale gas development in Poland are now being taken quite seriously, according to Buggenhagen.
“It’s become an issue of national priority and I think the government has a lot of challenges, like creating regulations and laws that are shale gas friendly. I believe that we’re must work with the government and regulators to realize the potential in Poland. The country has mining laws but does not have petroleum laws, so the law needs to catch up and come up with something that’s considers and even encourages foreign investment.”
Buggenhagen explained what he believed was at stake for Europe regarding the development of shale gas in Poland.
“In North America we have a competitive market with more than enough gas, but countries in Central and Eastern Europe all share the issue of reliance on Russian gas supplies and they’re not always a reliable source.”
He said Poland was much more stable for fulfilling European energy needs.
“It’s part of the EU and anything we find will benefit Europe. There are lots of coal burning countries in this region and natural gas is a natural alternative.”
“How long are the Europeans going to be held hostage by the east?” he queried. “Europe is an expensive place, so if you can create your own resource, that’s a good thing. How is Poland going to be part of the EU without growing its economy?”
“It offers a huge potential energy resource for the EU, which is energy starved - they have to import a lot of energy, the North Sea resource is in decline and I think shale gas is a way for the EU to take care of its energy needs; I don’t think it’s time for wind and solar to take over yet, natural gas is a clean burning fuel that’s in abundance.”
“Shale gas could create a stable energy supply for very long time,” Buggenhagen contended. “Not to mention the jobs that would be created. Poland has the real potential to become an energy exporter in the near term with direct benefit to the local economy.”
He said Poland’s hard working culture could go a long way towards such success.
“You’ll see real development in 3-5 years,” Buggenhagen predicted of shale gas in Poland. For a while we’ll see a high price while a market is developed.”
“It’s a huge growth opportunity in one of the best energy markets in the world,” he said noting Poland’s economic growth last year (1.7%), despite the global economic downturn.
Meanwhile, the arrival of oil and gas majors to Poland involved in exploring shale gas has created a buzz in the atmosphere there.
“We’re excited because it’s brought a lot of possibility. They don’t prove plays,” he explained of majors, “they produce them. They’re risk averse. Once we prove the plays they’ll come in here and mine shale gas for 20-50 years and they’ll be very good at it.”
He reported that Lane Energy Poland/Conoco-Phillips partnership had drilled two wells now and were evaluating that information and “It’s kind of a wait and see. Technically it’s an exciting play. Our industry has been very risk averse in recent years.”
But Buggenhagen explained that the nimbleness of small companies like San Leon has helped facilitate the possibility of the shale gas industry Poland and elsewhere in Europe.
“We were the second company to submit shale gas licenses in the Baltic Basin in Poland,” he said. “Little companies can make decisions and quickly act on them.”
“The Baltic basin has the potential of the Marcellus or the Barnett,” Buggenhagen continued. “It’s very similar in potential. If I worried about the downside I’d never drill these wells. We are incredibly optimistic.”
According to Buggenhagen, shale gas production in Poland could offer significant funds to state and regional coffers.
“A portion of the concession fees go to local governments and then a portion goes to national government,” he explained. “A landowner might get money for surface access, but not for minerals. All minerals in Poland are owned by the state.”
Buggenhagen also said he believed shale production would create local jobs.
“We’re making every effort, shooting seismic now, working with the local community to employ as many locals as we can,” he reported. “It’s a potential windfall for local communities.”
Among the challenges for the success of shale gas in Poland, Buggenhagen said there were major surface issues that were related to the environment like land access, water use, etc.
“And I think that’s what’s still evolving,” he explained. “The people and the government and regulators understand that as well - we’re all on the same page in that respect.”
The biggest challenge, he said, apart from proving the shale gas play was developing it given the regulatory environment, for example in terms of water access, land access, and the European “Natura 2000” protected areas, a major issue.
“You have to do full environmental assessment,” Buggenhagen explained of Natura 2000. “We said we would not do those because they could take 6-9 months, and we agreed to work in the most obvious surface areas, go back and work with the Polish Environment Ministry.”
While he admitted environmental concerns were a tough issue, he contended that responsible development of shale gas in Poland is possible.
“We still have to prove the play,” he reiterated. “I’m one of most optimistic, but am also a realist and believe we have to prove it – something which is a year or two away.”
San Leon is making strides toward doing just that. In March of this year the company entered a Baltic shale gas agreement in Poland with Canada’s global oil and gas upstream enterprise, Talisman Energy; the deal has Talisman drilling wells at three of San Leon’s concessions, with an option for further wells, among other activities in their agreement, which appears to be paying off, according to Buggenhagen, who described the partnering between the two as fruitful. He likened Talisman to the so-called godfather of shale gas, George Mitchell who he described as a “real cowboy - the kind of guy who proves plays. Now we have a financially strong partner who does the same.”
“It’s a great partnership - I can’t say a bad thing. They’re very respectful of who we are and how we operate, they provide us with a lot of experts, who are much more experienced with shale gas than I am,” he said.
Buggenhagen added, “We weren’t just looking for a funder, we were looking for the right company, and they offer us the best chance for success.”
He reported, “In the Baltic basin we are preparing to shoot a major 2D seismic campaign and we have already started the permitting and scouting - the first source points should be acquired in November/December.”
In the speculation surrounding Polish shale gas prospects some have stated their reservations, that even if Poland produced the shale gas, there was insufficient infrastructure to get the gas to market.
“That’s probably a challenge that we face (infrastructure), however Poland delivers a lot of Russian gas. If we find 10-50 trillion cubic feet of gas then the infrastructure will follow no doubt.”
Buggenhagen continued, “There are a lot of naïve people concerned about the number of rigs – most are owned by public contractors in US, they all flock there when a new product is developed. The rigs will be here almost overnight once we can prove it, every thing that supports that infrastructure.”
Regarding San Leon’s oil shale operations in Morrocco, Buggenhagen commented: “We’re building our pilot plant as we speak with the goal of having it online in the first quarter of next year to prove the technology of our in situ method for producing oil shale. “
“It’s unique in that it doesn’t require water,” he said “In my home state in Colorado, water is a scare commodity and there is a lot of resistance to injecting it into the ground to be lost forever.”
“If we can recycle gas and water to harvest oil shale it could be a world class project,” he concluded.