San Leon Energy: Shale find Poland's most commercially advanced

By Costas Pitas

LONDON, Jan 23 (Reuters) - Gas explorer San Leon Energy (Other OTC: SLGYF - news) announced a successful shale test in Poland on Thursday, saying the project was the most commercially advanced in the country, improving prospects for Polish shale gas.

San Leon said an initial test at a site near the northern city of Gdansk revealed a potential yield of up to 400,000 cubic feet per day (about 11,300 cubic metres) of gas and that the total would rise to millions of cubic feet per day after further exploration.

"We've basically cracked the nut in terms of the recipe, in terms of how to frack," Executive Chairman Oisin Fanning told Reuters, referring to the controversial process of pumping sand, water and chemicals at high pressure into shale formations deep underground.

"Several million cubic feet of gas a day is what we're expecting," he said, adding that an announcement on flow rates, which are expected to be at a commercial level, would be made within 60 days.

Three years ago, strong company interest in what were estimated to be huge reserves trapped in Polish shale formations led the government to hope that Poland could replicate the U.S. shale boom.

But a downgrade in reserves estimates and the exit of three big energy companies, Exxon Mobil (TLO: XOM-U.TI - news) , Talisman Energy (Toronto: TLM.TO - news) and Marathon, have since cast doubts on Poland's potential.

Fanning said that San Leon, which began fracking in Poland in July 2013, had succeeded where others had failed through the use of a different kind of proppant, the sand grain used to keep hydraulic fractures open.

"Everybody in Poland today ... found that our proppant was getting crushed," Fanning said.

"This time we used ceramic proppant, like little marbles. They're hard, it keeps them open, it doesn't get crushed," he said.

Shares in Dublin-based San Leon, which has a market capitalisation of around 100 million pounds ($166 million), were up 9.3 percent to 4.35 pence at 1319 GMT.

Chevron (Amsterdam: CHTEX.AS - news) and ConocoPhillips (NYSE: COP - news) are the only global players left in Poland's shale sector.

Last August, Conoco subsidiary Lane Energy Poland said it was extracting about 8,000 cubic metres of shale gas per day at a test well in northern Poland, which it said did not yet qualify as commercial production.

Italy's Eni (NYSE: E - news) will pull out of Poland due to unclear regulation and tough geology, sources told Reuters earlier this month. Eni did not comment. ($1 = 0.6030 British pounds) (editing by Jane Baird)