May 22, 2013 / 11:49 AM / 4 years ago

UPDATE 1-Poland says will not tax shale gas output until 2020

* Poland concerned by exits of several foreign firms

* Had planned for taxes, levies to total about 40 pct of profits

WARSAW, May 22 (Reuters) - Poland will not collect taxes on the production of shale gas until 2020 to make its extraction more financially attractive after several foreign players quit the Polish market in the past few months, the finance minister said.

Poland’s government is determined to make a success of shale gas to cut its dependence on natural gas imported from former occupier Russia, but attracting investors grew harder after the country drastically scaled back estimates for reserves.

Exxon Mobil, Canada’s Talisman Energy and U.S. oil firm Marathon, all quit their Polish shale gas operations, with some of them citing uncertainty about the regulatory environment as a factor.

“The law on the taxation of shale gas will go into effect in 2015, but we will not levy the tax until 2020 to attract companies to extract shale gas,” Finance Minister Jacek Rostowski said in a speech on Wednesday.

The finance ministry has previously said taxes and levies on gas and oil exploration would total about 40 percent of the sector’s profits from 2015, positioning Poland as a more attractive investment than Norway, Britain and Australia.

The departure of several players put pressure on the government to make the terms more favourable if it is to meet its ambition of being Europe’s biggest producer of shale gas.

The U.S. Energy Information Administration originally estimated Polish shale gas reserves at 5.3 trillion cubic metres, but this was subsequently revised downwards to about a tenth of that figure.

Early drilling suggested it would be more difficult to extract, significantly raising costs for the producers.

Foreign players are also concerned about the uncertain legal and regulatory framework, potentially crippling red tape and environmental regulation.

About 40 test wells are in operation, though none is expected to start producing gas before 2015.

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