Norway − a promising development direction

PGNiG Upstream International AS (formerly PGNiG Norway AS) was established for the purposes of a project on the Norwegian Continental Shelf, the aim of which is to provide access to new recoverable reserves of oil and gas outside Poland. The principal business objective of PGNiG Upstream International AS is the exploration for and production of crude oil and natural gas on the Norwegian Continental Shelf. PGNiG UI has been pre-qualified as an operator by Norwegian authorities.

PGNiG Upstream International AS, a PGNiG Group company, holds interests in exploratory and production licences on the Norwegian Continental Shelf, in the Norwegian Sea, in the North Sea, and in the Barents Sea. Jointly with partners, the company has been producing hydrocarbons from the Skarv, Morvin, Vilje and Vale fields and working on development of the Snadd and Gina Krog fields located on the Norwegian Sea and the North Sea. In the other licence areas, the company is engaged in exploration projects.

The company’s main asset is the Skarv field, which has been developed using a floating production, storage and offloading (FPSO) vessel. The FPSO is owned by the licence interest holders, including PGNiG Upstream International AS, and is expected to continue is operations for the next 20 years. Other fields (Morvin, Vilje and Vale) comprise a group of wells connected to the existing production infrastructure.

Crude oil is sold directly from the fields to Shell International Trading and Shipping Company Ltd (crude from the Skarv, Vilje and Vale fields) and to TOTSA TOTAL OIL TRADING S.A. (crude from the Morvin field). All the fields except for Vilje produce also – apart from crude oil – the associated gas, which is transferred via a gas pipeline, chiefly to Germany, where it is collected by PGNiG Supply & Trading GmbH.

In 2015, the company produced a total of 664 thousand tonnes of crude oil and other fractions (measured as tonnes of crude oil equivalent) and 572 mcm of natural gas from deposits on the Norwegian Continental Shelf. Production from all the deposits was higher than initially planned. The increase was achieved primarily through the use on the Skarv field of a technique of injecting natural gas into a deposit to improve oil recovery.

Based on the research and analyses carried out in 2015, field models were updated. As a result, the estimated recoverable reserves controlled by PGNiG Upstream International AS increased significantly. The company’s total net reserves grew from 80.9m boe at the end of 2014 to 87.3m boe (5,101 thousand tonnes of crude oil and 7,806 mcm of natural gas) at the end of 2015.

In 2015, PGNiG Upstream International AS and its partners continued the development of the Gina Krog and Snadd fields. Maersk, a new drilling rig placed in service in October 2015, was used to drill exploration and production wells on the Gina Krog field. A steel jacket was set up over the Gina Krog field, where a production platform, currently being built in South Korea, will be placed. Most of the work to connect the Gina Krog field to the existing infrastructure was also carried out in 2015. Production from Gina Krog is scheduled to commence in 2017. In 2015, as a partner in the PL029C licence area (in the vicinity of the Gina Krog field), the company was also involved in the drilling of an exploration well on the East-3 prospect. Data from the well confirm the presence of hydrocarbons. In 2015, the results were analysed and an estimate of resources was made. In the case of the Snadd field, which is at the stage of selection of the development concept, work on selecting the optimum project scenario was under way.

Working jointly with its partners, PGNiG Upstream International AS also continued operations in its other exploration licence areas. Among other things, the company worked on the evaluation of prospectivity of the PL646, PL702, PL703, PL707, PL711, PL756 and PL799 licence areas.

In January 2015, under the APA 2014 licensing round, PGNiG Upstream International AS was granted the PL799 operator licence in the Norwegian Sea As the operator, the company acquired a 40% interest in the licence, while its partners – Statoil Petroleum AS, VNG Norge AS and Explora Petroleum AS – each received a 20% interest. This licence is located in the vicinity of the Skarv and Snadd fields, and is another operator licence granted to PGNiG Upstream International AS on the Norwegian Continental Shelf.

As far as the PL558, PL646 and PL711 licences are concerned, the geological and geophysical analyses performed on an ongoing basis for each of the licences led the company and its partners to the conclusion that the exploration risk was high at some of them, and as a consequence the licences were relinquished (without drilling exploration wells). In 2015, the company received a confirmation of relinquishment of its PL648S operator licence. As at December 31st 2015, PGNiG Upstream International AS held interests in 15 exploration and production licences on the Norwegian Continental Shelf, including two operator licences.

In 2015, the company filed licence applications as part of two licensing rounds: APA 2015 (Awards in Predefined Areas) and the 23rd Licence Round. In January 2016, the company was awarded (in the APA 2015 licensing round) interests in four exploration and production licences, including one operatorship. Two of the licences (PL838 and PL839) are located in the Norwegian Sea, one in the North Sea (PL813), and one in the Barents Sea (PL850). The 23rd License Round will be resolved in 2016.