Exploration and Production

The segment’s business focuses on extracting hydrocarbons from deposits and preparing products for sale. The segment comprises the entire process of oil and gas exploration and production, from geological analyses to geophysical surveys and drilling work to field development and hydrocarbon production. The work is conducted by the segment on its own or jointly with partners, under joint operating agreements. It relies on storage capacities available at the Daszewo and Bonikowo underground gas storage facilities.

The PGNiG Group is the leader of the Polish hydrocarbon exploration and production market. Since 1990 hydrocarbon exploration in Poland has been based on a licensing policy which ensures equal access to exploration licences for all market participants. As at December 31st 2014, PGNiG S.A. held 77 crude oil and natural gas exploration and appraisal licences (compared with a total of approximately 70 licences held by all other companies). Over the past 25 years, a number of foreign companies have carried out exploration in Poland, including such global majors as Amoco, Texaco, Conoco and Exxon. New exploration companies were also established by Polish incumbents, i.e. PKN Orlen and Grupa LOTOS. At the end of 2014, twenty-one organisations were engaged in hydrocarbon exploration in Poland. Despite this highly competitive environment, the PGNiG Group has maintained its leading position − no foreign company has independently made a material discovery or become a production licence operator. There is also a number of international oilfield service companies active in Poland, such as Schlumberger, Halliburton, Weatherford and United Oilfield Services. Despite the intense competitive pressure, companies of the PGNiG Group (GEOFIZYKA Kraków S.A., GEOFIZYKA Toruń S.A. and Exalo Drilling S.A.) enjoy a strong position in this part of the market.

 

Exploration

Exploration in Poland

In 2014, PGNiG S.A. was involved in crude oil and natural gas exploration and appraisal projects in the Carpathian Mountains, Carpathian Foothills and Polish Lowlands, both on its own and jointly with partners. Drilling work in the areas covered by licences awarded to PGNiG S.A was performed on 24 wells, including 15 exploration wells, 6 research wells and 3 appraisal wells. Out of the 24 boreholes, ten were drilled in search for hydrocarbons from unconventional sources.

In 2014, six wells yielded positive results, including one exploration borehole in Pomerania (drilled in previous years), two exploration boreholes in the Greater Poland region, and three appraisal boreholes in the Carpathian Foothills (including one drilled into unconventional deposits). 14 wells (five of which had been drilled in previous years) failed to yield a commercial flow of hydrocarbons and were abandoned.

The PGNiG Group was also involved in exploration and appraisal work in Pakistan, Norway and Libya, but discontinued exploration activities in Egypt. The exploration and appraisal work in Norway and Libya was carried out by PGNiG S.A. subsidiaries, i.e. PGNiG Upstream International AS and Polish Oil and Gas Company-Libya B.V., respectively.

Exploration abroad

Pakistan

PGNiG S.A. conducts exploration work in Pakistan under an agreement for hydrocarbon exploration and production in the Kirthar licence area, executed between PGNiG S.A. and the government of Pakistan on May 18th 2005. The work in the Kirthar Block is conducted jointly with Pakistan Petroleum Ltd., with production and expenses shared in proportion to the parties’ interests in the licence: PGNiG S.A. (operator) – 70%, PPL – 30%. In 2014, PGNiG S.A. began preparations to drill appraisal boreholes Rehman-2 and Rehman-3 (scheduled for completion in 2015 and 2016). PGNiG S.A. had to declare a force majeure event and suspend work on the Rizq-1 well on two occasions due to armed attacks in the region. Work on Rizq-1 was resumed in late December 2014. Production from the Rehman-1 and Hallel X-1 wells continued uninterrupted, and the extracted gas was supplied to the Pakistani transmission system.

Norway

PGNiG Upstream International AS 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 field (Skarv project) and developing the Snadd field. In 2014, it acquired interests in three producing fields: Morvin (6%), Vilje (24.243%) and Vale (24.243%), as well as in the Gina Krog field (8%), which is currently in the development phase. In the other licence areas, the company is engaged in exploration projects.

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Production

In 2014, the PGNiG Group produced hydrocarbons in Poland, in the Norwegian Continental Shelf and in Pakistan. Natural gas and crude oil in Poland is extracted by two branches of PGNiG S.A.: the Zielona Góra Branch and the Sanok Branch. The Zielona Góra Branch produces crude oil and nitrogen-rich natural gas at 22 sites, including 13 gas production facilities, 6 oil and gas production facilities and 3 oil production facilities. The Sanok Branch produces high-methane and nitrogen-rich natural gas and crude oil at 37 sites, including 20 gas production facilities, 11 oil and gas production facilities and 6 oil production facilities.

In 2014, the PGNiG Group produced a total of 4,504 mcm of natural gas (high-methane gas equivalent), of which 4,027 mcm was produced from fields in Poland, and 477 mcm from fields abroad. Production of crude and other fractions came in at 1,207 thousand tonnes of crude oil equivalent. Natural gas and crude production volumes are presented in the table below.

 

EXTRACTION OF NATURAL GAS AND CRUDE OIL
Product Unit 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Natural gas* milliard m3 4,501 4,58 4,31 4,3 4,22 4,11 4,07 4,28 4,28 4,32
million boe   28,8 27,1 27,8 27,1 26,4 26,1 27,5 27,5 27,7
Crude oil* thousand tonne 1207 1099 492 468 501 504 499 528 541 619
million boe   8,1 3,6 3,5 3,7 3,7 3,6 3,9 3,7 4,5
Total million boe   36,9 30,7 31,3 30,3 30,1 29,7 31,4 31,2 32,2

* measured as high-methane gas (E)
** with the condensate and production tests