News
01.03.2007 Conclusion of the conditional agreement for purchase of the interest in the Norwegian licenses
The Management Board of Polskie Górnictwo Naftowe i GazownictwoS.A. (“PGNiG”, “the Company”) hereby reports that on 28 February 2007PGNiG, as the buyer, and Mobil Development Norway A/S and ExxonMobilProduction Norway Inc. (“ExxonMobil”), as the seller, concluded theconditional agreement (“the Agreement”) to purchase a 15% interest inthe Norwegian exploration licenses PL 212, PL 212B, PL 262 containingthe Scarv and Snadd fields on the Norwegian Continental Shelf (“theLicenses”).
In accordance with the Agreement, PGNiG will purchase a 15% interestin the Licenses for the price of US$ 360 million on a post tax basis.
Execution of the Agreement is subject to a number of conditions:
a) approval of the general shareholders' meeting of PGNiG and other required PGNiG approvals; and
b) approval by the Ministry of Petroleum and Energy according to section 10-12 of the Norwegian Petroleum Act;
c) the Ministry of Finance having issued a tax ruling in accordance with section 10 of the Petroleum Taxation Act; and
d) no pre-emption rights being exercised.
The Agreement can be terminated if at least one of the following conditions is not met, that is:
1. if condition a) is not be met by 15 May 2007, and
2. the remaining conditions are not met by 1 November 2007.
Moreover, in order to execute the Agreement, it isnecessary for PGNiG to obtain a so-called Pre-qualification andQualification from the Norwegian Ministry of Petroleum and Energy,which is a standard procedure for investors considering an investmentin the oil industry in Norway. In addition to obtaining thequalification by the time all of the conditions are met ("theCompletion Date") PGNiG is also required to obtain a gas shipperlicence not later than 2 months after the Completion Date.
On the date of acquisition of the Licenses, theCompany will become a party to a number of agreements related to theorganisation and exploration of the resources.
Within the areacovered by the Licences, which are the subject of the Agreement,recoverable resources ("the Resources") have been discovered to-date inthe Skarv and Snadd fields. The Resources are located in the NorwegianSea, around 200 km west of Sandnessjoen, at a depth of between 300 mand 400 m.
According to the data approved by the NPD (NorwegianPetroleum Directorate) (2006 Fact Book), all Resources, in which PGNiGwill purchase the above-mentioned interest from ExxonMobil, areestimated as follows:
- 35.8 bcm of natural gas;
- 18.3 mmcm of crude oil and condensate (approx. 15 m tonnes);
- 5.8 m tonnes of NGL (Natural Gas Liquids).
Itis likely that these numbers will increase by about 20 per cent as aresult of unitisation with the Idun field; however, PGNiG interest inthe unitised area would then be decreased.
British Petroleum is the operator of the developmentand the other partners include: Shell, Statoil and Norsk Hydro. Thedevelopment is currently at the Front End Engineering Design ("FEED")stage and is expected to advance to the Plan for Development ("PDO")stage in mid 2007. The production of natural gas and crude oil isexpected to start in mid-2011. PGNiG estimates capital expenditure fordevelopment of the Resources will amount to approximately US$5bn, outof which, accordingly, PGNiG's capital expenditure will amount toapproximately US$600m
The acquisition of these three exploration andproduction licenses in Norway marks PGNiG's first major internationalacquisition in the upstream sector. This acquisition is in line withPGNiG's stated strategy to expand its upstream oil & gas reservesoutside of Poland and to secure more diverse sources of gas supply.PGNiG believes that the Norwegian Continental Shelf is highlyprospective and the Company's entry into Norway represents an importantmilestone in its strategic development. PGNiG's investment in theLicenses is a long-term investment.
