Foreign operations

In 2016, further APA 2015 rounds (Awards in Pre-defined Areas) and the 23rd Licence Round were concluded; PGNiG UN was awarded interests in five new exploration licences. Within two to three years, the licence partners will perform geological and geophysical investigations allowing them to make precise estimates of the hydrocarbon potential of the licences. After that period, drill-or-drop decisions will be made. As at December 31st, 2016, PGNiG UN held interests in 17 exploration and production licences on the Norwegian Continental Shelf, in two of them as the operator. On January 17th, 2017, PGNiG UN was awarded two more licences by the Norwegian government in the APA 2016 round and granted operatorship of one of them. The licence partners were given two years to acquire seismic data and carry out geological and geophysical surveys, with drill-or-drop decisions due afterwards. The awarded licences have significant gas potential, which fits in with plans envisaging gas imports from Norway to Poland. Both licences are located close to existing production and pipeline infrastructure, which will make project work much simpler and faster.

Crude oil is sold directly from the fields to Shell International Trading and Shipping Company Ltd (from the Skarv, Vilje and Vale fields) and to TOTSA Total Oil Trading S.A. (from the Morvin field). All fields except for Vilje also produce associated gas, which is transferred via a gas pipeline mainly to Germany, where it is collected by PGNiG Supply & Trading GmbH. PGNiG UN’s key sales markets are Norway, Germany and the UK.

PGNiG is engaged in exploration work in Pakistan under an agreement for hydrocarbon exploration and production in the Kirthar licence area executed between PGNiG and the government of Pakistan on May 18th, 2005. Work in the Kirthar block is conducted jointly with Pakistan Petroleum Ltd. (PPL), with production and expenses shared proportionately to the parties’ interests in the licence: PGNiG (operator) – 70%, PPL – 30%. Exploration activities within the licence area have resulted in the discovery of two gas deposits − Rehman and Rizq. Natural gas reserves: 11.3 bcm (Rehman) and 3.8 bcm (Rizq) In line with the concept providing for simultaneous development of the Rehman and Rizq fields, the drilling of Rehman-2 was completed in November 2016, with Rehman-3 spudded on November 17th. 2016 saw further progress in the construction of pipeline infrastructure, which was used to enable production from Rizq-1 as of November 7th. Rizq-1 is producing natural gas as part of an extended well testing programme and the gas is sold to the Pakistani gas system. The same pipeline will be used to make the Rehman-2 well available for production. Gas from the Rehman and Rizq fields is produced via facilities located in the Rehman field. In mid-2016, preparatory work began for drilling four new wells (two production wells, one appraisal well and one exploration well). As part of further exploration and documentation work, work on a new 3D seismic survey was completed. The Company also continued production from the Rehman-1 and Hallel X-1 wells. In 2017 in Pakistan, PGNiG will continue drilling the Rehman-3 well and will commence drilling the Rehman-4 and Rizq-2 wells. In the following years, under the Kirthar licence, the Company will perform work to gradually expand the capacity of the production installations; further drilling work will also be performed on the Rehman and Rizq fields. In addition, PGNiG plans to continue exploration work within three potential fields: N2, W1 and W2. PGNiG is seeking to secure an exploration licence in the Baran Block, adjacent to the Kirthar licence area.

Due to a rapid deterioration of the security situation in Libya in mid-2014, on August 12th, 2014 POGC Libya gave notice of a force majeure to the National Oil Corporation (NOC) and started to scale back its operations in the country. In November 2015, POGC-Libya entered into an Interim Agreement with NOC, under which the parties agreed that the EPSA will not expire even if the force majeure continues for more than two years after its notification. In 2016, steps were taken to stabilise the situation in Libya by engaging the international community in coordinating the peace process aimed at electing a new unity government. Throughout 2016, POGC Libya made efforts to reduce the impact of the force majeure on the project. The efforts were pre-approved by NOC and involved analysing seismic data and verifying the prospectivity of the LC113 licence.

Work was continued within a subdivision of the Lubben licence area in east Germany (Brandenburg) under a joint operations agreement of August 4th, 2015. PGNiG’s (36% interest) project partners are Central European Petroleum Gmbh (39% interest and operatorship) and Austria’s Rohöl-Aufsuchungs AG (25% interest). In the first half of 2016, drilling of the Markische Heide-1 exploration well was completed and the acquired data was analysed to identify a potential prospect. Given major differences in the interpretation of seismic data and the increased exploration risk, PGNiG decided to withdraw from the project.

On November 5th, 2016, a Memorandum of Understanding and a Confidentiality Agreement were signed with National Iranian Oil Company (NIOC) concerning joint operations on the Soumar oilfield owned by NIOC’s subsidiary Iranian Central Oil Fields Company. By the end of March 2017, PGNiG is to prepare a development concept for the field based on data supplied by its Iranian partner. After the concept is approved by NIOC and a relevant consent is secured, the parties will be able to proceed to negotiate a potential contract. In Teheran PGNiG SA and National Iranian Oil Company signed a letter of intent concerning their collaboration on the Soumar oil field, with in-place resources put at approximately 475 mm boe.

In 2016, seismic data acquisition was carried out by PGNiG Group in Hungary, Italy, Algeria, Mozambique, Tunisia, Egypt and Morocco. Processing and interpretation activities were conducted in Gabon, Germany, France, Belgium, Italy, Algeria, Switzerland, Pakistan, India, Spain and Columbia. In 2016, the Group also worked on projects related to well logging and measurement of gas drilling parameters in Germany.