- B3 production field: In 2020, the average daily output of crude oil and associated natural gas was 1.6 thousand boe/d (up 22% year on year). The year-on-year increase in production rates was a result of a successful workover programme, with a total of eight wells (including two injectors) worked over on the B3 field in 2020. As at the end of 2020, the B3 field’s remaining recoverable reserves were estimated at 12.6 million boe. Based on the current licence validity date, production from the field is expected to continue until 2031;
- B8 production field: In 2020, the average daily output of crude oil and associated natural gas was 3.7 thousand boe/d (up 13% year on year). As at the end of 2020, the B8 field’s remaining recoverable reserves were estimated at 33.4 million boe. Based on the current licence validity date, production from the field is expected to continue until 2036;
- B4/B6 gas fields under preparation for development. The project is to be delivered through special purpose vehicles Baltic Gas Sp. z o.o. and Baltic Gas Sp. z o.o. i wspólnicy Sp.k. in partnership with CalEnergy Resources Poland Sp. z o.o. LOTOS holds a 51% interest in the project. The 2C (contingent) recoverable resources of the B4/B6 fields are estimated at 4.8 billion cubic metres (for the 100% interest). A final investment decision (FID) for the project is under way.
Exploration and production activities in Poland
The LOTOS Group’s exploration and production activities in Poland are carried out through two companies, LOTOS Petrobaltic and LOTOS Upstream, as well as their subsidiaries and jointly-controlled entities. The activities are concentrated within the Polish zone of the Baltic Sea. In addition, they are carried out in Polish onshore areas.
The LOTOS Group’s exploration and production activities in Poland are conducted through its subsidiaries and jointly-controlled entities under a total of nine licences, including: three offshore oil and gas exploration and appraisal licences covering the Łeba, Rozewie and Gotlandia areas, four offshore licences for the production of hydrocarbons from the B3, B8, B4 and B6 fields, and two onshore licences for the exploration for, appraisal and production of oil and gas in the Młynary and Górowo Iławeckie areas.
In 2020, the LOTOS Group’s average daily hydrocarbon output in Poland was 5.3 thousand boe/d (+15.7% year on year), which accounted for 26% of its total production volume. Hydrocarbons were produced from the B3 and B8 fields in the Baltic Sea.
As at the end of 2020, the LOTOS Group’s 2P hydrocarbon reserves in Poland totalled 46.0 million boe (including 42.0 million boe of crude oil and 4.0 million boe of natural gas), accounting for 61% of the LOTOS Group’s total 2P reserves.
In parallel to its exploration and production operations in Poland, in 2020 LOTOS Petrobaltic launched development initiatives to diversify its business and revenue sources, including work to enable its entry into the newly emerging offshore wind farm market. Moreover, conceptual work was under way for a geo-sequestration programme of carbon capture and underground storage within water flooded formations of the Baltic Sea.
Competition for the upstream business
Operators exploring for hydrocarbon deposits, appraising them and producing hydrocarbons from fields in Poland are mainly companies majority-owned by the Polish state. The leader is PGNiG, which:
- is engaged in exploration and appraisal work within 46 licence areas (of which 41 it operates by itself and 5 – jointly with partners) (as at the end of 2020, this number accounted for 62% of all licences for exploration and appraisal of crude oil and natural gas deposits issued in Poland);
- holds 189 oil and gas production licences (96% of all licences issued).
The LOTOS Group is the leader in exploration and production within the Polish zone of the Baltic Sea. All the three combined offshore hydrocarbon exploration, appraisal and production licences and all the four licences for production of hydrocarbons from oil and gas fields within the Polish Economic Zone of the Baltic Sea have been issued to the LOTOS Group’s subsidiaries and their joint ventures. Under the production licences covering the B4/B6 gas fields, work is being carried out in partnership with CalEnergy Resources Poland Sp. z o.o. The project is to be delivered through special purpose vehicles Baltic Gas Sp. z o.o. and Baltic Gas Sp. z o.o. i wspólnicy Sp.k. LOTOS holds a 51% interest in the project.
Companies holding licences for exploration and production of hydrocarbons from Polish fields
As at Dec 31 2020
| Licences for exploration and appraisal of hydrocarbon deposits | Licences for production of hydrocarbons from sources in Poland | |
|---|---|---|
| PGNiG S.A. | 46 (including 4 with Orlen Upstream | 189 (including 1 with Orlen Upstream) |
| and 1 with LOTOS Petrobaltic) | ||
| Orlen Upstream Sp. z o. o. | 14 (including 4 with PGNiG) | 1 (with PGNiG) |
| LOTOS Group | 5 (including 1 with PGNiG) | 4 |
| Northam Sp. z o.o. | 4 | |
| Gemini Resources Ltd. | 2 | |
| Palomar Capital – San Leon Energy BV | 2 | |
| San Leon Energy PLC | 2 | |
| Blue Gas N’R’G Sp. z o.o. | 1 | |
| Central European Petroleum Ltd | 1 | |
| KGHM Polska Miedź SA | 1 | |
| Trias Sp. z o.o. | 1 | 1 |
| ZOK Sp. z o.o. | 2 | |
| Total number of licences awarded9 | 74 | 196 |
(9)Several companies may be awarded the same licence. Therefore, the total number of licences awarded is higher than the number of licensed companies.
Source: Public Information Bulletin of the Climate Ministry, Reports and statements on licence awards – December 2020.
Key assets of the LOTOS Group (production levels and licences)
In addition, the Company is engaged in exploration and appraisal work within the areas covered by its licences to discover additional oil and gas resources. In 2020, work was ongoing in the Gotland, Łeba and Rozewie offshore licence areas (LOTOS Petrobaltic’s interest: 100%) to develop a regional structure and tectonic model. In the Młynary onshore licence area (LOTOS Petrobaltic’s interest: 100%), preparatory work was under way to acquire 3D seismic data, as part of which Attachment 1 to the Plan of Geological Operations for 3D seismic surveys was developed and the boundaries of the planned 3D seismic imaging were being analysed. In the Górowo Iławeckie onshore licence area (PGNiG operator interest: 51%, LOTOS Petrobaltic’s interest: 49%), work was under way to proceed to the exploration drilling stage.
Licences held by the LOTOS Group companies in Poland
As at Dec 31 2020
Source: the Company.
Logistics
Crude oil and associated natural gas are produced from the B3 field using the Baltic Beta rig and the PG-1 unmanned drilling rig. All produced crude oil is transported by tankers and sold to Grupa LOTOS S.A. Natural gas is transported via a subsea 80 km pipeline to the CHP plant in Władysławowo, owned by Energobaltic Sp. z o.o. (wholly-owned subsidiary of LOTOS Petrobaltic).
Production of crude oil from the B8 field is supported by the Central Production Facility, commissioned on October 1st 2020. All produced crude oil is transported by tankers and sold to Grupa LOTOS S.A. Natural gas will be transported via a subsea pipeline to Energobaltic’s CHP plant in Władysławowo.
The Petro Giant drilling rig purchased in 2019, following the necessary adaptation work and crew training, commenced workover operations on the B3 field in 2020. Throughout 2020, the workover programme covered a total of eight wells (including two injectors) on the B3 field. The ongoing well workover programme is designed to maximise recovery rates and enhance production.
Sea logistics services in the Baltic Sea region are provided by the Miliana Shipholding Group. The services consist in the receipt and storage of crude oil at production sites, transport of crude from the field onshore, and rescue assistance services for offshore rigs.