Key development projects of the Exploration & Production segment

The project is being carried out by the SPV B8 Sp. z o.o. Baltic S.K.A. In 2020, crude oil and associated natural gas were being produced from the B8 field at an average rate of 3.7 thousand boe per day (up 13% year on year). In parallel, work related to launching the Central Production Facility on the B8 field was under way. In particular, the start-up of process units at the Central Production Facility was completed and a 30-day test of the oil separation and export unit, APG gas turbine and water injection systems was successfully performed. The Central Production Facility obtained a PRS class certificate in accordance with the applicable P105 standard. On October 1st 2020, the Central Production Facility was placed in service. In addition, work was carried out on the launch of a gas compression system, enabling gas transmission from the B8 field to the Energobaltic CHP plant in Władysławowo, and completion of the field development project.

Key parameters of the B8 project (for the LOTOS Group interest):

• LOTOS Group interest 100%

• 2P reserves 33.4 million boe as at December 31st 2020 (91% crude oil, 9% natural gas)

• current output 3.5 thousand boe/d (Q4 2020)

The Central Production Facility achieved full capacity in the fourth quarter of 2020. However, whether oil production volumes will be increased to an average level of 5.0 thousand boe/d within five years will depend on satisfaction of all assumed technical conditions and on prevailing macroeconomic conditions, in particular the global oil prices.

The YME project is at an advanced development stage. The field operator is Repsol, and LOTOS Norge’s interest in the project is 20%. In the fourth quarter of 2020, an important milestone in the process leading to timely completion of the work was reached. The Maersk Inspirer platform, which will be used to support production from the YME field, was towed from the Egrsund shipyard, where conversion work on the platform had been carried out. On December 31st 2020, the platform was successfully placed on the field. The offshore start-up phase, involving the tie-in and commissioning of production systems, is currently under way. First oil for the Yme field is currently expected in the fourth quarter of 2021. The project schedule may be affected by restrictions related to COVID-19, as well as the identified risks to offshore operations, including extended time of work related to the start-up phase and subsea infrastructure, as well as weather windows during which work can be performed at offshore locations in winter.

Key parameters of the Yme project (for the LOTOS interest)

• LOTOS Group interest 20%
• 2P reserves 12.5 million boe/d as at December 31st 2020 (100% crude oil)

• first production Q4 2021
• expected average output 5.0 thousand boe/d (for 5-year period from production launch)
• operator Repsol Norge AS.

The B4/B6 project consists in the development of natural gas deposits in the Baltic Sea, in partnership with CalEnergy Resources Poland Sp. z o.o. It is being implemented by special purpose vehicles Baltic Gas Sp. z o.o. and Baltic Gas Sp. z o.o. i wspólnicy Sp. k. LOTOS’s interest in the project is 51%. The 2C recoverable resources of the B4/B6 fields are estimated at 4.8 billion cubic metres (for the 100% interest). The final investment decision (FID) has not yet been reached, but preparatory work is under way.

The project has been defined in technical terms. However, difficult conditions in the wake of the COVID-19 pandemic coupled with turbulence on the contractor market and sharp declines in commodity prices are far from conducive to the taking of FID. FID is expected to be reached, ushering in the construction phase, once the crisis recedes and project execution risks lessen. In the meantime, work is ongoing to complete certain formalities and administrative procedures necessary for effective implementation of the project. In particular, the following key tasks were carried out in 2020: (i) steps were taken to secure relevant administrative and environmental permits and to update production licences; (ii) approval of amendments to the production licences was obtained; (iii) an environmental permit for the onshore facility was obtained; (iv) preparations for archaeological surveys along the route of the planned pipeline were launched; (v) approvals of geological and engineering documentation for the construction of platforms were obtained; (vi) specialist geotechnical surveys for platform installation purposes were carried out; (vii) work on contracts for sale of petroleum products from the B4/B6 fields was under way, and key commercial terms of contracts for sale of products were agreed with Grupa LOTOS.

Key parameters of the B4/B6 project (LOTOS interest):

• LOTOS interest: 51%
• 2C reserves: 17.9 million boe as at December 31st 2020
• Final investment decision depending on market developments
• expected average output: 4.3 thousand boe/d (for 5-year period from production launch)

The NOAKA project involves the development of discoveries north of Heimdal: Frigg Gamma Delta, Langfjellet, Liatårnet, Rind, Fulla and Froy, in which LOTOS holds an average interest of 10% and AkerBP is the operator, as well as the Krafla and Askja fields, where LOTOS has no interests and Equinor is the operator. At the current stage, an optimum development concept for the project is to be selected. In the second quarter of 2020, an important milestone in the process to complete the project was reached: on June 11th, AkerBP and Equinor entered into an agreement defining the commercial terms of the project execution, Which will be the basis for proceeding to the preparation of a Plan for Development and Operations (PDO). In accordance with the project schedule, the PDO is to be developed and submitted for approval by the Norwegian authorities by the end of 2022.

NOAKA is one of the key development projects on the Norwegian Continental Shelf, with total potential of more than 500 million boe of recoverable reserves (for the 100% interest). For the LOTOS Group, the project will be a foundation for long-term development in Norway, in cooperation with key operators on the NCS: AkerBP and Equinor.