Following plans to scale up gas production, Polish player secures more Norwegian acreage

As part of its strategy for the diversification of gas supplies amid growing concerns about energy security due to the current geopolitical crisis, PGNiG has inked a deal with Wellesley Petroleum to expand its footprint offshore Norway by acquiring a stake in an Aker BP-operated field.

Earlier this month, PGNiG revealed plans to produce an additional volume of approximately 0.5 billion cubic meters of natural gas this year from three reservoirs – Skarv, Gina Krog, and Duva – following the launch of the Baltic Pipe pipeline scheduled for 4Q 2022. The additional volumes of hydrocarbons would then be supplied to Poland to strengthen energy security.

Based on its production forecast, PGNiG expects to produce 3 bcm of natural gas from its assets on the Norwegian Continental Shelf in 2022.

With energy security at the forefront of its thinking, PGNiG Upstream Norway, a Norwegian subsidiary of Poland’s state-owned oil and gas company PGNiG, revealed on Friday that it had entered into an agreement with Wellesley Petroleum to acquire a 40 per cent interest in licence PL942, covering the Ørn gas field.

Iwona Waksmundzka-Olejniczak, President of the Management Board of PGNiG, remarked: “The transaction of purchasing shares in the Ørn field confirms our aspirations for further dynamic development of production activities on the Norwegian Continental Shelf. It is our priority foreign market, also due to its importance for the diversification of gas supplies to Poland after the launch of the Baltic Pipe gas pipeline this year.” 

Based on the data provided by the Norwegian Petroleum Directorate, the field’s recoverable reserves are about 6.75 billion cubic meters of natural gas, 0.17 million tonnes of oil and 0.79 million tonnes of NGLs.

The Ørn field is located approximately 20 km from the Skarv field in which PGNiG Upstream Norway also holds an interest. The Ørn will use the existing production infrastructure, including the Skarv FPSO, to reduce the time and costs of production start-up as the HPHT field will be developed as a tieback to Skarv.

The company has applied the same solution to its other deposits near Skarv – Ærfugl and Gråsel – providing for increased profitability of their production. In March 2021, Aker BP as the operator of the Skarv field secured approval from the Norwegian government to raise the gas output from this field.

“The Ørn field fits perfectly with our plans for enhancing the production potential and further cost optimization of the Skarv area, which is the main hub of our operations on the Norwegian Continental Shelf,” added Waksmundzka-Olejniczak.

As explained by PGNiG, the ability to use the existing infrastructure will enable the reduction of CO2 emissions associated with the development of the field. After being discovered in 2019 with an exploration well, the Ørn field’s development is currently scheduled to start in 2023, while production is expected in 2026. Aker BP is the operator of the Ørn field with a 30 per cent stake while Equinor also holds a 30 per cent stake.

Chris Elliott, CEO of the Wellesley Group of companies, commented: “Ørn has been a very exciting and rewarding journey for us, from submitting the licence application document to a successful exploration drilling campaign and then maturing the discovery into a high-quality development project. Transacting at this phase allows us to refocus resources into exploration and also demonstrates the enduring value creation potential of gas exploration in Norway.”

According to Aker BP, the production volume attributable to PGNiG Upstream Norway from the Ørn field is expected to average about 0.25 billion cubic meters of natural gas per year in the period 2026-2035. The acquisition of Wellesley’s 40 per cent of stake in this field is subject to the consent from – among others –  the Norwegian Ministry of Petroleum and Energy.

“With excellent governance and a low carbon emissions profile, we are convinced that further exploration in Norway will ultimately deliver cleaner and more secure gas to Europe than can be obtained from any other source,” concluded Elliott.

The Ørn field purchase is the second transaction between PGNiG Upstream Norway and Wellesley Petroleum. Back in 2019, the companies signed a sale and purchase agreement for a 20 per cent stake in concessions PL636 and PL636B, covering the Duva deposit.

PGNiG holds interests in 59 licences on the Norwegian Continental Shelf and produces from fourteen fields. The firm’s natural gas production volume was 1.42 bcm in 2021, up from 0.48 bcm in 2020.

The company explains that this growth was possible thanks to, among other things, the acquisition of all assets of INEOS E&P Norge, including 21 licences, and other acquisitions in 2017-2020, as well as the completion of the development of the Ærfugl field and the launch of production from the Gråsel and Duva fields.

Neptune Energy, the operator of the Duva field, is working on doubling gas production to support increased supplies to the UK and Europe due to the energy security concerns, which were exacerbated by Russia’s attack on Ukraine.