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ORLEN Group 2016 Integrated Report

II nagroda specjalna w kategorii Raport Zintegrowany | Najlepszy raport on-line

Upstream

Capitals:  
 

 

The Upstream has a significant position in PKN ORLEN’s value creation map, and is consistently increasing its contribution to the Group’s performance. We are expanding our reserves and acquiring the know-how that is particularly valuable in the upstream industry. By optimising work and focusing on the most promising projects, we expect to leverage the strong potential for production growth, both in Poland and Canada.

Janusz Radomski
President of the Management Board at ORLEN Upstream

    units Canada Poland
Natural gas and oil reserves (2P) MMBOE 102.5 11.3
Output MMBOE / year 4.5 0.5
Average production MBOE / day 12.2 1.4
Output structure (liquid / gas) % 43/57 10/90
Net drilling number 13.1 5.0
Licenses number - 31

The new strategy of the ORLEN Group assumes the further development of exploration and production activities in order to expand production and own reserves of crude oil and natural gas.

The development of competences in the area of production required the completion of an international team of experts, capable of building and managing a diversified portfolio of assets and  employing the latest available methods of exploration and production technologies. By the end of 2016, ORLEN Upstream with its subsidiary FX Energy was working either independently or with a partner (PGNiG) in 31 licenses in Poland with a total area of about 19 thousand km2, located in 9 voivodships of Poland and in the area of three oil basins. The share of the ORLEN Group is 100% in 17 licenses, 51% in one license, and 49% in 13 licenses. The Group had 2P reserves of 11.3 MMBOE at the end of 2016, with an average annual extraction of 1.2 MBOE/D. In Canada, the ORLEN Group operates mainly in the province of Alberta and has production assets of over a total area of nearly 1.6 thousand km2 net (377 thousand acres) with an annual average production of hydrocarbons in 2016 reaching 12.2 MBOE/D, and a total of 2P reserves of 102.5 MMBOE at the end of the year.

Activities in Poland

In 2016, the ORLEN Group continued optimization of its asset portfolio. In 2016, the ORLEN Group continued its asset portfolio optimisation. This was related both to the acquisition of new areas for exploration and to the abandonment of other, less promising parts of the licenses. In a tendering process, the Poręba-Tarnawa prospecting and exploration license was obtained from the Ministry of Environment in the Małopolskie voivodship, and another prospecting and exploration license, Skołyszyn, located on the border of the Małopolskie and Podkarpackie voivodships. As part of the Edge area, a new license was obtained for the prospecting and exploration of hydrocarbons, named Tuchola N.

An assessment was also performed of the appropriateness of continuing prospecting work in the licenses located in the Mazowieckie and Lubelskie voivodships (the Lublin Shale and Karbon project), the Łódzkie voivodship (the Mid Poland Unconventionals project), and the Małopolskie voivodship (the Karpaty project), and a decision was made to concentrate further exploration work only in selected areas within the said projects.

Currently, hydrocarbon production in the Polish market takes place in collaboration with PGNiG S.A. and reaches a level of 1.2 MBOE/D, proportional to ORLEN Group’s share of 49%. Production is carrying out on the Płotki project located in the Wielkopolska. It’s characterized by high potential in accumulation of hydrocarbons.

As part of the work carried out in the Podlasie-Lublin Basin, the acquisition of 3D seismic data was completed in 2016 in the Wierzbica license. The data were subsequently interpreted further as part of a scientific research project within the Blue Gas program. Work related to the decommissioning of wells and well sites in the Wierzbica and Wodynie-Łuków license areas was also carried out.
In 2016, an analysis of 2D seismic data ended in the Wodynie-Łuków license area. 3D seismic data were also acquired in the Lublin and Garwolin license areas and in block 255.

In the Perm Basin, an analysis of 2D seismic data was performed in the Sieradz block. Documentation was completed and preparatory work was also carried out for the development of a part of the Sieraków area.

In 2016 in the Płotki area  an exploratory well was drilled in the Pyzdry license and the  drilling of an exploratory well was commenced under the Kórnik-Środa license. At the same time, planning-design activities for the development of two deposits within the same license area were carried out and planning activities for the construction of Pyzdry gas station were initiated. In 2016, the development of the Karmin deposit ended in the Jarocin-Grabina license, and production started. Moreover, two exploratory wells were drilled in the Edge project, in the Unisław-Gronowo and Brda-Rzeczenica license.

As part of the work carried out in the Carpathian Basin in the area of the Bieszczady project, the acquisition of 2D and 3D seismic data was carried out. In 2016, a production test was performed for a well in block 437, and drilling of two exploratory wells commenced at blocks 437 and 457.

As part of the Karpaty project, an exploratory well was drilled at block 435. As part of the Miocen project, the acquisition of 3D seismic data was carried out in the Siennów-Rokietnica license area and their analysis was initiated

Exploration projects of the ORLEN Group in Poland:

Source: Own preparation

Activities in Canada

The production activity in Canada is carried out mainly in the Alberta province through a subsidiary - ORLEN Upstream Canada. In 2016, yearly production amounted to 4.5 MMBOE.

Operating activities in the stable Canadian market fit within the risk profile defined in the overall strategy of the group. The favourable parameters of the assets held in terms of reservoir, as well as the development of business in the region, which has already been well explored, reduce the operational risk related to the investment. The Canadian market is characterized by excellent access to developed drilling and maintenance services, as well as by access to qualified staff with experience with regard to the extraction of unconventional deposits. The stable tax system and friendly regulatory environment are also important.

In 2016, a gas plant owned by ORLEN Upstream Canada was put into operation in the Ferrier/Strachan area. It has a production capacity of 1.1 million m3 of reservoir fluid per day, allowing a total processing capacity of 6.5 MBOE/D. The ORLEN Group also has some production assets in the province of New Brunswick as well as a share of 10.7% in Goldboro LNG, a project involving the construction of an LNG export terminal on the east coast of Canada.

Assets in Canada:

Sales volume of the Upstream sector

The ORLEN Group volume sales in the Upstream sector (thousand tonnes):

Sales 2016 2015  
  value volume value volume change %
1 2 3 4 5 6=(2-4)/4 7=(3-5)/5
Crude oil 84 76 104 96 (19%) (21%)
Natural gas 172 359 68 179 153% 101%
Others 186 123 43 35 333% 251%
Total 442 558 215 310 106% 80%

Until the end of 2015 the production and sales of hydrocarbons was realised only through the Upstream in Canada. Thanks to the acquisition of 100% of American company FX Energy shares, conducted in December 2015 in 2016, the production and sales of hydrocarbons were also carried out in the Polish market.

In 2016 the aggregate sales in both markets amounted to nearly 5 MMBOE an increase of 80% (y/y).

Sales volume structure in the Upstream sector of the ORLEN Group:

 

  See the recording „Upstream Segment”


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