Poland's PGNiG expands upstream portfolio further in Norway with Aker BP deal

London — Poland's PGNiG said Tuesday it is further expanding its presence on the Norwegian Continental Shelf through an agreement with Aker BP to take a stake in the Alve Nord discovery and to increase its share in the producing Gina Krog field.

PGNiG has moved to increase its share of gas projects offshore Norway in recent years, expanding its upstream portfolio ahead of the construction of the Baltic Pipe to bring Norwegian gas directly to Poland.

PGNiG's aim is to maximize its own equity production's contribution to gas volumes that go from Norway to Poland through the Baltic Pipe.

Under the deal with Aker BP, PGNiG will take an 11.92% working interest in license PL127C -- which includes the Alve Nord discovery -- for $11 million, contingent on the further development of the find.

The Alve Nord discovery is north from the Aker BP-operated Skarv field where PGNiG is also a partner.

PGNiG will also increase its stake in Gina Krog from 8% to 11.3%.

In return, the company will transfer a 5% working interest in its recent Shrek discovery on the license PL838 and pay a firm cash consideration of $51 million to Aker BP.

PGNiG estimates that the overall transaction will increase the company's future gas production by 0.1 Bcm/year on average.

"The transaction is a perfect fit for the PGNiG's strategy," the company's CEO Jerzy Kwiecinski said in a statement.

"It contributes to the diversification of gas supplies to our portfolio and strengthens Poland's energy security due to the build-up of our own hydrocarbon resources," Kwiecinski said.

"Increasing our working interest in the producing Gina Krog field will result in immediate growth of the company's production on the Norwegian Continental Shelf and PGNiG's EBITDA," he said.

Oil and gas production from Gina Krog started in 2017, and last year it amounted to 19.9 million boe, of which PGNiG's share was 1.6 million boe.

The remaining oil and gas reserves of Gina Krog are estimated at 172.5 million boe.

Shrek operatorship

Under the agreement with Aker BP, PGNiG said it was also agreed that the operatorship of PL838 will be transferred from PGNiG to Aker BP.

"This will optimize the value of the Shrek discovery through Aker BP's vast experience, supply chain and track record of delivering major development projects safely, on schedule and to budget," it said.

It is assumed that the Shrek discovery can be developed through a tie-back to the nearby Aker BP-operated Skarv field, in which PGNiG is a partner, it said.

"It is also the intention that PGNiG will resume operatorship of PL838 once Shrek begins producing," it said.

Following the transaction with Aker BP, PGNiG will hold interests in 31 production licenses on the Norwegian Continental Shelf, five of which are producing.

In the last three years, PGNiG has increased its oil and gas reserves in Norway from 80 million boe to approximately 200 million boe.

The company is also expanding its producing portfolio through development and planning activities on another six assets (Skogul, Aerfugl, Duva, Tommeliten Alpha, King Lear and Shrek).

PGNiG said production from the first two fields is due to start during the first six months of this year.

The 10 Bcm/year Baltic Pipe is a joint venture between the Polish and Danish transmission system operators Gaz-System and Energinet.

It will connect the Norwegian, Danish and Polish gas grids and is scheduled to be completed in October 2022. PGNiG has reserved 8.2 Bcm/year of capacity in the pipeline.