Exploration and production activities in Poland

The LOTOS Group’s exploration and production activities in Poland are carried out through two companies, LOTOS Petrobaltic S.A. and LOTOS Upstream Sp. z o.o., as well as their subsidiaries and jointly-controlled entities. The activities are concentrated within the Polish zone of the Baltic Sea.

The LOTOS Group’s exploration and production activities in Poland are conducted through its subsidiaries and jointlycontrolled entities under a total of nine licences, including: three offshore oil and gas exploration, appraisal and production licences covering the Łeba, Rozewie and Gotland areas, and four offshore licences for the production of hydrocarbons from the B3, B8, B4 and B6 fields. Until 2021, LOTOS Petrobaltic also held interests in onshore licences in Poland: 49% interest in the joint licence with PGNiG S.A. in the Górowo Iławeckie area and 100% interest in the Młynary licence area. In 2021, a decision was made to relinquish interests in onshore licences.

In 2021, LOTOS’s average daily hydrocarbon production in Poland was 5.7 thousand boe/d (+7.4% year on year), which accounted for 33% of the LOTOS Group’s total production volume. Oil was produced from the B3 and B8 fields in the Baltic Sea.

As at the end of 2021, the LOTOS Group’s P2 hydrocarbon reserves in Poland totalled 43.9 mboe (including 40.1 million boe of crude oil and 3.8 million boe of natural gas), which accounted for 63% of the Group’s total 2P reserves.

5.7 thousand boe/d

LOTOS’s average daily hydrocarbon production in Poland

In parallel to its exploration and production operations in Poland, in 2021 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. In addition, in November 2021, LOTOS Petrobaltic, together with Grupa LOTOS S.A. and Grupa AZOTY S.A., published ‘Green Paper for the Development of CCS in Poland’. The paper was drawn up as part of LOTOS Petrobaltic’s feasibility analysis for projects involving geosequestration of carbon dioxide (underground storage of CO2). The document widely analysed the legislative environment as well as the technical and infrastructure challenges.

The Lotos Group’s domestic sales in 2021 should be deemed to be exceptionally successful despite the challenging environment stemming in the first part of the year from pandemic-related constraints and in the second part of the year from price volatility. We continued cooperation with trade partners generating higher levels of sales in terms of volumes and margins. We demonstrated that we are a credible supplier, once again fully satisfying clients’ demand during the refurbishment shutdown. New challenges were also defined last year for our industry. Under its climate policy the European Commission presented the Fit for 55 package. It aims to accelerate limitations on greenhouse gas emissions and the discontinuation of fossil fuels. New legislative solutions, the rapid pace of change in the macroeconomic environment and the Russian aggression against Ukraine mean that the model for the functioning of the domestic fuel market will undergo even more rapid and deep transformations.

Robert Kacperski Director of Domestic Trade

Key assets of the LOTOS Group (production levels and licences)

The LOTOS Group’s key licence assets in Poland include:

  • B3 production field: In 2021, the average daily output of crude oil and associated natural gas was 2.3 thousand boe/d (up +41.4% 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 in 2020, In addition, the increase in production was attributable to the drilling of the B3-13C well (spud of the B3-13B well), brought online in May 2021, and the workover of the subsea B3-5 well, where the production was resumed in August 2021. As at the end of 2021, the B3 field’s remaining recoverable reserves were estimated at 11.8 million boe.Based on the current licence validity date, production from the field is expected to continue until 2031;
  • B8 production field: In 2021, the average daily output of crude oil and associated natural gas was 3.4 thousand boe/d (up -7.7% year on year). As at the end of 2021, the B8 field’s remaining recoverable reserves were estimated at 32.1 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.

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 2021, 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, which was expanded with additional geological analyses. In onshore licences, cameral work was under way, but following analyses, it was decided to relinquish both the Młynary licence area (with a 100% LOTOS Petrobaltic’s interest) and the Górowo Iławeckie onshore licence area (where PGNiG, the operator, held a 51% interest and LOTOS Petrobaltic held a 49% interest).

Licences held by the LOTOS Group companies in Poland

As at December 31st 2021

LotosgrafikiENMapa4 LotosgrafikiENMapa4

Source: the Company

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).

Oil production from the B8 field is carried out by the Central Production Facility. All produced crude oil is transported by tankers and sold to Grupa LOTOS S.A. Natural gas is transported via a subsea pipeline to Energobaltic’s CHP plant in Władysławowo.

In September 2021, the CALM buoy and the transmission infrastructure components were replaced, and its anchoring system on the B8 field was strengthened. Another tanker providing oil storage and transport services was also contracted through Miliana Group companies; the B8 field tanker was replaced in November 2021.

In 2021, the Petro Giant drilling rig continued workover activities on the B3 field (production wells in the PG-1 unmanned platform area, B3-5 subsea production well and B3-13C well (sidetrack of the B3-13B well)). 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. These services include, but are not limited to: collection and storage of crude oil in the production area, transport of crude oil from the fields to the port, rescue assistance for the platforms, transport of personnel, equipment and materials as part of handling the current processes and work on the platforms, as well as specialized work related to the replacement of infrastructure on the operated fields.

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