As part of the initiatives, a report entitled ‘CCS – Conceptual Design of CO2 Storage in Water-Contaminated Structures (B-101, Aquifer B3) in the Baltic Sea Area’ was commissioned. In the course of further discussions with state authorities, a number of barriers were identified, which were collected in the Green Paper prepared together with Grupa AZOTY S.A. The Paper also identifies opportunities and ways to address certain legal and technical issues. The applied global and, above all, European solutions are also presented in the Paper.
Key development projects of the exploration & production segment
Poland
B8 project: Development of a crude oil field in the Baltic Sea
The project is being carried out by the SPV B8 Sp. z o.o. Baltic S.K.A. In 2021, crude oil and associated natural gas were being produced from the B8 field at an average rate of 3.4 thousand boe per day (up -7.7% year on year). At the same time, work was carried out in 2021 to launch and test a gas compression system. In October 2021, gas transmission commenced from the B8 field to the Energobaltic CHP plant in Władysławowo. In addition, work was carried out to change the configuration of the seawater injection system in order to increase the amount of water injected. The work was successfully completed in October 2021, making it possible to increase the amount of water injected into the reservoir, which helps increase of the reservoir pressure and thus increase of hydrocarbon production. In December 2021, a 30-day test of the platform’s all process units including the water injection system was successfully conducted after its reconfiguration. The project is in transition to the billing and closeout phase.
Key parameters of the B8 project (for the LOTOS Group interest):
- LOTOS Group interest 100%
- 2P reserves 1 million boe as at December 31st 2021 (91% crude oil, 9% natural gas)
- Current output 4 thousand boe/d (average in 2021)
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.
B4/B6 project: Development of natural gas fields in the Baltic Sea
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 project is currently at the stage of preparation for the final investment decision (FID). The technical aspects of the project were defined and the project was prepared for FID in early 2020. However, the original timing of the FID decision coincided with the onset of the Covid-19 pandemic and the crisis in the market for commodities, particularly natural gas, that saw the lowest price levels in history. These factors were not conducive to undertaking FID as originally planned. Over the course of 2021, there was a reversal of trends in the natural gas market, with the commodity now trading at record high levels. However, the market is strongly volatile, with high uncertainty as to the level of prices in the medium to long term. In addition, concerns about yet more coronavirus mutations and their negative impact on the global economy are resurfacing. The current market volatility and uncertainty are not conducive to making business decisions about new projects, and the final investment decision concerning the B4/B6 project cannot be expected until the market situation is considered stable.
As part of the project, work continues in the so-called preparatory phase (prior to the FID decision). In particular, in2021 the following key tasks were carried out: (i) the process to obtain the required administrative, environmental and corporate approvals was under way; (ii) the environmental permit for the onshore facility was obtained; (iii) archaeological tests were carried out along the route of the planned pipeline; (iv) dialogue was conducted with administrative agencies to approve updates to the administrative decisions issued.
Key parameters of the B4/B6 project (LOTOS interest):
- LOTOS interest: 51%
- 2C reserves: 9 million boe as at December 31st 2021
- and the final investment decision cannot be expected until the market situation is considered stable.
- expected average output: 2 thousand boe/d (for 5-year period from production launch)
Norway
Yme project: Development of an oil field in Norway
The YME project is at final stage of development and offshore start-ups. The field operator is Repsol, and LOTOS Norge’s interest in the project is 20%. In October 2021, first oil was confirmed – production from one well began. Currently, the cleaning and testing of three more production wells is underway and rig commissioning and upgrades continue, including laying out wiring and pipeline insulation. The first commercial loading of 100,000 barrels of oil produced from the Yme field onto a tanker was completed on December 22nd 2021, and the first sale of oil from the Yme field was confirmed on December 25th 2021. The second shipment of oil from the Yme field took place on January 13th 2022.
The Yme project is being implemented under a new plan for development and operations, approved in March 2018. At the end of 2020, a milestone for timely completion of the work was reached. The Maersk Inspirer platform, which will be used to support production from the field, was towed from the Egrsund shipyard, where conversion work on the platform had been carried out, and was successfully placed on the field. Over the course of 2021, the offshore start-up phase, involving the tie-in and commissioning of production systems, was under way. Another significant milestone was reached in August 2021 when the operator received regulatory approval to start production from the Yme field, using the Maersk Inspirer platform. Concurrently, in May 2021, the operator entered into a number of conditional agreements with Maersk Drilling, Havila Sirius and other entities. Their performance will lead to Repsol taking over responsibility for the permanent operation of the Maersk Inspirer platform and to a change in its ownership.
Development of the Yme field is one of the key strategic projects implemented within the LOTOS Group’s exploration and production segment. The field’s 2P recoverable reserves are estimated at 12.5 million boe as at December 31st 2021 (LOTOS’s interest); The average production from the Yme field over the next five years is expected to reach approximately 5,000 bbl/day for LOTOS Norge’s interest.
Key parameters of the Yme project (for the LOTOS interest)
- LOTOS Group interest 20%
- 2P reserves 5 million boe/d as at December 31st 2021 (100% crude oil)
- launch of production October 2021
- expected average output 0 thousand boe/d (for 5-year period from production launch)
- operator Repsol Norge AS.
New development project: NOAKA
The NOAKA project involves the development of discoveries north of Heimdal: Frigg Gamma Delta, Langfjellet, Liatårnet, Rind, Fulla and Froy, where AkerBP is the operator, as well as Krafla and Askja, where LOTOS has no interests and Equinor is the operator. The project is currently in pre-development phase. In September 2021, a major milestone of the project was achieved. In September, LOTOS Norge signed an agreement with AkerBP to harmonise their respective licence interests in the NOA (North of Alvheim) and Fulla areas. The document has defined rules for LOTOS Norge and AkerBP to swap their interests in eight licences: PL873, PL026B, PL364, PL442, PL442B, PL442C, PL874, PL026. As a result of the agreement, LOTOS’s effective and uniform interest in licences will be 12.3%. A development concept was selected for the NOA and Fulla licence areas: the DG2 decision gate was reached. The field development plan (DG3) is scheduled to be prepared by the end of 2022, with first oil expected in 2027.
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.
New development project: Trell/Trine
The project involves the development of the Trell and Trine fields located in the Heimdal area, with AkerBP as the operator. LOTOS’ effective interest in the project will be 11.9%. The project is currently in pre-development phase. In December 2021, a major milestone of the project was achieved. A development concept was selected for the Trell and Trine fields: the DG2 decision gate was reached. The selected concept assumes the development of the FPSO (floating production, storage and offloading) infrastructure in the Alvheim licence area. The field development plan (DG3) is scheduled to be prepared by the end of 2022, with first oil expected in 2025. The Trell/Trine resources attributable to the LOTOS interest are estimated at approximately 2.6 mboe.
Key new growth initatives
LOTOS Petrobaltic, as an operator of assets in the Baltic Sea area, has been implementing a number of development initiatives aimed at diversifying its activities and sources of revenue.
As part of the initiatives, a report entitled ‘CCS – Conceptual Design of CO2 Storage in Water-Contaminated Structures (B-101, Aquifer B3) in the Baltic Sea Area’ was commissioned. In the course of further discussions with state authorities, a number of barriers were identified, which were collected in the Green Paper prepared together with Grupa AZOTY S.A. The Paper also identifies opportunities and ways to address certain legal and technical issues. The applied global and, above all, European solutions are also presented in the Paper.
Another submission to the NCBR contest. The project is to be submitted to NCBR by January 12th. It involves the construction of a floating wind turbine in the vicinity of the platforms in the B8 field to provide power to these facilities. This would be the first installation of its kind in the Baltic Sea, and the first deployment of the technology in Poland. The project is to be carried out by a consortium of three partners: LOTOS Petrobaltic, Gdansk University of Technology and the Baltic Industrial Group.
In principle, the floating turbine is to power the platform, but also provides LOTOS Petrobaltic with an opportunity to further engage the platform in the development of hydrogen production systems and other energy-intensive systems, e.g. preparation of CO2 for injection into the deposit using the EOR-CCS technology.
LOTOS Petrobaltic S.A.’s participation in the research into, construction and operation of offshore wind farms helpsbuild a Polish operator of an offshore fleet and an installer of offshore wind farms (stimulating the heavy industry in Poland) and ultimately an installer of offshore wind farms also in Europe and globally.
The areas of the offshore wind power generation industry in which LOTOS Petrobaltic S.A. develops or intends to develop its competences are:
- Hydrography: As part of the diversification of its activities, LPB provides geotechnical and geophysical survey services in the Baltic Sea to third parties. As a result, LPB is already an active participant in the offshore wind energy market.
- Vessels for construction of offshore wind warms: The rapid growth of offshore wind energy means that there will be a shortage of large installation vessels in the second half of this decade. LPB has taken steps to launch the construction of the following vessels: (i) wind turbine foundation installation vessel (WTFIV); (ii) wind turbine installation vessel (WTIV); (iii) Cable laying vessel (CLV).
- O&M Services: Operation and maintenance of offshore wind power generation units is a key element of the value chain in the long term. Successful market positioning in this area requires the presence of a ship owner and operator of versatile offshore service operation vessels (SOVs) and crew transport vessels (CTVs). LOTOS Petrobaltic S.A., with its experience in conducting maritime operations and in efficient management of a fleet of specialized vessels, having SOVs and CTVs in its resources, may in the future become such an operator, which will enable the company to participate in the offshore wind energy service chain and ensure adequate presence of Polish companies in it. LPB has signed an agreement with GL, PKN, ARP and GPB for the construction and contracting of service vessels.
