10.1.2.1 Oil and gas exploration and evaluation assets
Acounting policies
Exploration for and evaluation of mineral resources means the search for crude oil and natural gas resources and the determination of the technical feasibility and commercial viability of their extraction.
From the moment of obtaining the right to explore for hydrocarbons in a given area to the moment when the technical feasibility and commercial viability of extracting mineral resources is determined, expenditure directly connected with exploration for and evaluation of oil and gas resources is recognised in accordance with IFRS 6 Exploration for and Evaluation of Mineral Resources as a separate item of non-current assets. The expenditure includes the costs of acquisition of exploration rights, costs of exploration rigs, salaries and wages, consumables and fuel, insurance, costs of geological and geophysical surveys, as well as costs of other services.
The Group classifies its hydrocarbon exploration and evaluation assets as property, plant and equipment or intangible assets, depending on the type of the acquired assets, and applies this classification policy in a consistent manner.
Once the size of a deposit is confirmed and its production plan is approved, the expenditure is transferred to appropriate items of property, plant and equipment or intangible assets classified as development and production assets.
The Group examines the need to recognise impairment losses on exploration and evaluation assets by considering whether in relation to a specific area:
- the period for which the Group has the right to explore in the specific area has expired during the current financial year or will expire in the near future, and is not expected to be renewed,
- no substantial expenditure on further exploration for and evaluation of mineral resources is anticipated,
- exploration for and evaluation of mineral resources have not led to discovery of commercially viable quantities of mineral resources and the Group has decided to discontinue such activities,
- sufficient data exist to indicate that, although development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.
If expenditure on property, plant and equipment under construction does not result in discovery of any reserves in the case of which extraction is technically feasible and economically viable, impairment losses on property, plant and equipment under construction are recognised and charged to profit or loss of the period in which it is found that commercial production from the deposits is not viable.
| Note | Property, plant and equipment classified as exploration and evaluation assets | Intangible assets classified as exploration and evaluation assets | Total | |||
| Poland | Poland | Norway | Lithuania | |||
| Gross carrying amount Jan 1 2021 | 178.5 | 14.1 | 296.8 | 11.1 | 500.5 | |
| Capital expenditure | 2.8 | – | 87.3 | – | 90.1 | |
| Exchange differences on translating foreign operations | – | – | 15.9 | – | 15.9 | |
| Written-off expenditure on abandoned project | 9.5 | (79.4) (1) | (0.9) (2) | – | – | (80.3) |
| Gross carrying amount Dec 31 2021 | 101.9 | 13.2 | 400.0 | 11.1 | 526.2 | |
| Accmulated depreciation Jan 1 2021 | – | 12.0 | – | – | 12.0 | |
| Depreciation and amortisation | – | 0.8 | – | – | 0.8 | |
| Written-off expenditure on abandoned project | 9.5 | – | (0.6) (2) | – | – | (0.6) |
| Accumulated depreciation Dec 31 2021 | – | 12.2 | – | – | 12.2 | |
| Impairment losses Jan 1 2021 | 127.7 | – | 21.4 | 11.1 | 160.2 | |
| Recognised | 9.4 | 0.6 | – | – | – | 0.6 |
| Exchange differences on translating foreign operations | – | – | 1.0 | – | 1.0 | |
| Written-off expenditure on abandoned project | 9.5 | (79.3) (1) | – | – | – | (79.3) |
| Used/Reversed | – | – | – | – | – | |
| Impairment losses Dec 31 2021 | 49.0 | – | 22.4 | 11.1 | 82.5 | |
| Net carrying amount Dec 31 2021 | 52.9 | 1.0 | 377.6 | – | 431.5 | |
| Gross carrying amount Jan 1 2021 | 176.2 | 14.1 | 281.2 | 10.2 | 481.7 | |
| Capital expenditure | 2.3 | – | 9.7 | – | 12.0 | |
| Exchange differences on translating foreign operation | – | – | 5.9 | 0.9 | 6.8 | |
| Gross carrying amount Dec 31 2020 | 178.5 | 14.1 | 296.8 | 11.1 | 500.5 | |
| Accumulated amortisation Jan 1 2020 | – | 11.1 | – | – | 11.1 | |
| Deprecisation and amortisation | – | 0.9 | – | – | 0.9 | |
| Accumulated depreciation/amortisation Dec 31 2020 | – | 12.0 | – | – | 12.0 | |
| Impairment losses Jan 1 2020 | 111.9 | – | 21.0 | 10.2 | 143.1 | |
| Recognised | 9.5 | 15.8 | – | – | – | 15.8 |
| Exchange differences on translating foreign operations | – | – | 0.4 | 0.9 | 1.3 | |
| Used/Reversed | – | – | – | – | – | |
| Impairment losses Dec 31 2020 | 127.7 | – | 21.4 | 11.1 | 160.2 | |
| Net carrying amount Dec 31 2020 | 50.8 | 2.1 | 275.4 | – | 328.3 | |
(2) Write-off of expenditure on abandoned project on the Młynary field.
Property, plant and equipment are classified as exploration and evaluation assets until the technical feasibility and commercial viability of extracting the discovered resources are demonstrated.