Transcript

ACTIVITIES IN SHALE GAS AND

SHALE OIL EXPLORATION IN POLAND

Katarzyna Socha, Joanna Ratajczak Stockholm 10th April 2013

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PRESENTATION OUTLINE

PGNiG SA – COMPANY INTRODUCTION

ENERGY SITUATION IN POLAND

SHALE GAS RESOURCES ESTIMATION FOR EUROPE AND POLAND

SHALE GAS/OIL EXPLORATION ACTIVITY IN POLAND

PGNIG SA SHALE GAS/OIL EXPLORATION ACTIVITY

EXECUTED AND PLANNED WORKS

OVERWIEV OF THE DRILLED WELLS

RISK RELATED TO THE UNCONVENTIONAL HYDROCARBON

EXPLORATION IN POLAND

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PGNiG (Polish Oil and Gas Company) is a leader in natural gas segments in Poland that contain trade, distribution, oil and gas exploration and production as well as gas storage and processing. The company is also the largest importer of natural gas to Poland.

PGNiG provides nearly 100% of gas production in Poland and up to 70% of oil production in Poland

PGNiG produces from fields in Poland (2011):

4.33 bcm of natural gas

468 ths tons of crude oil

The production is also from fields abroad:

Norwegian Shelf - the production started at the end of December 2012

Pakistan – the production is planned to start in 2013

PGNIG SA COMPANY INTRODUCTION

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93 Exploration Concessions

with total acreage of 60.9 ths sq. km

225 Production Concessions

with total acreage of 1.5 ths sq. km

oil 40 oil and gas 32

gas 153

PGNIG SA - EXPLORATION & PRODUCTION ACTIVITY IN POLAND

110 oil fields

231 gas fields

8 oil and gas fields within

5 Petroleum Provinces

Discovered:

OIL AND GAS FIELDS IN POLAND

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PGNIG SA - CONCESSION AREAS OUTSIDE POLAND

Pakistan

Norway

Egypt Libya

Participation PGNiG SA 100%

Acreage 5 494.0 km sq

Geographic site Province Awbari,

Murzuq Basin

Obligations

3 000 km 2D seismic, fulfilled 1 500 km sq 3D seismic, fulfilled

8 exploration well

Estimate stocks 146.2 bcm natural gas

15.4 MM tons condensate

Participation PGNiG SA 100%

Acreage 4 414.4 km sq

Geographic site Western Desert

Obligations 1 350 km 2D seismic,

2 exploration well

Estimate stocks 22.0 MM tons crude oil

Participation Pakistan Petroleum Limited

PGNiG SA 30%

70%

Acreage 956.22 km sq

Geographic site Province Sindh,

Folded belt Kirthar

Obligations 1 well, 100 km 2D seismic, fulfilled

Reserves 11.6 bcm of natural gas

Participation

BG Norge AS

Idemitsu Petroleum Norge AS Norwegian Energy Company ASA

PGNIG Norway AS

40.00% 20.00% 20.00% 20.00%

Acreage 11976.96 sq km

Structures PL599

Location Norwegian Continental Shelf

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ENERGY SITUATION IN POLAND – FUEL CONSUMPTION SHARES

Poland is consuming 14.4 bcm of gas per annum (comparable to Romania and three times less than Spain, France or the Netherlands); Gas share in Polish energy market is much lower than an average in the EU (14% against 26%); It is a consequence of the extensive usage of coal (hard/brown) as the source of primary energy.

EU natural gas sales by sector in 2010**

* Source: BP Statistical Review 2011.

** Source: EuroGas Statistical Report 2011

40%

28%

29%

2%

Residential and Commercial

Industry

Power Plants

Others

PGNiG natural gas sales breakdown in 2011

Primary energy consumption by fuel in 2010*

38% 27%

26%

14%

15% 56%

12%

4% 2% 5% 1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

European Union Poland

Other

Renewables

Nuclear Energy

Coal

Natural Gas

Oil

36%

51%

10%

3%

Residential andcommercial

Industry

Power plants andheat plants

Others

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ENERGY SITUATION IN POLAND – POLISH ENERGY POLICY

Polish energy policy is determined by directives and recquirements of European Union, which assume natural gas will remain the fuel of choice and will continue to make a growing contribution to energy suply in Europe, because of „its green properties” and highly efficient application technologies.

Energy security is the main priority in Polish energy policy. This is the result of high dependancy on imported hydrocarbons. To meet the demand, Poland is forsed to import 95% of oil and more than 70% of gas. More than 94% of oil and 80% of gas is imported from Russia by Friendship and Yamal pipelines. The governments goal is to diversify the import sources and transport ways.

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In gas sector crucial Polish government activities include: Construction of LNG terminal in Świnoujście to diversify delivery sources An increase in capacities of underground gas strorages Extention of transmission and distribution system and network An increase of domestic gas production

In oil sector the crucial Polish government activity is an extention of Odessa-Brody oil pipeline from Ukraine to Polish refineries in Płock and Gdańsk

ENERGY SITUATION IN POLAND – POLISH ENERGY POLICY

Poland is willing to have high resources of unconventional oil and gas. The confirmation of that could change the energy situation in Europe. What is important for Poland, it would decrease the country dependancy on the import of these energy sources.

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EUROPEAN SHALE GAS RESOURCES ESTIMATIONS

Country Shale Gas Resources Natural Gas Reserves

BCM TCF BCM TCF

Poland 5295.84 187 164.256 5.8

France 5097.6 180 5.664 0.2

Norway 2350.56 83 2039.04 72

Ukraine 1189.44 42 1104.48 39

Sweden 1161.12 41 0 0

Denmark 651.36 23 59.472 2.1

U.K. 566.4 20 254.88 9

Netherlands 481.44 17 1387.68 49

Turkey 424.8 15 5.664 0.2

Germany 226.56 8 175.584 6.2

Lithuania 113.28 4 0 0

Ro+Hu+Bg 538.08 19 76.7472 2.71

Source US Energy Information Administration, April 2011 Bcm=109m3, Tcf=1012ft3

According to preliminary estimates, the Europe total shale gas in place resources could be 17500 BCM. If these can be proven and produced, it could dramatically change Europe's energy balance, reducing the continent's dependence on gas imports.

DISTRIBUTION OF SHALE PLAYS IN EUROPE

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Shale Gas Basins Risked Gas In-Place Recoverable Resources

Bcm Tcf Bcm Tcf

Baltic Basin 14556 514 3653 129

Lublin Basin 6287 222 1246 44

Podlasie depression 1586 56 396 14

Source: US Energy Information Administration, April 2011 Bcm=109m3, Tcf=1012ft3

POLISH SHALE GAS RESOURCES ESTIMATES

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SHALE GAS/OIL ACTIVITY IN POLAND – AWARDED CONCESSIONS company

number of concessions

Chevron 4

Composite Energy 1

Cuadrilla 2

DPV Service 5

Eco Energy 3

Eni Polska 3

Exxon 6

Gora Energy Resources 1

Indiana Investments 3

Lane Energy 13

Mac Oil 1

Marathon Oil Poland 11

Orlen Upstream Sp.z o.o. 7

Petrobaltic 7

POGC 15

Realm Energy 3

Saponis Investments 3

Silurian Sp.z o.o. 9

Strzelecki Energia 6

Talisman 3

Vabush Energy 1

Wisent Oil & Gas 4

TOTAL 111 „Shale gas/shale oil” exploration concessions in Poland – 01.03.2013 status

Up to date 22 companies (including 3 Polish companies: PGNiG SA (POGC), Orlen Upstream and Lotos) have been awarded 111 concessions for exploration of unconventional resources. Another submitted applications wait for awarding decision in the Polish Ministry of Environment.

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SHALE GAS ACTIVITY IN POLAND – DRILLED WELLS

1 Lane Energy Poland Sp. z o.o. Łebień LE - 1

2 Lane Energy Poland Sp. z o.o. Łęgowo LE - 1

3 Lane Energy Poland Sp. z o.o. Warblino - 1H

4 Lane Energy Poland Sp. z o.o. Łebień LE - 2H

5 Lane Energy Poland Sp. z o. o., Strzeszewo LE-1

6 Polskie Górnictwo Naftowe i

Gazownictwo S.A.

Lubocino - 1

7 Polskie Górnictwo Naftowe i

Gazownictwo S.A.

Lubycza Królewska - 1

8 Polskie Górnictwo Naftowe i

Gazownictwo S.A.

Markowola-1

9 Polskie Górnictwo Naftowe i

Gazownictwo S.A.

Lubocino -2H

10 Polskie Górnictwo Naftowe i

Gazownictwo S.A.

Opalino - 2

11 ExxonMobil Exploration and

Production Poland Sp. z o.o.

Energia Chełm sp.j.

Krupe - 1

12 ExxonMobil Exploration and

Production Poland Sp. z o.o.

Siennica - 1

13 Saponis Investments Sp. z o.o. Wytowno S - 1

14 Saponis Investments Sp. z o.o. Lębork S-1

15 Saponis Investments Sp. z o.o. Starogard S - 1

16 Talisman Energy Polska Sp. zo.o. Lewino - 1

17 Talisman Energy Polska Sp. zo.o. Szymkowo - 1

18 Talisman Energy Polska Sp. zo.o. Rogity - 1

19 Chevron Polska Energy Resources

Sp. z o.o.

Grabowiec - 6

20 Chevron Polska Energy Resources

Sp. z o.o.

Frampol - 1

21 Orlen Upstream Sp. z o.o. Syczyn - OU1

22 Orlen Upstream Sp. z o.o. Berejów - OU1

23 Orlen Upstream Sp. z o.o. Syczyn – OU2K,

24 Orlen Upstream Sp. z o.o. Goździk-OU1,

25 Orlen Upstream Sp. z o.o. Berejów - OU2K

26 Marathon Oil Poland Sp. z o.o. ORZ Cyców - 01

27 Marathon Oil Poland Sp. z o.o. SIE-Domanice - 01

28 Marathon Oil Poland Sp. z o.o. RYP-Lutocin - 01

29 Marathon Oil Poland Sp. z o.o. KWI - Prabuty-1

30 Marathon Oil Poland Sp. z o.o. BRO-NM Lubawskie-01

31 Marathon Oil Poland Sp. z o.o. SOK - Grębków - 01

32 Eni Polska Sp. z o.o. Bągard - 1

33 Eni Polska Sp. z o.o. Kamionka-1

34 Eni Polska Sp. z o.o. Stare Miasto - 1

35 Gora Energy Resources Sp. zo.o. Siciny - 2

36 Indiana Investmens Sp. z o.o. Gapowo B -1

37 Indiana Investmens Sp. z o.o. Miszewo T-1

38 Vabush Energia Sp. zo.o. Belvedere - 1

39 Vabush Energia Sp. zo.o. Chopin - 1

40 Liesa Energy Sp. z o.o. Lelechów SL-1

41 Liesa Energy Sp. z o.o. Czasław SL-1

42 Wisent Oil&Gas Sp. z o.o. Rodele-1

43 Chevron Polska Energy Resources

Sp. z o.o.

Zwierzyniec-1

44 Orlen Upstream Sp. z o.o.

Wierzbica-1 Status: March 2013

PGNIG SA - SHALE GAS/OIL EXPLORATION ACTIVITY

Oil prone areas within the Lower Paleozoic deposits

Concession area km2

1 Wejherowo 729.99 2 Kartuzy - Szemud 782.61 3 Stara Kiszewa 1 178.14 4 Bartoszyce 669.36 5 Górowo Iławeckie 1 094.39 6 Blok 172 936.79 7 Blok 173 936.69 8 Blok 192 921.87 9 Blok 193 942.03

10 Kock - Tarkawica 1 028.64 11 Ryki - Żyrzyn 426.86 12 Pionki-Kazimierz 532.00 13 Warka-Ursynów 734.42 14 Tomaszów Lubelski 745.76 15 Wiszniów-Tarnoszyn 1 106.55

Sum 12 766.10

Gas prone areas within the Lower Paleozoic deposits

PGNiG SA concessions

Polish national company PGNiG SA (POGC) has been awarded 15 concessions covering an area of 12 766.10 km2. PGNiG SA (POGC) concessions are located within important Paloezoic sedimentary basins, starting from the Baltic Syneclise in the northern Poland, through Podlasie Basin in the central part, ending in the Lublin Basin in the south. Lower Paleozoic shales of Silurian and Ordovician age are considered as the most prospective for unconventional hydrocarbons and are the main target for “shale gas” and „shale oil” exploration.

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Characteristics of perspective

horizon for shale gas/oil exploration:

Laterally continuous

Not significantly disturbed by tectonic activity (natural fracture

presence might be favourable in terms of hydraulic fracturing)

Thickness higher than 30m

High organic matter content (more than 2% TOC)

Thermal maturity in gas/oil window

Brittle enough to be fractured (contains more than 40% of sillica

and has proper geomechanical properties)

Contains hydrocarbons!!!

SHALE GAS/OIL – WHAT KIND OF ROCKS ARE WE LOOKING FOR?

PGNIG SA - SHALE GAS EXPLORATION ACTIVITY

Accessible geological, geophysical and geochemical data suggest that Ordovician and Silurian shales are rich enough in organic matter and thermally matured enough to be worth an inputted interest. According to available data, PGNiG SA (POGC) concessions are located within the area of different, but generally high, exploration potential what creates hope for the future success.

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PGNIG SA – EXECUTED AND PLANNED EXPLORATION ACTIVITIES FOR SHALE GAS/OIL IN 2013

1

2

3

14 15

4

6 7

8 9 10

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12 13

Wejherowo License

Executed:

Lubocino-1 well

Lubocino-2H well

Opalino-2 well

Lubocino 3D seismic survey

Planned:

Opalino-3,-4 wells

Kochanowo-1 well

Czestkowo-1 well

Tepcz-1 well

Opalino 3D seismic survey

Kartuzy Szemud and

Stara Kiszewa Licenses

Executed:

Somonino-Przywidz 2D seismic survey

Wysin-1 well – currently drilled

Planned:

Borcz-1 well

Miłowo-1 well

Kartuzy Szemud-1 well

Mirowo-1well

Bartoszyce and

Górowo Iławieckie Licenses

Analysis of available geological and

geophysical data is now beeing

performed.

After the results is known, new

exploration program will be created

for these two licenses

172, 173, 192, 193 Licenses

New 2D seismic data has been

recently acquired and is now beeing

interpreted.

New wells will be planned after

interpretation results.

Drilling is planned for 2014

Warka- Ursynów and Kock-

Tarkawica Licenses

Executed:

Czernic-Ryki 2D seismic survey

Planned:

Wojcieszków-1 well

Pionki Kazimierz and Ryki- Żyrzyn

Licenses

Analysis of available geological and

geophysical data is now beeing

performed.

After the results is known, the

decision about well location and

drilling will be made

Tomaszów Lubelski and Wiszniów-

Tarnoszyn Licenses

Executed:

Lubycza Królewska-1 well

Korczmin 2D seismic survey

Planned:

Fracking in Lubycza Królewska well

Kościaszyn-1 well

LUBOCINO-1 WELL RESULTS

The first vertical exploration well, Lubocino-1, was drilled at the beginning of 2011. The well ended up in Cambrian deposits and drilled 1843.5 m of Silurian and 63 m of Ordovician strata. 800 m of core was recovered, which was further analyzed to examine geochemical, petrophysical and geomechanical properties of the rocks. Wide spectrum of wireline logging was also applied. The results of combination of both, laboratory and geophysical analysis, turned out to be very promising and confirmed the presence of unconventional gas within the Ordovician and Silurian strata.

Black shales of Silurian age (A); Microporosity (B) and micro-fractures (C) in Silurian shales

Geochemistry interval 2200 - 2972 m

Organic matter content Range 0 – 5%

Total gas content From lab. analyses. Range 100% – 0

Gas content From a wellsite lab. Range 0.1 – 10%

Tmax Range 300 – 500°C

Hydrogen Index HI 0 - 300

•Presence of organic matter content (TOC > 0.5%) from laboratory analyses indicate good and very good source rock potential in prospective interval (2550 – 2972m). •Total gas from MudLog during

shows increased value in the most prospective interval 2550 – 2972 m. •Temperature Tmax shows

sufficient thermal maturity of organic matter within Lower Silurian and Ordovician deposits. •Hydrogen index values are also

satisfactory and are placed at the transition zone of oil and wet gas window.

S I L U R

I A N

ORDOVICIAN

LUBOCINO-1 WELL RESULTS – GEOCHEMICAL INTERPRETATION

Total porosity from helium porosimeter 20% - 0

Total porosity from Nuclear magnetic resonance (NMR) 20% - 0

Effective porosity Z NMR 5% - 0

Permeability 0.001 - 100mD

S I L U R

I A N

ORDOVICIAN

Reservoir properties interval 2200 - 2972m

• Laboratory analyses of permeability indicate its good properties especially in the 2550 – 2972 m interval where they reach up to 50mD. Its significant scattering suggest rock matrix permeability as well as fracturability and presence of fractures. •Total porosity values

measured by porosimeter and magnetic resonance analyses correspond well with total porosity interpreted from wireline logs. •Effective porosity values

measured by NMR analyses do not correlate sufficiently with effective porosity interpreted from wireline logs.

LUBOCINO-1 WELL RESULTS – RESERVOIR PROPERTIES INTERPRETATION

LUBOCINO-2H – FIRST PGNiG SA HORIZONTAL WELL FOR SHALE EXPLORATION

Lubocino-2H horizontal well was spudded on

28.08.2012 at the same well pad location as vertical

Lubocino-1.

The horizontal section was drilled at the 2925m TVD.

The total measured depth of the well was 3980m (MD).

The horizontal section, 932m in lenght, was drilled in

Upper Ordovician horizon in the 200o azimuth.

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LUBOCINO-2H WELL RESULTS- HYDRAULIC FRACTURING

2925m (horizontal section depth)

Lubocino-2H well was drilled in Upper Ordovician horizon

(Caradocian Sasin Formation) in the interval containing high

amount of sillica. Geomechanical analysis of the core samples

and geophysical measurements indicated these rocks to be

brittle. What is more geochemical analysis showed high

content of organic matter, proper thermal maturity and

hydrocarbon saturation.

7 stages of hydraulic fracturing was planned but due to

technical problems 6 were executed.

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3D SEISMIC DATA IN PLANNING THE HORIZONTAL WELLS- LUBOCINO 3D SEISMIC SURVAY

Using different seismic atributes (relating on acoustic

parameters of rocks and principles of acoustic waves

propagation) it is possible to define the areas of the best

geological and geomechanical properties of rocks. It is

highly recquired in the planning of well location and

stimulation processes.

Seismic signal coherence

Seismic anizotropy and directions of the highest

values of seismic inversion velocity

Seismic anomalies obtained from the cross graph

of Vp/Vs

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OPALINO 2 WELL AND PLANNED OPALINO 3D SEISMIC DATA SURVAY

OPALINO-2

Or

OPALINO-2

Opalino-2 well is the exploration well designed to

recognize the Lower Paleozoic potential for

unconventional exploration and the saturation

within Middle Cambrian deposits.

The well was driled at the end of 2012 to the TD of

3050m. Around 300m of core was taken whichis

now subjected to the detailed laboratory analysis.

Preliminary analysis results suggest better

parameters of Lower Paleozoic rocks for

unconventional oil/gas exploration than in the

nearby Lubocino-1 well. Opalino-2 well was logged

with all necessary tools to get the reservoir

characteristics as accurate as possible.

Middle Cambrian horizon was tested and the

inflow of gas (85% CH4) was recorded.

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WYSIN-1 WELL

Wysin-1 well

Wysin-1 well is the first exploration well designed to recognize the Lower

Paleozoic potential for unconventional exploration on Stara Kiszewa

License.

The well was spudded at the end of March 2013.

Wysin-1 well is a vertical well and is going to be drilled to the total depth of

3990m TVD. Drilling will be finished in Middle Cambrian deposits.

Around 370m of core is going to be taken that will be subjected to the

detailed laboratory analysis. The well will be logged with all necessary

tools to get the reservoir characteristics as accurate as possible.

LUBYCZA KRÓLEWSKA-1 WELL RESULTS

Lubycza Królewska-1 well, on Tomaszów Lubelski concession, was spudded on Mar. 26th 2012. The total depth of the well was at 3530m. The well was going to drill 1300 m of Silurian and 250 m of Ordovician deposits while in fact it recognized 2055m of Silurian and 268m of Ordovician. The high changes between planned and actual stratigraphy were the result of the tectonic zone presence. Many technical problems with well drilling were encounterd. Nearly 800m of core was recovered and is now beeing subjected to the detailed laboratory analysis. The well was logged with all necessary tools to get the reservoir characteristics as accurate as possible.

WHAT IS THE RISK ASSOCIATED WITH EXPLORATION OF UNCONVENTIONAL GAS RESOURCES IN POLAND?

The risks associated with exploration of unconventional gas deposits in Poland include: • unrecognized geology – most of the archive wells come from 1970s and 1980s, what results in the absence of the most required data for shale prospectivity analysis (geochemical data indicating organic matter content and maturity, kerogen type etc.). Old geophysical measurements don’t give the possibility of reliable reservoir parameters estimation, • urbanization of the area – population density in Poland is quite high (122 persons/km2). What is more, the perspective zones for “shale gas” exploration are located within areas used for agriculture activities, • restrictive regulations on environmental protection – the concession owner has to take into consideration local Polish and European Union legal regulations, • large number of environmentally protected areas and objects – numerous concession areas are covered by National Parkas, Nature Preservation Areas as well as Natura 2000 zones. Exploration works are highly limited within these. Exploration should be provided according to Spatial Development Plan created by local authorities, • negative opinions from local authorities, especially from attractive touristic areas, • access to proper water resources – drilling and fracturing one horizontal well requires 8000-20 000 m3 of water, • very high capital cost (cost and number of wells, large production facilities), • cost of proper technologies,

SUMMARY AND CONCLUSIONS

Poland has the potentially largest resources of shale gas in Europe. The development of the unconventional gas/oil in Europe is still in the preliminary stage.

Exploration of unconventional gas/oil will not be easy but one should remember that such gas accumulations create opportunities for both Europe and for companies starting the exploration.

The existing evaluations of the shale gas potential in Poland are promising.

Further evaluation is ongoing and each month brings new data. The understanding of Palaeozoic formations increases with each drilled well.

It is very possible that Poland could have gas on a scale large enough not only to cover its demand, but probably to export gas or to replace coal-power generation as well.

THANK YOU FOR YOUR ATTENTION


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