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The strategy of ORLEN Group assumes consistent development of upstream operations with the aim to secure access to crude oil and natural gas deposits. In 2011 works on strengthening and expansion of ORLEN Group position in the upstream segment were continued. Two first vertical exploration wells in the Lublin region were successfully completed. Three new concessions were added to the Company’s portfolio: Hrubieszów, Łódź and Sieradz.

Activities carried out last year included mainly implementation of projects held in the portfolio, defining project assumptions for coming years and analysis of potential investment objectives.

In 2011 the Company consistently expanded the team of experts prepared for conducting comprehensive assessment of extraction projects, in terms of their technical and economic potential. Apart from the G&G (geological-geophysical) team, reservoir engineering and M&A divisions, the personnel of ORLEN Upstream was expanded by operational staff, supervising drilling works carried out by the Company. Consistent monitoring of the world market of extraction projects allows for efficient assessment of the potential of occurring acquisition opportunities. Whereas constantly expanded database, containing information on projects, allows for their selection in such a way that they correspond to the Company’s strategy to the fullest possible extent.

The major expansion projects contributing to the development of the upstream sector in 2011 included:

  • consecutive stages of the exploration and production projects in the Lublin region (including completion of two wells for exploration of shale gas),
  • ongoing exploration and appraisal project on the Baltic Shelf in the Latvian Economic Zone (including preparation for exploration drilling),
  • implementation of the first stage of the Sieraków project, covering initial appraisal and drilling of the first well,
  • initial analyses of available data and development of project assumptions for newly acquired Hrubieszów, Łódź and Sieradz concessions,
  • studies and analyses of several dozen potential exploration and production projects/assets in various geographic locations,
  • comprehensive analyses of a few selected projects related to the purchase of production assets outside Poland.

Over the next few years, the Company will continue six ongoing projects. Three of the projects are focused on exploration and appraisal of hydrocarbon from unconventional deposits: Lublin project, Hrubieszów project and Mid-Poland project; the other three are designed to provide crude oil and gas from unconventional deposits: the Lublin Basin project, the Baltic Sea project and the Sieraków project.

Lublin Basin project

This project is carried out by ORLEN Upstream, fulfilling the role of an operator. Key tasks performed under this project in 2011 include mainly integrated data assessment process and verification of knowledge on the geologic structure of the region and preparation of recommendations for potential drilling sites. The best perspectives concern sandy and silty Carboniferous formations and carbonate Devonian formations lying at the depth of appr. 1.2 km to over 4 km, which cover the biggest deposits ever discovered in this region.

For 2012, the company has planned additional 3D seismic works in this area. One exploration well is also possible, provided that the potential of the studied area is positively appraised.

Offshore project on the Baltic Sea

The project on the Baltic Sea is an off-shore project, located on the Latvian Baltic Shelf conducted by ORLEN Upstream in cooperation with Kuwait Energy Company. In 2011 under this project the company conducted numerous activities, most important of which concern reinterpretation and integration of available historic geological data as well as results of newly performed 3D seismic tests covering the area of over 300 km2. Data collected from measurements helped determine more precisely the structural and tectonic construction of initially identified – on the basis of 2D tests – areas of potential hydrocarbon resources (potential crude oil and natural gas deposits). At the end of 2011 the technical team initiated the selection of sites for future wells. Designs of wells have been developed and it is possible that ORLEN Upstream will drill the first exploration well in 2012. The project carried out in the Latvian Economic Zone allows to build competence and experience by ORLEN Upstream in the scope of upstream operations at sea.

Sieraków project

Sieraków project is an exploration and production project implemented by ORLEN Upstream in cooperation with PGNiG within the area of the Polish Lowland. The main objective of the works is geological appraisal of the structure of the Main Dolomite, confirmation of existence of industrial deposit resources, their development and launching of production.

At the beginning of 2011 the company drilled the Sieraków-5 appraisal well. Collected data served to update the static geological model and dynamic simulation model of the deposit, and consequently to select subsequent sites for appraisal wells. If planned drillings confirm the accumulation of hydrocarbon in industrial quantities, the project will enter the development stage, as part of which the company plans to make three production wells and to construct a surface facility over the next few years. In accordance with previous assumptions, another appraisal drilling is planned for 2012.

Lublin project

This is the most advanced project to confirm the presence of unconventional gas deposits, carried out by ORLEN Upstream under five concessions (Bełżyce, Garwolin, Lubartów, Lublin, Wierzbica). In the initial period the company performed 2D field seismic works under the project. Collected data were processed and integrated with historical data. In 2011, the company also developed two geological and technical projects for Wierzbica and Lubartów sites, and then drilling and measurement works were carried out on these wells. Decision regarding further works in this area will be made on the basis of results of analyses and tests of core samples. If conclusions are positive, the company plans to carry out horizontal wells and fracturing.

Drilling works were preceded by a series of meetings with inhabitants of Wierzbica and Niedźwiada municipalities, as well as with representatives of local authorities at all levels. The meetings were accompanied by lectures on the exploration and appraisal of unconventional gas deposits. Moreover, the company engaged in the life of local community by initiating educational programmes in schools in Berejów, Niedźwiada i Wierzbica, and by supporting local sports organisations and promoting environmental activities. The wells are subject to comprehensive technical supervision, which confirmed that all operations were carried out properly, in compliance with all procedures provided for by law and best operational practices. Moreover, monitoring of the natural environment and infrastructure was carried out before initiation of drilling, and the same scope of measurements has been recommended after completion of works.

Hrubieszów project

In March 2011, the Department of Geology and Geological Concessions of the Ministry of Environment granted to ORLEN Upstream another five-year concession for exploration and appraisal of natural gas deposits in the Lublin region. The area covered by the concession encompasses 414.5 km2 and is located within the south-eastern part of the Lublin Coal Basin, in Chełm and Hrubieszów poviats. ORLEN Upstream plans to carry out three stages of geological works in this region. The first one will cover the analysis of historical geological data and designing of field seismic works. The second one – design, execution and interpretation of 2D seismic images covering a length of 50 km and 3D seismic images covering the area of 30 km. The third stage will include design and execution of appraisal wells. Acquisition and interpretation of seismic data is planned for 2012.

Mid-Poland project

In July 2011 the concession procedure for two new areas: Łódź and Sieradz was completed. Exploratory concessions granted to ORLEN Upstream cover the total area of 1,683.5 km2 and are located in the south-western part of the Łódzkie Voivodship. The main geological targets in this area include assessment of the potential presence of hydrocarbons in unconventional deposits of tight gas and shale gas type. The three-year exploratory programme was divided into two stages. During the first year, the company will concentrate on analysis, reprocessing and reinterpretation of historical geological information. The second two-year stage will cover the acquisition of new 2D and/or 3D seismic data, integration of new and historical geological data, assessment of the area and development of recommendation for appraisal by drilling methods. The next stage will be acquisition of an appraisal concession and drilling of exploratory and appraisal wells. Reinterpretation of historical seismic data is planned for 2012.


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