PGNiG Upstream Norway AS, part of the PGNiG SA Group, signed a sales and purchase agreement with Equinor (formerly Statoil) to buy into the Tommeliten Alpha gas and condensate field, located in the southern part of the Norwegian Continental Shelf in the greater Ekofisk Area. The transaction marks a next step in the implementation of the PGNiG Group’s strategy and will allow for a significant increase in natural gas production outside Poland.
“This latest gas field acquisition in Norway is of special importance to us. It means a significant increase in natural gas production in the region. It is from here that we plan to send gas to Poland via Denmark through planned Baltic Pipe pipeline. Thanks to this transaction PGNiG is entering high-profile group of oil&gas companies in the Ekofisk Area. The Tommeliten Alpha project allows us to implement our diversification strategy at attractive financial terms. This is good news to our shareholders,” Piotr Woźniak, President of the Management Board of PGNiG SA said.
The purchase price was agreed to be 220 USD million at the contractual date of transaction on January 1, 2018. According to PGNiG estimates, the acquisition will allow to increase company’s gas production output from Norwegian portfolio by 0.5 bcm/year in the first six years of the production. In addition Tommeliten Alpha will allow PGNiG to extract approx. 0.5 million tonnes of oil and NGL in the peak production year.
Tommeliten Alpha is a gas and condensate field with documented recoverable resources amounting to 12.8 bcm of natural gas, 5.9 mcm of oil (approx. 5 million tonnes) and 0.5 million tonnes of NGL (according to the Norwegian Petroleum Directorate – NPD), equivalent to approx. 52 mmboe (net to working interest acquired by PGNiG). PGNiG believes in an upside potential in the field reserves. In addition there is a significant exploration upside in the direct vicinity of Tommeliten Alpha.
Tommeliten Alpha discovery is located in the North Sea in the direct vicinity of large, already developed fields, including giant Ekofisk. According to current plans, the production is expected to commence in 2024, and the development concept assumes subsea tie-back to the existing infrastructure on Ekofisk. This will allow for a cost-effective development, further decrease of future production cost and will accelerate the field’s start-up.
The discovery will be developed with the participation of large and experienced oil companies. The operator is ConocoPhilips (28.26%), and current partners are Total (20.23%), Eni Norge (9.13%) and Equinor (42.38%) which will sell its entire working interest to PGNiG. These companies have cooperated in the Greater Ekofisk Area for numerous years and successfully realized a number of development projects similar to that of Tommeliten Alpha in scale and development model.
“The purchase of new assets in Norway is a natural and strategic investment direction for the PGNiG Group. PGNiG has a long-term plan for Norway, and has already gained experience and well-established position in the region. The investments made so far provide PGNiG Upstream Norway with positive and stable financial results at a relatively low level of risk,” Piotr Woźniak said.
Acquisition of the Tommeliten Alpha discovery will be dependent on standard conditions, including obtaining the required administrative consents in Norway and approval of the Supervisory Board of PGNiG SA.
PGNiG Upstream Norway currently has interests in 20 exploration and production licenses on the Norwegian Continental Shelf, and is the operator of two of them. PGNiG established its presence in Norway in 2007. PGNiG Group’s recoverable reserves in Norway are currently 83 million boe (according to NPD as of 1st January 2018). After the acquisition of shares in the Tommeliten Alpha discovery has been finalized, this amount will increase to 135 million boe (according to NPD as of 1 January 2018).