PGNiG to Acquire Stake in Norwegian Shelf Licenses
Polskie Gornictwo Naftowe i Gazownictwo S.A. (PGNiG) on Wednesday concluded a conditional agreement with Mobil Development Norway A/S and ExxonMobil Production Norway Inc. to purchase a 15% interest in the Norwegian exploration licenses PL 212, PL 212B, PL 262 containing the Scarv and Snadd fields on the Norwegian Continental Shelf.
In accordance with the agreement, PGNiG will purchase a 15% interest in the licenses for the price of US$ 360 million on a post tax basis.
Execution of the Agreement is subject to a number of conditions:
a) approval of the general shareholders' meeting of PGNiG and other required PGNiG approvals; and b) approval by the Ministry of Petroleum and Energy according to section 10-12 of the Norwegian Petroleum Act; c) the Ministry of Finance having issued a tax ruling in accordance with section 10 of the Petroleum Taxation Act; and d) no pre-emption rights being exercised.
The Agreement can be terminated if at least one of the following conditions is not met, that is:
1. if condition a) is not be met by 15 May 2007, and 2. the remaining conditions are not met by 1 November 2007.
Moreover, in order to execute the Agreement, it is necessary for PGNiG to obtain a so-called Pre-qualification and Qualification from the Norwegian Ministry of Petroleum and Energy, which is a standard procedure for investors considering an investment in the oil industry in Norway. In addition to obtaining the qualification by the time all of the conditions are met ("the Completion Date") PGNiG is also required to obtain a gas shipper license not later than 2 months after the Completion Date.
On the date of acquisition of the Licenses, the Company will become a party to a number of agreements related to the organization and exploration of the resources.
Within the area covered by the Licenses, which are the subject of the Agreement, recoverable resources ("the Resources") have been discovered to-date in the Skarv and Snadd fields. The Resources are located in the Norwegian Sea, around 200 km west of Sandnessjoen, at a depth of between 300 m and 400 m.
According to the data approved by the NPD (Norwegian Petroleum Directorate) (2006 Fact Book), all Resources, in which PGNiG will purchase the above-mentioned interest from ExxonMobil, are estimated as follows:
- 35.8 bcm of natural gas;
- 18.3 mmcm of crude oil and condensate (approx. 15 m tonnes);
- 5.8 m tonnes of NGL (Natural Gas Liquids).
It is likely that these numbers will increase by about 20 percent as a result of unitization with the Idun field; however, PGNiG interest in the unitized area would then be decreased.
BP is the operator of the development, and the other partners include: Shell, Statoil and Norsk Hydro. The development is currently at the Front End Engineering Design ("FEED") stage and is expected to advance to the Plan for Development ("PDO") stage in mid 2007. The production of natural gas and crude oil is expected to start in mid-2011. PGNiG estimates capital expenditure for development of the Resources will amount to approximately US$5 billion, out of which, accordingly, PGNiG's capital expenditure will amount to approximately US$600 million
The acquisition of these three exploration and production licenses in Norway marks PGNiG's first major international acquisition in the upstream sector. This acquisition is in line with PGNiG's stated strategy to expand its upstream oil & gas reserves outside of Poland and to secure more diverse sources of gas supply. PGNiG believes that the Norwegian Continental Shelf is highly prospective and the Company's entry into Norway represents an important milestone in its strategic development. PGNiG's investment in the Licenses is a long-term investment.
Norwegian law governs the purchase agreement.
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