Integrated Annual Report of LOTOS Capital Group 2016

Key growth-oriented projects of the LOTOS Group

Objectives, activities, results in 2016

Profile of the B8-7K horizontal well Enlarge picture
Drilling path (drawing)

Our key growth-oriented projects carried out in 2016 in the Upstream segment include: 

B8 field development − doubling of oil production in the Baltic Sea

In September 2015, LOTOS Petrobaltic started profitable production from the B8 field, which − despite a 60% decline in crude oil prices − has made a positive contribution to the company's financial standing. In 2016, our oil production in the Baltic Sea doubled, partly as a result of completion of the LOTOS Group's first ever drilling of the B8-7Khorizontal well using the innovative drilling technology RSS. Bringing the well on stream allowed us to enhance oil recovery from the field.

The B8 site is the third largest oil production facility in Poland; the field holds the largest recoverable oil reserves in the Polish part of the Baltic Sea. Its 2P reserves are 29.5 mboe (chiefly oil), current production is 2,800 boe/d, and planned production − 5,000 boe/d.

Launch of the Utgard Project

In 2016, we made and formalised a decision to start the Utgard project. Its objective is to develop a new field in Norway through a tie-in with the nearby Sleipner area infrastructure, and to launch hydrocarbon production in 2019/2020. The field's 2P reserves are 8.1 mboe (55% crude oil and 45% natural gas), with planned daily production volumes of 4,000 boe/d.

More information
Directors’ Report on the operations of Grupa LOTOS S.A. and the LOTOS Group in 2016

Chapter 2.2. Status of key development projects in 2016 (in terms of subtitle „Innovation and development projects”)

Upstream strategy for 2017–2022

Our main upstream objectives for the next 5 years are sustainable growth, continued development of a balanced upstream portfolio, and position of a production leader in the Baltic.

Sustainable growth of the Upstream segment will be pursued by the LOTOS Group through presence on predictable markets, i.e.: 

  • Expansion in Norway (centered around hubs, Norwegian Continental Shelf) and Poland (Baltic Sea), and
  • Geographical diversification in response to market conditions. 

Development of a balanced upstream portfolio will consist in diversification of production sources and licence structure, i.e.:

  • Increasing involvement in field development projects,
  • Gradually increasing the role of oil and gas exploration,
  • Expanding the asset portfolio by capturing market opportunities, 
  • Reducing the share of mature fields in the portfolio. 

In practical terms, the LOTOS Group strategy for 2017−2022 means:

  • Development of the following fields: B4/B6 (gas), Utgard, FriggGamma Delta, and YME,
  • Production from the following fields: B8, B3; Lithuanian fields; Heimdal and Sleipner (70% crude oil, 30% natural gas),
  • Exploration for new oil and gas deposits under onshore and offshore licences,
  • Production of crude oil and natural gas at 30,000–50,000 boe/d

The upstream strategy is to be implemented in two stages. Its success metrics set for 2017–2018 are 2P reserves at approximately 60 mboe and production at approximately 22,000 boe/d. The corresponding targets for 2019–2022 are 2P reserves at more than 60 mboe and production at 30,000–50,000 boe/d.

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