Orlen Invests in Energy Security

Liquefied Gas Takes the Lead

Orlen imports liquefied gas through the LNG terminal in Świnoujście, and uses the Lithuanian LNG terminal in Klaipeda as well. It has also reserved some capacity at a floating terminal that will be built in the Gdańsk Bay in late 2027 – early 2028. Its regasification capacity will be 6.1 billion cubic meters of natural gas per year.

In 2022, LNG deliveries were the main source of imported gas. They accounted for as much as 43 percent of all imports of this commodity – amounting to about 6 billion cubic meters. Switching to offshore supplies was prompted by the gas crisis in Europe, triggered by the war unleashed in Ukraine by Russia.

As of December 15th this year, since the launch of the terminal in Świnoujście, a total of 264 deliveries have been made for the amount of approximately 20 million tons. Most shipments came from Qatar (130) and the United States (113). However, Poland also received deliveries from other countries, including Norway (13), Nigeria (3), Trinidad and Tobago (3), Egypt (1) and Equatorial Guinea (1). The vast majority of liquefied gas coming into Poland is regasified; once in a gaseous state, it is sent to the national grid and then to end consumers.

Gas Carriers Will Increase Supply Flexibility

Orlen is expanding its fleet of gas carriers that will carry LNG shipments for the group in the coming years. The concern will use eight vessels under a long-term charter contract with the Norwegian Knutsen OAS Shipping company (6 vessels) and the Greek Maran Gas Maritime company (2 vessels). The shipowners will be responsible for manning the vessels and their technical condition, while PGNiG Supply & Trading – Orlen's London-based trading company – will have full commercial control over the vessels.

The company is to charter them for a period of ten years, with the possibility of extension. Each vessel can transport about 70,000 tons of liquefied gas, equivalent to about 100 million cubic meters of natural gas in a gaseous state. This is the average amount that all households in Poland consume per week. The ships have been sized so as to be able to enter almost any LNG terminal in the world. Four gas carriers are already in operation. The final units are planned to enter service in 2025.

The ships are equipped with solutions that increase their energy efficiency and reduce their environmental impact. These include integrated management of electricity consumption and a re-condensation system that allows recovery of gas that evaporates naturally during transport.

Own Extraction – the Best Guarantee of Supply

Orlen's strategy until 2030 assumes investments at a level of PLN 320 billion, of which PLN 70 billion is to be allocated to developing extraction projects as well as gas trading and distribution. The upstream segment is to develop intensively; in 2030 its EBITDA is expected to reach PLN 90-100 billion, while the total EBITDA of the entire group at that time will be over PLN 400 billion. The company has assumed that its own production will reach 12 billion cubic meters of gas, half of which is to come from Norway.

Orlen continues to strengthen its position on the Norwegian Continental Shelf, where it is acquiring successive assets. It currently operates 19 production fields, with eight more under development. With the recent purchase of a 100 percent stake in KUFPEC Norway, a subsidiary of Kuwait Foreign Petroleum Exploration Company, annual Orlen's gas production there will increase by a leap of about 1 billion cubic meters, to more than 4 billion cubic meters.

This is not the end of acquisitions in the region. Discussions in that regard are ongoing. And history shows that on average, the group completes one acquisition per year. Company representatives indicated that a few more, probably two to four, acquisitions need to be pursued to obtain another 2 billion cubic meters of gas. This will allow the company to meet its strategic plan, which is to produce 6 billion cubic meters of gas per year in Norway.

After finalising the purchase of KUFPEC Norway, the group will rank eighth among players on the Norwegian continental shelf in terms of total production (this will amount to more than 100,000 barrels of oil equivalent per day), while in terms of gas production it will move up to seventh place. The Group will hold 94 licenses on the Norwegian continental shelf, ranking it fifth among companies operating in the area.

This direction is important because gas produced in Norway is sent to Poland via the Baltic Pipe pipeline. The capacity of the connection is 10 billion cubic meters per year, of which Orlen has reserved more than 80 percent. The assumption is that as much of this capacity as possible should be filled with its own gas production.

Domestic Gas Deposits

Apart from Norway, the group has small-scale extraction operations in Pakistan (approximately 300 million cubic meters per year). The output is sold locally. Since 2013 it also has concessions in Canada, with the principal assets located in the province of Alberta. In that market, extraction is carried out mainly from shale deposits, using horizontal drilling and hydrofracking. Exploration activities are also underway in the United Arab Emirates.

The company continually invests in domestic production. Admittedly, domestic gas deposits are largely depleted, dispersed, and the gas is difficult to access. However, the company is making efforts to extract the domestic hydrocarbon deposits to the fullest, to utilise them to the maximum, partly thanks to new technologies and digital tools that have been developed for this purpose in recent years.

Currently, domestic production is about 3.5 billion cubic meters of gas per year. The Group operates 52 oil and gas mines, mainly in southern and western Poland. Production is also carried out at domestic fields in the Baltic Sea.

Storage Capacity Is Growing

Storage is a key element of the country's energy security. Orlen has begun expanding its Underground Gas Storage Facility in Wierzchowice in the Lower Silesian Voivodeship. The facility was built at the site of a former natural gas deposit. The expansion currently underway is the largest investment of its kind in the gas storage segment. When completed, the facility's capacity will increase by 60 percent, up to 2.1 billion cubic meters.

The total storage capacity in Poland will increase as a result of this project by a quarter, exceeding 4 billion cubic meters of gas. This volume is equivalent to ten months of gas consumption by all households in the country. This is an important safeguard to guarantee continuity of supply in case of unforeseen events.

The Green Direction

Natural gas will continue to be used in Poland for a long time to come – in power generation, heating, industry and households. But Orlen Group is already thinking about the future, preparing for the new, post-transition reality. It is pursuing investments in renewable energy sources – solar and wind, the latter both on land and offshore.

It is also pursuing a hydrogen strategy. Expenditures in this area are expected to reach about PLN 160 billion. By 2030, Orlen wants to have 1 GW of installed capacity in low- and zero-emission hydrogen production facilities. The goal is to produce about 130,000 tons of renewable hydrogen. The company plans to build ten hydrogen hubs – in Poland, Czechia and Slovakia.

The possibility of transferring hydrogen using the natural gas transmission networks owned by Orlen Group is being explored. The pipelines are about 200,000 kilometres long. In addition, the company's large-scale natural gas storage facilities may be expanded with additional caverns suitable for long-term hydrogen storage.

Biogas Plans

One important element of Orlen's strategy is the construction of biogas and biomethane plants. PGNiG BioEvolution, responsible for this area, is in charge of searching for projects, preparing for the construction of plants and comprehensive production management. In addition, it is expected to integrate the projects developed to date within the group, including the biogas plants it already owns.

The corporation aims to produce at least 1 billion cubic meters of biogas per year by 2030. Production is by all means desirable. It enables waste processing and production of heat, electricity or gaseous fuel from obtained biogas, at the same time disposing of waste that is onerous for people and the environment. Biogas and biomethane production facilities are ideally suited for circular economy.

Orlen has been active for years in trying to ensure Poland's energy security. This issue has always been extremely important to the group. The current geopolitical situation confirms how far-sighted that decision was. The war in Ukraine initiated by Russia, and the resulting raw material crisis, forced all of Europe to make efforts to diversify hydrocarbon supplies, including gas, at the same time. After all, the Old Continent was dependent on imports from Russia. Poland took steps in this direction earlier, which is why it weathered the crisis unscathed. Steps toward independence from external supplies must be continued. The green transition is moving in precisely this direction. Therefore, further investments in energy security must not be slowed.

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