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The Facility is the first credit facility obtained by PGNiG under the Reserve Based Loan formula. Under the formula, the lenders' claims are secured primarily by specific crude oil or natural gas reserves. The Facility will be one of the key sources of financing for PGNiG in the years to come. It will provide financing needed to complete the Skarv project, while allowing PGNiG more flexibility with respect to its planned exploration and production activities in other areas. Thanks to the Reserve Based Loan formula, the Facility will have little impact on PGNiG SA's debt capacity, as it is secured on its Norwegian assets and will not directly encumber the Company's business in Poland. What is important, the Facility will help the PGNiG Group achieve additional savings in finance expenses.

The Facility is a revolving credit facility, granted for the term of seven years and in which Crédit Agricole CIB acts as Facility and Security Agent and BNP Paribas and Société Générale as Technical Banks. It will help the PGNiG Group meet the financing requirements connected with its operations on the Norwegian Continental Shelf. The proceeds from the Facility are to be used primarily to finance the expenditure on the Skarv field development project. However, after having financed the Skarv project, PGNiG Norway may flexibly use any remaining proceeds.

The amount of funds which can be made available under the Facility is based on the value of the Skarv field, where PGNiG Norway holds 11.9175% shares. In recent months, the banks performed a detailed due diligence of the Skarv project and PGNiG Norway, including the reserves volumes and production plans. The Skarv project was highly assessed by the technical teams working for the banks, which enabled PGNiG to obtain the Facility under attractive terms.

The execution of the agreement confirms the Skarv field's large potential, which is large enough to serve as security for the Facility even before the start-up of production. PGNiG Norway purchased its 11.9175% interest in the Skarv field in 2007 and has been developing the field ever since. The Skarv project is currently the largest production project in Norway. It has already been completed in some 85%, and production is scheduled to commence in the second half of 2011. Currently, the most advanced work is carried out at a South Korean shipyard, which will soon deliver a Floating Production, Storage and Offloading System (FPSO). Measuring 292m x 51m, it will be the largest vessel of this type in the world. Concurrently, production wells are being drilled and sub-sea installations, to be connected to the FPSO, are being prepared in Norway. So far, the project has been implemented on schedule and within budget.

Until the end of 2009, PGNiG invested in Norway approximately USD 760m, of which around USD 660m was spent on the Skarv project (including the purchase price of USD 360m and the capital expenditure of USD 300m incurred in 2007-2009). The completion of the project will require a further investment of some USD 300m in 2010-2013. The entire sum will come from the Facility proceeds. The total planned capital expenditure on the Skarv project (USD 960m) is consistent with the information disclosed by PGNiG in 2007.

The Skarv project is the first foreign project expected to bring measurable economic benefits to the PGNiG Group. As early as in 2011, PGNiG Norway will commence the production of crude oil and natural gas, expected to reach 0.5m tonnes of crude oil and 0.4bn m³ of natural gas in 2012. At current market prices, such volumes would translate into revenues of over USD 300m in 2012. It should be added that the revenues would be generated at a relatively low cost of sales.

The PGNiG Group might achieve additional economic benefits if new discoveries were made in Norway. The licences in the vicinity of the Skarv field have a significant exploration potential. In 2010, PGNiG Norway discovered, in cooperation with its partners, the Snadd North field, whose resources are estimated at 57m -100m barrels of oil equivalent (BOE).

The aggregate recoverable resources of the Skarv, Snadd and Idun fields corresponding to PGNiG Norway's interest in the fields exceed 66m BOE, which represents almost 10% of the PGNiG Group's total resources. PGNiG Norway is currently implementing an ambitious plan to acquire new crude oil and natural gas deposits. Proceeds from the Facility will help it smoothly implement the plan. Over the next seven years, the company's liquidity will be guaranteed irrespective of the prevailing market conditions, as long as the financial covenants included in the Facility agreement are not exceeded.

Joanna Zakrzewska

Spokesperson for PGNiG SA