The new discovery marks another step towards strengthening the PGNiG Group's position on the Norwegian Continental Shelf and confirms that its strategy to increase natural gas and crude oil production from the Group's own fields is being consistently implemented.

Such a significant volume of documented reserves of the Snadd North deposit suggests that there may exist further hydrocarbon exploration potential within the Cretaceaous formations, where several large lithofacies (stratigraphic) traps have already been identified in the area over which PGNiG Norway AS operates.

The discovery of the Snadd North deposit, in the area covered by the PL212 license near the gas- and oil-bearing Skarv field, was confirmed through exploration well 6507/5-6ST2. The main purpose of the well was to examine hydrocarbon saturation in the early Cretaceous Lysing formation lying some 800m above the mid Cretaceous formation where the Skarv deposit is documented. The drilling of the well was preceded by detailed geological and geophysical analyses by the partners, i.e. BP Norge AS, E.ON Ruhrgas Norge AS, Statoil ASA, and PGNiG Norway AS. The well confirmed existence of deposit sandstone featuring very good reservoir properties and saturated with high-methane natural gas. The drilling was finished at the depth of 2876 (TVD) in the early Cretaceous Lange formation.

Well 6507/5-5 was drilled from the Borgland Dolphin drilling rig, which continues drilling in the Skarv field area. The sea depth in the area is approximately 325 metres.

The recoverable reserves of Snadd North are initially estimated at 9-16bn of standard cubic metres of natural gas (from 57m to 100m boe). PGNiG holds an 11.9175% interest in the newly discovered deposit. Drilling of the production well through the deposit formation has been planned for H1 2011. The production well will be a sidetrack from the exploration well and will be drilled as a horizontal hole in the deposit zone.

The newly discovered deposit has material economic significance for PGNiG Norway. Snadd North will have a direct contribution to the reserves already documented on the Skarv field, which net of Snadd North amounted to: 42.1bn m3 of gas, 16.5m m3 of oil and 5.5m tonnes of NGL (434m boe). The deposit will be developed in 2011 from the Skarv platform, which will significantly reduce the capital expenditure and facilitate swift transition to production. The Snadd North deposit, containing natural gas, will significantly increase the flexibility of future production from the Skarv field. Production from Skarv is expected to start in H2 2011. The annual production of crude oil and natural gas from the field is expected to reach 0.4m tonnes and 0.5bn m3, respectively.

Currently, the project is advanced in about 80% and has progressed as scheduled.

Joanna Zakrzewska

Spokesperson for PGNiG SA