Objectives, ambitions and implementation of the Strategy in 2017–2020

Ambitions:

Increase hydrocarbon reserves and production

Objectives:

Expand the documented resource base by ca. 35%

Increase hydrocarbon production by ca. 41%

Significantly reduce unit cost of exploration and appraisal activities

Maintain unit cost of hydrocarbon development and production

* CAPEX including expenditure on acquisition of hydrocarbon deposits.

In 2020, implementation of the Strategy in the areas of building a base of documented hydrocarbon reserves, developing the discovered domestic deposits, and producing hydrocarbons from Polish fields proceeded in accordance with the assumptions. PGNiG conducted activities under its exploration and production licences located mainly in the provinces of Szczecin, Poznań, Rzeszów and Kraków, and continued its exploration for and appraisal of crude oil and natural gas deposits.

Given the limited capacity for growth in discoveries of new hydrocarbon reserves and little prospects of finding unconventional reserves in Poland, the Group is also looking for ways to increase its hydrocarbon reserves and step up production abroad. The Group remains committed to carrying out production projects which will yield equity gas on the Norwegian Continental Shelf, in order to directly transport the gas to Poland.

In 2020, in the pursuit of the strategic objective of scaling up hydrocarbon production outside Poland, PGNiG UN took steps to acquire nine new fields. As a result of the investments made, the company also achieved a significant increase in proven reserves in Norway, which rose from 169.4 m boe at the beginning of the year to 214 m boe by the end of 2020.

PGNiG also conducts exploration work in Pakistan. In 2020, the drilling, testing and tying-in of production wells was completed and work was underway to expand the capacity of the production facilities.

Aspirations:

Retail: Maintain current market position and maximise margins

Objectives:

Maximise retail margins while maintaining the total volume of retail gas sales at ca. 67–69 TWh/year

In implementing the Strategy guidelines, a number of initiatives, projects and operational activities are carried out to support achievement of the strategic objectives in all four defined areas: implementation of a margin defence strategy, optimisation and digitisation of customer service processes, development of product offering, and development of energy consultancy activities.

To achieve the strategic objectives set out in the defined areas, PGNiG OD carries out projects and operational activities in the following areas: new billing system, development of the product offer (including LNG bunkering services, photovoltaic solutions, additional/non-energy products) and development of customer service tools.

Aspirations:

Ensure availability of storage capacities

Objectives:

Ensure availability of storage capacities adjusted to actual demand and improve storage efficiency

In order to secure availability of the target storage capacities, in 2020 GSP worked on the construction of the Kosakowo CGSF, consisting of five chambers in Cluster B, which are to be filled with gas and put into operation in 2021, which will increase the working capacity to 250 mcm of gas.

Aspirations:

Diversified and competitive gas supply portfolio

Objectives:

Build a diversified and competitive gas supply portfolio beyond 2022

Increase total volume of natural gas sales by ca. 7%

In view of the expiry of the Yamal contract in 2022, the Group seeks to achieve real diversification of its gas supply portfolio. In this respect, the Group’s key activities include:

• Supporting the Baltic Pipe project by entering into transmission contracts – the Group’s strategic objective is to build a mix of gas supply sources that would be available via the Baltic Pipe, to enable gas imports from new directions and at market prices, thus ensuring flexibility of the gas supply portfolio beyond 2022;
• Developing LNG trading and logistic competencies on the global market – this will help the PGNiG Group create a more flexible gas supply portfolio beyond 2022 as the Group will be able to swiftly balance its gas imports. PGNiG has signed long-term contracts for the supply of liquefied natural gas to Poland which are to be performed after 2022.
• Expanding the resource base in Poland and abroad – by developing and maintaining high gas production levels in Poland and investigating potential for acquiring gas from new directions with a view to strengthening the Company’s competitive position beyond 2022.

In 2020, PGNiG’s sales of natural gas in Poland totalled over 190 TWh. The Group is aspiring to further increase its natural gas trading volumes in Poland and on international markets. The Group intends to continue efforts to strengthen its presence in the markets of Central and Eastern Europe, including the Ukrainian market, one of the most promising in the region.

Aspirations:

Step up gas network roll-out in Poland

Objectives:

Construct more than 300 thousand new gas service lines

Increase gas distribution volumes by ca. 16%

Working towards its strategic objectives, PSG continued activities which in 2020 led to the execution of more than 113 thousand connection contracts and supply of 11.57 bcm of natural gas to customers. By the end of 2020, over 208 thousand decisions defining the terms of connection were issued (an increase of 17% year on year) and 112,9 thousand service lines with a total length of 1,118.7 km were built.

The ‘Programme for accelerating investments in Poland’s gas network’ announced in 2018 provides that by 2022 around 90% of all Poles will live in municipalities connected to the gas grid. As part of the Programme, 71 new municipalities were connected to the distribution network. In addition, the distribution network is being extended to underserved areas, and gas is being supplied to customers using the liquefied natural gas (LNG) technology (island gasification). By the end of 2020, 37 commissioning certificates were signed for new LNG stations.

Aspirations:

Increase energy generation volumes

Objectives:

Increase power and heat sales volumes by ca. 20%

The strategic vision for PGNiG’s power and heat generation business is to effectively expand the generation capacities and provide district heating distribution services. The PGNiG Group also intends to increase heat sales and distribution volumes by acquiring district heating assets and expanding its generation business across Poland. In 2020, the PGNiG Group’s strategy for the power and heat generation business was pursued through participation in acquisition projects on the Polish district heat market and the implementation of strategic investments in the existing assets to meet the more stringent industrial emission standards, BAT (best available technology) criteria, and requirements of the climate policy.

Aspirations:

Effective business model, development of R&D&I and CSR

Objectives:

Increase involvement in and effective execution of R&D&I projects (target outlays of ca. PLN 680m)

Improve operational efficiency across the PGNiG Group

Enhance the Group’s image

Capital expenditure in 2017–2020 totalled PLN 21.5bn, representing approximately 63% of the 2017−2022 CAPEX plan.

In 2020, the PGNiG Group monitored the implementation of 150 R&D&I projects. The total amount of expenditure incurred by the Group on the projects was approximately PLN 515m. In 2020, innovation and development projects were underway, competencies in the following key areas gradually developed: Renewable energy sources, Alternative fuels, Energy Efficiency, and InnVento Startup Centre.