Objectives and ambitions for 2017−2022 Implementation of the Strategy in 2017–2021

In 2021, implementation of the Strategy in terms of building a base of documented hydrocarbon reserves, developing the discovered domestic deposits, and producing hydrocarbons from Polish fields proceeded as planned.

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 2021, PGNiG UN took steps to significantly ramp up production and improve operating performance (thus pursuing its strategic objective) through investments, i.e. the acquisition of INEOS E&P Norge AS (completed at the end of September 2021), completion of investment works and launch of production from Duva, Ærfugl and Ærfugl Nord, launch of investment works on the Tommeliten Alpha field and third development phase on Ormen Lange, preparation of development concepts for the King Lear, Alve Nord, Fogelberg, Cape Vulture and Shrek deposits, and further works on currently producing fields. In addition, there are yearly APA rounds (Awards in Predefined Areas), where the company can bid for more licence interests.

In 2021, exploration and production work within the Kirthar licence area in Pakistan was carried out as planned. PGNiG also acquired a 25% non-operator interest in the Musakhel exploration licence, where work completed in 2021 included the acquisition and interpretation of gravimetric data.

Wholesale

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 2021, PGNiG successfully continued its sales strategy and retained the customer base.

In 2021, PGNiG’s sales of high-methane grid gas in Poland amounted to 198.5 TWh (ca. 18.1 bmc), up by 7.5% relative to 184.7 TWh (ca. 16.8 bcm) in 2020. 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. Given the prevailing market situation and high levels of gas in Ukrainian storage facilities, gas was not imported into Ukraine from the west for a major part of 2021 and the Company’s trading activities in that country focused on transactions to purchase/sell gas held in Ukrainian underground storage facilities.

In response to the significant growth of market demand, in 2021 PGNiG continued to very dynamically grow its small-scale LNG business, where gas is sold in the form of LNG transported by road tankers to regasification facilities with no access to the distribution network. The volume of fuel delivered to end users in the form of liquefied natural gas is growing steadily.

Retail

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.

In 2021, the Company’s market situation was largely driven by post-pandemic economic changes combined with an unprecedented surge in gas prices on European markets, with which the prices quoted on the Polish Power Exchange (POLPX) are correlated. In particular, strong fluctuations in the prices of fuels and energy carriers on wholesale markets had an adverse effect on PGNiG’s ability to deliver its commercial policy targets in terms of margins and net profit.

Storage

In 2021, GSP had been working on the construction of the Kosakowo CUGSF, comprising five chambers in Cluster B, which were filled with gas and put into operation in September 2021 (the project was finally completed in December 2021).

In addition, as part of the H 2020 project, GSP prepared feasibility studies for an underground hydrogen storage facility at the Mogilno CUGSF and for a project involving large-scale hydrogen storage at salt caverns of the Kosakowo CUGSF. Another feasibility study prepared in 2021 related to possible construction of storage chambers dedicated to underground tankless storage of biomethane, including a process unit at the Mogilno CUGSF.

Working towards its strategic objectives, PSG continued activities which in 2021 led to the execution of more than 119.3 thousand connection contracts and supply of 13.14 bcm of natural gas to customers. By the end of 2021, over 260 thousand decisions defining the terms of connection were issued (an increase of 17% year on year) and 119,2 thousand service lines with a total length of 1,133.7 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, 32 new municipalities were connected to the gas distribution network (217 in total since the Programme was launched). In addition, the distribution network is being extended to underserved areas, and gas is supplied to customers using the liquefied natural gas (LNG) off-grid technology. In 2021, 31 newly constructed LNG regasification plants were commissioned by PSG and two more were purchased from PGNiG S.A.

In addition, PSG was implementing projects to build CNG stations. By the end of 2021, 20 CNG stations, including two LCNG stations, were commissioned.

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.

The PGNiG TERMIKA Group is taking steps to upgrade its old and environmentally inefficient generation assets to meet environmental regulations, stricter industrial emissions standards, the BAT (best available technology) criteria and requirements of the climate policy. The key investment projects underway in 2021 included the performance of the contract to construct a CCGT unit and a peak-load boiler house at the Żerań CHP plant (placed in service in December 2021), an investment programme to upgrade the Pruszków CHP plant (execution phase) and a programme to upgrade the Kawęczyn heat plant (contract award phase). Work is being continued on the project to construct a multi-fuel unit at the Siekierki CHP plant. In 2021, the project was revised in terms of its target fuel mix and a decision was made to fully depart from coal.

In 2021, the PGNiG Group monitored the implementation of 106 R&D&I projects. The total amount of expenditure incurred by the Group on the projects was approximately PLN 332m. In 2021, 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.