Integrated ESG
Report 2021

Summary of work related to research, development and innovation

The area’s main task is to build an efficient organisational and management model for R&D&I activities at the GK PGNiG, undertaken with a view to ensuring the Group’s competitive edge in the changing market. To this end, research, development and innovation projects are carried out to improve the Group’s long-term operational efficiency and foster its brand image. The Corporate Centre comprises the PGNiG Head Office with 16 Departments and one Office.

At the PGNiG Head Office, the R&D&I activities (solution identification, development, implementation/commercialisation), including cooperation with research and development institutions, as well as matters related to intellectual property (products of R&D activities), are managed by the Research and Innovation Department. The relevant organisational units are the Research and Innovation Department, the Business Development Department, and Central Measurement and Research Laboratory (CLPB).

Activities in 2021

Research and Innovation Department

In 2021, the Department oversaw work on 106 research, development and innovation projects. In 2021, the PGNiG Group spent a total of approximately PLN 332.6m on R&D&I and hydrocarbon identification and exploration projects, of which at the PGNiG Group companies: approximately PLN 111.1m, at PGNiG: approximately PLN 221.5m (including approximately PLN 18.5m on R&D&I projects and approximately PLN 203.0m on hydrocarbon identification and exploration projects (at the Geology and Hydrocarbon Production Branch)).

In 2021, collaborative work was being carried out with scientific and research partners on ongoing and planned R&D&I projects of interest to the PGNiG Group.

Under the INGA (INnovative GAs) joint venture, implemented in partnership with the National Centre for Research and Development and GAZ-SYSTEM S.A., in 2021 work continued on the execution of four research and development projects selected in the first INGA competition, including two exploration and production projects (INNKARP, SYNERGA), one post-mining methane recovery project (AMMUSCB), and one alternative fuels project (DME). In the second competition round of the INGA JV, two other projects were selected and scheduled for execution, one in the area of ‘Underground hydrocarbon storage’ (KAWSOL) concerning the integration of RESs with underground energy storage facilities in salt caverns, and the other in the area of ‘Exploration for and production of hydrocarbons and production of gas fuels’ (Miocen 3D) concerning exploration for unconventional hydrocarbon deposits.

All those processes are co-funded by the National Centre for Research and Development. The total budget of the projects is approximately PLN 74.4m, including NCBiR’s financing of PLN 36.4m. The objective of the INGA Joint Venture is to promote long-term innovation and competitiveness of the PGNiG Group companies in Poland and on the global market through targeted and commercialisation-oriented implementation of R&D projects and partnerships with research institutes.

In 2021, Stage 2 of the MiniDrill project was continued. The purpose of the project is to develop a technology for the drilling of a number of small-diameter sidetracks, radiating in different directions from an existing well, which will enable the acquisition of additional hydrocarbon volumes (compared with the methods currently used). In this way, the technology is expected to enable enhanced recovery of hydrocarbons from existing wells, optimising the production operations.

The key events in 2021 include the launch of the ‘Processor’ Digitalisation Programme. The total budget of projects under Tranche 1 of the Programme was PLN 137m. The aim of the programme is to maximise the benefits of digital innovation. One of its objectives is to identify areas within the PGNiG Group where the implementation of new digital technology solutions would quickly deliver benefits from the business activities of the PGNiG Group. The programme will be implemented in several tranches, with 11 projects under Tranche 1, including advanced data analysis and predictive models, digital twinning, 3D imaging combined with passporting and preparation to work in a private cloud environment.

One of the projects covered by Tranche 1 of the Digitalisation Programme is the Smart Field project coordinated by the Geology and Hydrocarbon Production Branch. As a result of the project, a flexible cloud environment is to be created for dynamic field modelling. The use of hybrid cloud computing capacity will reduce the time of preparing analyses for gas/oil deposits and enable the process to be fully automated. The above efforts are aimed at increasing the recoverable reserves of natural gas in Poland and maintaining domestic production volumes at a stable level. They also contribute to environmental protection by optimising energy consumption and reducing the carbon footprint throughout the value chain.

In 2021, the R&D&I area pursued a systemic approach to securing preferential financing across the Group. Procedures were followed to organise the identification of aid programmes, the division of responsibilities when applying for preferential funding, and the external communication with competent ministries. As a result, the PGNiG Group companies keep track of the sources of financing within the current and future EU financial frameworks and initiate application procedures for the most interesting R&D&I and investment projects.

Activities were also continued within the PGNiG Group’s Strategic Projects Committee for the Research, Development and Innovation Area. The Committee is an important forum for strategic R&D&I activities, knowledge exchange and discussions to achieve synergies in key business areas.

One of the key initiatives promoting innovation in the energy sector was the ‘PGNiG INNOVATORS’ conference organised in 2021. The conference for employees of the PGNiG Group was an online event held from June 16th to June 17th 2021. The conference highlighted the role and importance of innovation for the operations and competitive position of the entire PGNiG Group. Innovation was addressed in the context of global economic developments and trends, with attention paid not only to the need, but also to the absolute necessity to search for novel solutions and remain innovative in the rapidly changing world. The conference was attended by more than 2,000 employees of all Group companies.

Hydrogen Programme

In 2021, design work continued under the ‘Hydrogen – a Clean Fuel for the Future. Building Hydrogen Capabilities at the PGNiG Group’ programme, initiated in 2020. The programme pursues strategic objectives of the Company and the Group. Its objective is to assess and start the implementation (pilots/demonstrations) of hydrogen technologies within specific areas of the PGNiG Group’s business, including in particular distribution as well as large-scale storage and production, on the basis of identified technological capabilities and experience gained through successive R&D&I projects. The programme also aims to involve a team of specialists from all areas of the PGNiG Group’s business where a business case for implementing hydrogen technologies can be identified. Cooperation between stakeholders from different areas of the Company’s operations, while creating a single, coherent value chain, will contribute to the PGNiG Group’s commitment and increased responsibility for development and innovation growth, reduce project implementation costs, improve profitability of potential investments, and enhance the allocation of financial, material and human capital.

The following projects are pursued under the programme:

An off-grid research network to add green hydrogen to natural gas and to test the impact of hydrogen on gas infrastructure of the distribution network. In 2021, design work was completed, a permit for the construction of the Odolanów unit was obtained, tender procedures were concluded to select the electrolyser supplier and contractor for the PV unit and the battery energy storage facility.

Project to construct underground hydrogen storage facilities with the use of salt caverns. In 2021, PGNiG submitted an application to the European Commission for the ‘Important Projects of Common European Interest’ – for co-financing the project to construct energy storage facilities in Mogilno and Kosakowo, and to construct a research cavern in Mogilno. The project is being implemented by the PGNiG and GSP joint team.

Project initiated in 2021. The purpose of the project is to develop a blue hydrogen production technology (with parameters meeting the transport requirements) based on reforming natural gas integrated with a CO2 capture unit – adaptable to the characteristics of the market product and enabling hydrogen storage.

As regards the ‘Hydra Tank. Construction of a Research Hydrogen Refuelling Station’ project, considering the inability to execute the project within the time limit and at the location specified in the contract, following additional analyses, including a legal analysis, a decision was made to terminate the contract.

Activities in the Programme also include efforts not directly related to R&D&I projects. In October 2021, PGNiG joined the Sectoral agreement for the development of a hydrogen economy in Poland, coordinated by the Polish Ministry of Climate and Environment. PGNiG is also an active participant of the Hydrogen Europe association, a voluntary organisation of hydrogen market stakeholders, and the European Clean Hydrogen Alliance (ECH2A), coordinated by the European Commission. These are key platforms for broad cooperation in the development of the entire hydrogen value chain to build a hydrogen ecosystem in Europe over three decades.

Business Development Department

In 2021, the Business Development Department worked on development projects and tasks, focusing on the following key areas: Renewable Energy Sources, Alternative Fuels, Energy Efficiency and the Inn-Vento Start-up Centre.

In 2021, the ‘Photovoltaic Business’ project continued, designed to enable the PGNiG Group to enter in the prosument photovoltaic market. Under the project, a short list of companies providing such services was selected, with a view to acquiring one of them in 2022.

In parallel, under the ‘Photovoltaic Installations’ project, an inventory was made of roofs and own land that meet the criteria for the construction of photovoltaic systems and farms at PGNiG and the PGNiG Group. The first roof systems have already been installed under the project, with more systems planned to be mounted in the coming years. A concept for the development of large-scale photovoltaic farm projects has also been developed, involving the conditional acquisition of special purpose vehicles developing such projects. Technical and commercial criteria for target projects were formulated and preliminary discussions were initiated with developers of such projects.

As part of the WIND project, potential acquisitions of ready-to-build and operational wind farms are analysed on an ongoing basis. In 2021, PGNiG commenced to execute selected acquisitions; the same approach in this area is planned for 2022.

In 2021, projects in the area of alternative fuels were carried out, with a focus on the use of LNG, bioLNG, and CNG:

  • under the ssLNG/CNG (small scale LNG) Programme, the ISOLA project was launched to develop an optimum business model for off-grid gas distribution and LNG balancing, as part of which models for the off-grid gas distribution was prepared and analysis of the legal and regulatory framework was carried out;
  • Stage 2 of the Magellan project was carried out, providing for purchase of bunkering equipment. At present, the project is being continued as part of PGNiG OD’s KOLUMB 2 project;
  • the ‘Gepard’ project continued, designed to expand PGNiG’s LNG and CNG product offering for heavy road transport. Currently, the project is being implemented as part of an initiative to develop the LNG and CNG segment directly at PGNiG OD;
  • Stage 2 of the ‘BioLNG TANK’ project was completed, which provided, among other things, for establishing relations with suppliers of systems for parametrising and liquefying agricultural biogas to bioLNG, defining the terms of cooperation with the project partner, i.e. an investor in the agricultural biogas plant, and preparing draft long-term agreements on cooperation, sales of biogas and lease of land. Stage 2 of the project concluded with obtaining an internal investment decision for the construction project.

 

In 2021, following the implementation of projects improving energy efficiency, the President of URE granted PGNiG a certificate of energy efficiency for approximately 250 toe, with a value of approximately PLN 500,000. Thanks to the steady improvement of energy efficiency, the average annual savings in energy consumed approximate 13,800 toe, representing 160 GWh.

The implementation of those projects enabled the requirements of the PN-EN ISO:50001:2018 Energy Management System standard to be met, as confirmed by an appropriate certificate issued by Bureau Veritas Certification. The implemented system is a tool that enables systemic identification of energy efficiency improvement projects and eliminates the need for mandatory energy audits by external parties every four years. In total, 17 new energy efficiency improvement projects were identified at the PGNiG Branches in Sanok, Zielona Góra and Odolanów.

Moreover, the programme entitled ‘Improvement of Energy Efficiency at the PGNiG Group’ continued, designed to coordinate measures aimed at achieving benefits in energy management. Under the Programme, the Company launched further projects expected to improve its energy efficiency performance. Two projects were completed: The Dębno 4.0 project – implementation of a system for monitoring and managing utilities at the Dębno Oil and Natural Gas Production Site, and further upgrade of the gas engine at the Odolanów gas compressor station.

In 2021, InnVento’s activity focused on cooperation with the HugeTech accelerator, operator of the IDEA Global acceleration programme, co-financed with public funds (Measure 2.5 POIR – Smart Development Programme, Acceleration programmes). A similar cooperation agreement was also concluded with the Kraków Technology Park (KPT), operator of the KPT ScaleUp acceleration programme. As part of this cooperation, PGNiG can carry out pilot projects with selected start-ups in business areas that have been identified as promising for the implementation of technologies developed by small technology companies. InnVento was also a partner of the Space3ac accelerator, where international start-up teams which will join the Space3ac Poland Prize 2 programme will be given the opportunity to receive financial support and implement pilot projects for PGNiG.

In 2021, InnVento entered into agreements for six pilot projects in the following areas:

  • construction of a prototype application to support IT vulnerability management for PGNiG – Proessence start-up;
  • PoC (proof of concept) for a solution to provide a professional automatic balancing service for electricity from distributed generation sources, including by enabling the management of distributed electricity receivers, for PGNiG – TruBlu start-up;
  • development of predictive models for failures of a gas-fired boiler, their review based on historical data and demonstration implementation for PGNiG Termika – ReliaSol start-up;
  • development of an application called LeadGen (generator of leads: potential customers who would buy both gas and non-gas products and services (PV systems) for PGNiG OD; task under the Processor digitalisation programme – BitPeak start-up;
  • use of maize cob cores in the production of electricity, heat and CO2 for industrial applications as a new renewable energy source for PGNiG Termika – Photo Survey start-up;
  • a solution enabling automatic and intelligent classification of employee tickets in the Jira tool, which will enable the implementation of an automatic bot to answer employee inquiries for PGNiG OD – Alphamoon Services start-up.

In cooperation with CLPB, a technology competition was held and a bid was obtained to develop an effective, economically and technologically efficient method (a device or sensor) for measuring hydrogen concentration in natural gas that would guarantee accuracy, repeatability and stability as well as fast and correct detection.

PGNiG Central Measurement and Testing Laboratory (CLPB) Branch

The main objective of CLPB is to maintain and strengthen its market position as a leading calibration and testing laboratory accredited by the Polish Centre of Accreditation and a verification point for measuring equipment and systems used in the natural gas industry as well as a natural gas quality control laboratory for all types of natural gas, including CNG and LNG. In this area, CLPB continues to provide services such as testing the correctness and reliability of natural gas quality and quantity measurements, testing of metering equipment and systems, and provision of analyses, opinions and technical expertise. The CLPB Branch’s key customers are internal and external customers operating in Poland. The largest customers include PGNiG Group companies (Gas Storage Poland Sp. z o.o., Polska Spółka Gazownictwa Sp. z o.o., PGNiG Termika S.A., Sanok Branch and Zielona Góra Branch), GAZ-SYSTEM S.A., EuRoPolGaz S.A., KGHM Polska Miedź S.A. and Grupa Azoty Group companies.

The Branch provides metrology services for natural gas measurement and quality assessment equipment. Such equipment includes process chromatographic analysers for the assessment of natural gas quality, gas fuel dampness diagnostic devices and gas fuel density meters. CLPB also analyses the composition of natural gas, the content of odoriser and the content of sulfur compounds.

In order to enhance efficiency and the ability to take on new R&D challenges, a new dedicated unit was established within the Branch in 2020, namely the Research, Development and Innovative Technology Office. Key project initiatives implemented at the office since 2020 include:

  • New Fuel Lab (NFL) project to expand the laboratory activities of CLPB PGNiG to perform quantitative and qualitative tests of hydrogen purity for vehicle fuel applications, mixtures of natural gas with hydrogen and biomethane;
  • the Bio-CNG project: The Use of Biodegradable Fraction of Municipal Waste in Energy Production is a circular economy initiative to develop technologies for efficient preparation, processing and management of the organic fraction of municipal waste.

In 2021, new alternative fuel initiatives were launched, including:

  • The H2 Micro-Cogeneration (Micro-CHP) R&D project designed to acquire technical and economic expertise in the production process, as well as hands-on operational experience in the solid oxide fuel cells (SOFC) technology, and to subsequently develop and implement the high-efficiency small-scale micro-CHP technology based on solid oxide fuel cells (mCHP-SOFC).

Concepts and complete design documentation were prepared for the following projects:

  • The HyCogen R&D project focusing on the development of an innovative, economically viable, energy-efficient and unique technology of a gas engine in a cogeneration unit powered by a mixture of natural gas and hydrogen in any proportions (and ultimately with pure hydrogen), designed to supply electricity and heat to end users from lowest emission (and ultimately zero emission) sources;
  • The Biomethanization project intended to obtain deliverables in the form of know-how and rights to biomethanization technology in a methanogenic reactor, ready to move on to the pre-implementation stage;
  • The reFOOD project meant to develop an effective technological framework and business model based on the circular economy concept and the production of an alternative transport fuel using expired food products.

Development prospects and challenges for the future

Research and Innovation Department

PGNiG’s focus is primarily on reinforcing the PGNiG Group’s position in hydrogen technologies, further digitalisation of its business, and application of new solutions to its core business operations, particularly to Exploration and Production as well as Storage.

Priority will be given to the completion (within the adopted time frames and budgets) of ongoing R&D&I projects and to the commercialisation of further products. At the same time, new business areas that can increase the competitiveness of companies and strengthen their market position will be constantly analysed. These activities will be implemented over two time horizons.

Short-term horizon (until the end of 2022):

  • Strengthening the position of the PGNiG Group in hydrogen technologies, including by preparing an update of the Hydrogen Programme, incorporating the objectives set out in the ‘Polish Hydrogen Strategy until 2030 with an outlook until 2040’ adopted by the Polish government;
  • Under the InGrid Power to Gas (PtG) project: launch of a PV unit with a power storage facility in Odolanów in the second quarter of 2022, followed by an electrolyser unit and an island hydrogen research network in Odolanów to be launched in the fourth quarter of 2022, which will mark completion of the construction work and commencement of research activities;
  • As part of the H2020 project: launch in the third quarter of 2022 of a complete measurement vehicle capable of testing storage infrastructure containing hydrogen and natural gas-hydrogen mixtures;
  • Under the Blue H2 project, among other activities: preparation of feasibility studies for complete systems for gas reforming, CO2 capture and conditioning, and hydrogen application; as well as execution of agreements with industrial partners interested in the purchase of products (hydrogen and CO2).
  • Design and construction of an innovative turbo-expander in Odolanów, based on Polish know-how and technologies;
  • Roll-out of the passporting functionality for the power unit in the production facility, including its connection to production databases and real-time presentation;
  • Securing notification to the European Commission relating to the construction of salt caverns as large-scale storage facilities of energy in hydrogen.

Medium-term horizon (2022–2024):

  • Growth and expansion in the hydrogen technology market, including in P2G energy storage and hydrogen storage;
  • Roll-out of the Digitalisation Programme including digital innovation projects – e.g. big data analytics and decision support algorithms (artificial intelligence, machine learning) and process automation – developed, tested and implemented across the PGNiG Group’s value chain;
  • Commercialisation/implementation into the PGNiG Group’s business of the results of R&D projects, including products and technologies originating from INGA projects – assessed on an ongoing basis in terms of commercialisation viability;

Business Development Department

In 2022, steps will be taken primarily to ensure efficient implementation of new business products at the PGNiG Group and to identify and develop new projects.

In 2022, the PGNiG Group plans to enter the prosumer photovoltaic market through potential acquisition of a provider of such services. As part of the Group’s growth in the RES market in 2022, efforts will be continued to build and operate a portfolio of renewable electricity sources, including in the photovoltaics segment: development of photovoltaic systems on own land and in own facilities, acquisitions of photovoltaic farms and development of large-scale photovoltaic farm projects in accordance with the developed business concept; In the wind farm segment: potential acquisitions of wind farm projects ready for construction as well as operational wind farms.

In 2022, work is to be continued under the bioLNG TANK project. The procurement procedure for the ‘Turn-key construction of a bioLNG unit’ is to be launched, followed by execution of a contract with the winning contractor, execution of a contract with the agricultural biogas plant, and securing administrative permits for the construction project: environmental decision, zoning permit, technical connection conditions, and building permit. New liquefied biomethane projects will be selected and analysed, and new locations for investment projects will be identified.

Under the ‘ISOLA’ project, the Company will develop an optimum business model for the ‘off-grid gas roll-out’ concept, together with the provisions on optimised processes; estimate tangible benefits of the optimisation and develop a document governing that area.

Work will be carried out on the ‘waste-to-hydrogen’ concept, and data will be collected regarding potential production of other alternative fuels derived from waste (such as ammonia, methanol, and ethanol) and their possible applications; market research will be conducted with regard to the sale of other types of alternative fuels; and other hydrogen production technologies will be explored.

In the Energy Efficiency area, in 2022:

  • The PGNiG Group companies will phase in energy-related products developed in the ESCO project, including under the ongoing Stop SMOG project;
  • The Energy Efficiency Improvement Programme will be gradually delivered, and the average annual energy savings through the implementation of 17 identified projects have been preliminarily estimated at approximately 44 GWh;
  • The certified Energy Management System compliant with the PN-EN ISO 50001:2018 standard is to be maintained.

In 2022, the Group plans to increase the scale of test projects with start-ups, building on cooperation with external partners (accelerators). To this end, steps will be taken to identify and verify the technological and business needs of PGNiG and key Group companies, as well as to support effective management of such projects within the PGNIG Group. Another technology competition is also to be launched.

Central Measurement and Testing Laboratory (CLPB)

In 2022, CLPB plans to expand its measurement and testing activities by acquiring new customers, expanding the service range, increasing the use of its expertise potential and existing infrastructure, and to intensify marketing efforts through such activities as campaigns targeted at entities that use infrastructure requiring certification. Other business development initiatives will include building CLPB’s competences and infrastructure to offer qualitative and quantitative testing and analytical services for alternative fuels.

Short-term plans provide for expanding CLPB’s competences to include quality analyses of hydrogen as a low-emission vehicle fuel. Currently, there is no such laboratory in Poland, and the prospect of organising one becomes a very important element in the development of CLPB in the context of the emerging market for hydrogen fuel, as well as the quantitative and qualitative testing of natural gas-hydrogen mixtures and biomethane.

In addition, the model NSG-T01 metering station is planned to be upgraded, which allows commercial calibration of various types of gas meters (turbine, ultrasonic, and centrifugal) within the range of (0.16 ÷ 6,500 cm/h), as Poland’s only such facility (except for theCentral Office of Measures). Replacement of the existing control system as well as the control and measurement devices will enable the company to expand its measuring capabilities to include turbine, ultrasonic, and thermal mass flow meters.

In the area of project development, 2022 is expected to see the launch of innovative hydrogen technology projects as part of the Hydrogen Programme in order to develop gas engine technologies for safe and low-emission combustion of natural gas-hydrogen mixtures. Conceptual work is under way to launch a green hydrogen production project.

In 2022, CLPB is expected to be involved in the following work as part of the construction and application of research infrastructure in Odolanów:

  • Verification of the winning projects in the ‘Measure H2 for PGNiG’ competition, namely the selective sensors used to measure hydrogen concentration in natural gas (as an alternative to expanding chromatographs), and in particular used as sensors in blending units to reduce network upgrade costs
  • Participation in the design and construction of hydrogen dosing systems, and in their laboratory and on-site tests;
  • Verification of the measurement results of previously used chromatographs (PGCs) in the presence of hydrogen;
  • Laboratory analyses of the effects of hydrogen on pressure sensors in pressure gauges and transducers;
  • Assisting in the commissioning of a test system of medium pressure gas meters, including leakage tests in the presence of hydrogen, and checking the ability to obtain the set gas flow values.

2022 is expected to see the launch of the ‘Circular Economy at the PGNiG Group’ programme aimed at gradual roll-out of the circular economy business model (CBM model) across the PGNiG Group in order to create opportunities for long-term revenue growth at the Group and improve the efficient use of raw materials, products and generated waste.

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