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LNG Energy Ltd. ("LNG") holds a 20% net interest in Saponis Investments Sp. Z.o.o,, "Saponis", comprising of approximately 734,000 gross acres (2,972 km2) of prospective shales in the Baltic Basin of Poland. Saponis is operated by BNK Petroleum Inc. (27%), with both Sorgenia E&P S.p.A. (27%), and Rohol-Aufsuchungs Aktiengesellschaft (26%) as additional working interest owners LNG acquired its interest through ownership of BWB Exploration, LLC ("BWB") which held the option to participate for up to a 20% interest and has exercised the option to participate in full. The three concessions, Starogard, Slupsk and Slawno, are located in Northern Poland and total approximately 734,000 acres (2,972 square kms), for an approximate net 146,800 acres to LNG.
On February 7, 2011, LNG announced that its wholly owned subsidiary, Kaynes Capital S.a.r.l. ("Kaynes"), had entered into an agreement to acquire a 50% interest in two oil and gas concessions in Poland for US$4 million. The two concessions are held under the Joyce and Maryani Investments Sp. Z.o.o. subsidiary titles, "Joyce & Maryani", and total approximately 360,000 acres in which the Company will have an additional 180,000 net acres in Poland. This acquisition was closed on February 17, 2011. The company's total gross acreage in Poland is now approximately 1.1 million acres.
Recent industry activity
Concurrent with LNG Energy's notice of participation with BWB, 3 Legs Resources plc's Polish subsidiary, Lane Energy Sp. z.o.o, announced (August 6th, 2009) that it had reached a farm-in agreement with ConocoPhillips on their acreage offsetting those lands held by Saponis. Subsequently, interest levels in pursuing Gas Shales in Poland has elevated substantially with additional international majors; Marathon, ENI, Talisman, Chevron and ExxonMobil, having announced their acreage holdings and interest to exploit Gas Shales in Poland.
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Planned activity in 2011
Saponis: LNG, in conjunction with its partners in Saponis, shot two 10 km 2D seismic lines through the planned well locations on each of the three concessions in order to avoid faults so that all targeted intervals will be encountered in the first test well on each concession. The additional work program was proposed in concession amendments and approved by the Polish Ministry of Environment in late June 2010. The concession amendments also included an extension of the spudding deadline on the first well in the Slupsk concession (Lebork S-1) to June 2, 2011 and on the first well in the Starogard concession (Starogard S-1) to December 2, 2011 to allow the Company to utilize both the new seismic data and the information gathered on the Wytowno S-1 well on the Slawno Concession which was spudded in December 2010. The amendments also extended the deadline of drilling the 2nd well on the Slupsk concession to December 2012 and the 2nd well on the Starogard concession to June 2013.
The first well, Wytowno S-1, in the Slawno concession was spudded in December 2010. The well has been drilled to its total depth of 3,580 meters and successfully run and cemented casing to TD. Approximately 200 sidewall cores have been taken for analysis of the physical parameters of the rock. These core samples will be analysed to obtain; porosity, permeability, total organic carbon, rock evaluation pyrolysis, thermal maturity, gas composition, micropaleontology, and mechanical properties. The Company estimates that it will take about 45 days to do a complete analysis of this core data after which a fracture stimulation design of the wellbore can begin.
The rig was immediately relocated to the Lebork well location on the Slupsk concession to begin drilling operations. The Lebork drill site has already been completed and all permits are in place and this well was completed in May 2011. The third well in the Starogard concession will be spudded in the second half of 2011. All three wells drilled in 2011 are engineered to be vertical, with the primary objective being to gather all core, petrophysical and completion test data to characterize the shale gas deliverability a for horizontal development plan.
Joyce & Maryani: Activity in 2011 will be focused upon the reprocessing of existing 2D seismic and designing the acquisition of 50km of new 2D seismic in each concession area. Basin Modeling and the entire 2D seismic database will be used to define drilling locations for the following year.
The opportunity
The opportunity is primarily targeting a Silurian and Ordovician aged resource play within the Baltic Basin, consisting of gas shales with a minimum gross thickness of 1000 ft (300m) and a maximum gross thickness of 3300ft (1100m) over all five concession areas. The resource presence is defined by wells that have been extensively cored (core intervals exceed 1000 m) for both scientific and exploration purposes by Polish research institutes over the last 50 years. Preliminary core test results and resource characterization, of the existing cores, have been extremely encouraging relative to known US shale gas arenas and provided the technical rationale for participation. However, modern shale gas analysis requires new core testing and petrophysical measurements, undertaken by laboratories familiar with characterizing North American based shale gas resource plays, to design the horizontal well development plans.
Currently, Poland does not have sufficient internal natural gas production to meet its domestic demand requirements and must import additional natural gas from trans-European gas pipelines supplied by Russia. Two thirds of Poland's domestic requirements are met by imports from Russia, Uzbekistan and Germany (Source: Ministry of Economy, Republic of Poland). Consequently, all gas production is anticipated to be purchased within the domestic marketplace at prices substantially greater than those available within North America.
 Topography Baltic Basin
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 Baltic Basin Regional Gravity Map
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