Signing of a Framework Agreement on the Exploration for and Extraction of Shale Gas

Wednesday, 04 July, 2012
Report no. 33/2012

The Management Board of KGHM Polska Miedź S.A. (the “Company”) hereby announces that on 4 July 2012 the Company signed a framework agreement on the exploration for and extraction of shale gas (the “Agreement”). The parties to the Agreement are KGHM Polska Miedź S.A., Polskie Górnictwo Naftowe i Gazownictwo S.A. (“PGNiG”), ENEA S.A., PGE Polska Grupa Energetyczna S.A. and TAURON Polska Energia S.A. (hereafter jointly referred to as the “Parties”).

The subject of cooperation of the Parties based on the Agreement will be the exploration, evaluation and extraction of shale gas in geological formations for which concessions have been granted for the exploration and evaluation of deposits of crude oil and natural gas in relation to the Wejherowo concession held by PGNiG (the “Wejherowo Concession”). With respect to the Wejherowo Concession, there will be close cooperation involving an area of approximately 160 km2 (the “Area of Cooperation”). The Agreement also provides for preferential treatment of the Parties with regard to the possibility of cooperation in relation to the remaining area of the Wejherowo Concession (with the exception of a situation where PGNiG on its own engages in exploration, evaluation or extraction of shale gas and excluding the area in the vicinity of Opalino and Lubocino where PGNiG is already conducting exploratory work).

The Agreement provides for cooperation based on the targeted structure of a limited partnership that, following a successful exploration, will extract shale gas. The Parties foresee the transfer of the concession for the extraction of shale gas to such limited partnership after it has been obtained by PGNiG. Each of the Parties participates in control over the realisation of the project, in particular through participation in the operating committee formed for this purpose.

Estimated expenditures on exploration, evaluation and extraction with respect to the first three zones (the Kochanowo, Częstkowo and Tępcz pads) within the Area of Cooperation are projected to be in the amount of PLN 1 720 000 000. Details regarding the terms of cooperation, including a detailed project budget and timeline, the shares of the Parties in financing the expenditures arising from the agreed-on budget, shares in the project's profits and the principles of responsibility, including contractual penalties in the case of the failure, in particular by PGNiG, to fulfil certain obligations resulting from the Agreement, will be determined by the Parties within four months from the date the Agreement is signed. Should such specific arrangements not be forthcoming, the Agreement may be terminated by each of the Parties. If within three months after reaching such arrangements the Parties have not received all of the required corporate approvals, or if by 30 December 2012 the required antimonopoly clearances have not been received, the Agreement will expire. 


Legal basis: Art. 56 sec. 1 point 1 of the Act dated 29 July 2005 on Public Offerings and Conditions Governing the Introduction of Financial Instruments to Organised Trading, and on Public Companies (Journal of Laws from 2009, No. 185, item 1439).