Warsaw (Platts)--7Dec2012/614 am EST/1114 GMT

PKN Orlen said Friday it had agreed to buy two of ExxonMobil's shale gas exploration licenses in Poland as the Polish refiner expands its upstream portfolio.

ExxonMobil decided to exit shale gas exploration in Poland in June this year after disappointing results from two vertical test wells.

But PKN has made it a strategic priority to expand its exploration activities, especially in shale gas, so snapping up the ExxonMobil assets fits well with this strategy, the company said.

The two concessions are Wodynie-Lukow and Wolomin in Poland's Podlasie basin.

"We have chosen the Wodynie-Lukow and Wolomin licenses because of positive results obtained from the vertical exploration well drilled in the village of Gozdzik, and because the entire region is highly prospective," PKN's upstream chief Wieslaw Prugar said in a statement.

"Analysis of the archived geological data, as well as of the newly collected samples, have encouraged us to broaden the scope of our exploration operations within the Podlasie basin and, consequently, to extend the potential unconventional gas production area in the future," Prugar said. GOVERNMENT APPROVAL

In its statement, PKN said it and ExxonMobil have filed an application with the Ministry of Environment requesting approval for the assignment of the two licenses to the Polish company.

Following the assignment, PKN will hold 10 shale gas exploration and appraisal licenses in Poland, with a total area of almost 9,000 sq km. The two ExxonMobil licenses cover a total of 2,150 sq km. The Wodynie-Lukow license is on the border of the Lublin and Warsaw Provinces, and the Wolomin license in the Warsaw Province.

The rights under the licenses will be transferred to PKN upon clearance from the Minister of Environment, the company said. "We expect a relevant decision will be issued by the Department of Geology and Geological Licenses in the next few weeks," Prugar said. In late October, PKN completed drilling of the first horizontal well in the Lublin Province, which is now to be fracked.

The company is planning to start drilling up to three more exploration wells by the end of this year.

In line with its strategy for 2013-2017 announced on November 30, in the next five years PKN said it could spend up to Zloty 5.1 billion ($1.6 billion) on upstream projects, chiefly shale gas exploration and production projects.

As part of the Zloty 2.4 billion core capex budget, at least 50 wells will be drilled, with first profits from the upstream projects expected to be seen in 2017.

--Adam Easton, newsdesk@platts.com --Edited by Jeremy Lovell, jeremy_lovell@platts.com