The FINANCIAL -- Strait Oil and Gas Ltd. (SOG) is to start the production of gas in
Georgia by the end of 2012 and oil in 2013. The company said that it has
invested USD 25 million in its business.
SOG has agreed to sell produced gas to the Georgian Industrial Group, while oil products will be exported from Batumi or Supsa. “I would assume that you will soon move to energy independence,” Alan Hitchins, CEO of SOG, said in an exclusive interview with The FINANCIAL.
Strait Oil and Gas Ltd. has licenses for 7,000 square km across the country. They last till 2025 while explorations started in 2006. The company is going to expand to Turkey and Azerbaijan. SOG owns 40 percent of Blocks VIA and VIB, while. Range Resources Ltd holds 40 percent and Red Emperor Resources Ltd - 20 percent.
“Our commercial success in exploration and production (E&P) activities would have a positive impact on the Georgian economy, state budget and in-depth exploration of licensed areas, as well as could help to reduce its heavy dependence on increasingly expensive oil and gas imports from its neighbouring countries.”
“We entered Georgia in 2003-2004, just after the Rose Revolution. We were looking for business opportunities in the oil sector and got interested in Georgia as the business environment here is great. From its inception, the company has appreciated the benefits of partnering with the Government of Georgia, local employees and contractors. The company took into consideration the great potential of Georgia in the E&P of carbohydrates as well as efficient anticorruption policies and the business friendly environment created in the country during the last decade. Therefore we decided to open our enterprise here in 2006.”
“We are a UK registered company, but we have formed a Georgian operational company as well – SOG (Georgia). The main partner of the company is the state of Georgia, represented by the National Agency of Natural Resources and the Georgian Oil and Gas Corporation. The leading and supervising unit of the company represents the Coordination Committee, which is comprised of an equal number of members of the company and partners.”
Q. Please could you give us more details about your projects in Georgia?
A. After having won the tender, SOG has been granted operational licenses in Georgia. The company has the right to implement oil and gas exploration and production operations on the licensed blocks VIA and VIB. The aim of the company is to perform detailed study of the licensed areas, explore and develop oil and gas resources in the following provinces of West Georgia: Imereti, Racha-Lechkhumi and Kvemo Svaneti.
At the beginning SOG (Georgia) started the collection of existing Soviet-era geological, geophysical, geochemical and drilling data available in state archives and special geological databases. The first stage of the work programme included processing and re-interpretation of existing information, based on which future exploration prospects were defined. During the period of 2007-2009 the company carried out a reconnaissance survey for seismic exploration on the Blocks, including field mapping and a topographic survey. In 2009-2010 we identified priority zones and identified 68 potential structures containing an estimated 2,045 billion barrels of undiscovered oil‐in‐place. These productive zones have been identified at the Mukhiani and Kursebi areas which are suitable for exploration and if successful, development drilling. In 2011 the company and partners agreed to dispose of almost USD 20 million for further exploration activities in Georgia. This disposal programme has been an opportunity to further upgrade and focus on the exploration portfolio.
In July 2011 the company spudded the first exploration of Mukhiani 1 (Vani 3 Prospect). The well encountered previously unrecognized faults which led to the basement being encountered far earlier than predicted. The company has decided to plug and suspend the well and move to the second exploration well site in the Kursebi area and will look to perform additional seismic over the Mukhiani prospect as part of the 2012 seismic programme.
In January 2012 the company commenced construction of the Namakhvani well site.
Since the disappointment of the Kursebi-1 exploration well SOG and partners have embarked on a revised strategy for Blocks VIA and VIB in Georgia. The partners will now focus on lower cost, shallow appraisal drilling of well defined contingent gas resources around the Tkibuli-Shaori coal bed methane (CBM) field which straddles the central section of the two licences. SOG have obtained and processed new data for the CBM project on the territory of Block VIA and Block VIB coal deposits (Tkibuli-Shaori).
The company recently conducted talks with the Georgian Industrial Group (GIG) over exploration of unconventional gas resources (CBM) in the Tkibuli coal mining area. The companies are keen on setting up a joint venture for gas exploration and production in the Tkibuli district. In the meantime available shale gas data has been processed, summarized and analyzed for Block VIA and Block VIB. In total on Block VI (Okriba, Shaori and Sachkhere areas) forecasted and estimated shale gas resources equal 26.2 billion m3. This estimation requires carrying out an additional field survey on blocks VIA and VIB, including new seismic information, as well as lower Jurassic shale sample geochemical and hydro-geological analysis to be completed by the end of 2012.
In November 2011 SOG in partnership with the Georgian Energy Ltd. acquired two licenses for Block VIII and Block XIG and in 2012 has continued geological study, obtaining, collection, processing, reinterpretation, analysis and generalization of existing geological, geophysical and drilling data on the mentioned Blocks. A new effort was initiated and completed to locate and analyze approximately 22 Soviet-era wells throughout an expanded area. This process is still in progress.
Q. What is the economic impact of oil and gas production on Georgia?
A. The impact is very important as Georgia imports gas and oil. I would assume therefore that you will soon move to energy independence. Asides from this, gas and oil producing has other huge benefits. For example, investments provided by SOG and partners have benefited local communities in the region of the VIA, VIB, VIII and XIG Blocks. These benefits include the construction of access roads, rehabilitation of environmentally sensitive areas and employment of the local population. I do believe that soon our activities in Georgia will bring more tangible results for all parties involved in our business.