Oil in Georgia: Dream or Challenge?
21
GIOGIE, Tbilisi, March 26, 2014 An Investor’s View at Expectations vs Reality Wolfgang Nachtmann
-
Upload
ite-oilgas -
Category
Presentations & Public Speaking
-
view
108 -
download
1
Transcript of Oil in Georgia: Dream or Challenge?
GIOGIE, Tbilisi, March 26, 2014
An Investor’s View at Expectations vs Reality
Wolfgang Nachtmann
General view at oil in Georgia
Oil potential – resources versus reserves
MND in Georgia – CanArgo work & investment program
Risks and opportunities in the Georgian oil patch
General Aspects
To be improved
Challenges
MND’s outlook
Content
3
List of Countries by Oil Production (2013)
Source: Wikipedia
4
Georgia – (Petroleum) Geologic Overview
Transcaucasian Intermountain Area
14 oil, 1 gas-oil, 1 gas fields: partly in production
4 oil discoveries: commerciality not given yet
Georgia’s Oil Potential – Some Estimates 1/2
5
Tethys Petroleum estimates there could be an ‘unrisk recoverable resources of approximately 3 billion barrels of oil’. GIOGIE 2014 website
Total initial oil resources on Georgian territory are projected at 850 million tonnes [= 6.2 billion barrels], of which 450 million tonnes [= 3.3 billion barrels] are onshore and 400 million tonnes on the Black Sea shelf. Initial gas reserves, the evaluation of
which has only so far been done in Eastern Georgia, are projected at 180 billion cubic meters. Interfax, June 06, 2012
GOGC, the state oil company, numbers the ‘prospective resources’ in Georgia with 677 million tons of oil [= 4.9 billion barrels] and 148 billion m3 of gas. AAPG Conference Tbilisi, September 2013
Question: Are the authors of these numbers really talking about the same?
Georgia’s Oil Potential – Some Estimates 2/2
6
Tethys Petroleum estimates there could be an ‘unrisk recoverable resources of approximately 3 billion barrels of oil’. GIOGIE 2014 website
Total initial oil resources on Georgian territory are projected at 850 million tonnes [= 6.2 billion barrels], of which 450 million tonnes [= 3.3 billion barrels] are onshore and 400 million tonnes on the Black Sea shelf. Initial gas reserves, the evaluation of
which has only so far been done in Eastern Georgia, are projected at 180 billion cubic meters. Interfax, June 06, 2012
GOGC, the state oil company, numbers the ‘prospective resources’ in Georgia with 677 million tons of oil [= 4.9 billion barrels] and 148 billion m3 of gas.
AAPG Conference Tbilisi, September 2013
Resources is not Resources! This is like comparing apples with oranges!
We need to implement international standards
Petroleum Resources and Reserves Classification (SPE)
7
increasing uncertainty
incr
eas
ing
com
me
rcia
lity
Tech
no
logy
+ $
$$
$
Reserves: economically producible with
today’s technology and at today’s prices
Georgia’s Historic Oil Production
8
Source: GOGC
3.33 mln tons / year = 67,000 bbl / day
2013: 47,863 tons = 957 bbl / day
Georgia’s oil industry employs about 1,000 people
ca. 1 employee / bbl oil / day
1,1
18
0,0
76
0,2
67
0,0
59
0,0
47
0,0
81
0,0
20
0,0
87
24
,19
8
1,1
53
0,5
38
0,0
26
0,0
53
0,0
08
0,0
24
0,0
01
0,3
07
0,2
90
1,1
39
0,0
13
0,8
79
1,0
20
0,9
22
0,6
24
0,0
18
0,0
76
0,5
14
0,7
70
0,6
55
0,0
90
0
2
4
6
8
10
12
14
16
18
20
22
24
26
Mln
.
t.
Oil production
Oil reserves (2P)
Georgia’s Cumulative Oil Production & Reserves
9
Source: GOGC
Cum. production: 27.7 mln tons = 202 mln bbl
2P oil reserves: 7.4 mln tons = 54 mln bbl
= today‘s production over 155 years
Ways to Increase Oil Reserves & Production
In an already proved oil region there are several ways to raise production as well as reserves numbers:
Exploration new field discoveries new reserves
Field development delineation of a field / reservoir / reserves optimize production (and investment cost)
Improved production methods stabilization / increase of net production increase of recovery factor additional reserves
10
11
MND: 50% Partner in CanArgo – Work Program (1)
Entry in summer 2012 – committed to a $100 mln work program:
Acquisition of some 423 km of 2D seismic 365 km completed in 2013 / 60 km to follow 2014
Studies TECON Engineering: feasability study for replacement of Ninotsminda processing plant, completed 2013 Montanuni Leoben: Maykop source rock study, in progress
Establish / improve HSE awareness and acceptance introduced in 2013
12
MND: 50% Partner in CanArgo – Work Program (2)
Entry in summer 2012 – committed to a $100 mln work program:
Preparation of drilling projects in all licenses ongoing – drill 1st well later in 2014
Reservoir management and production technical measurements to improve oil recovery from the Ninotsminda field started implementation, problems (technical, service!)
Renewal & extension of production facilities in Ninotsminda realization pending
CanArgo’s License & Activity Areas – Seismic
13
Planned: 423 km 2D-Seismic
Accomplished in 2013: Acquired 365 km Employed < 420 people in the field No LTI Data quality is good to reasonable Stayed well within approved budget
Access blocked by villagers
General / Supportive Aspects (1)
The political situation in Georgia is considered stable
Georgia’s PSA law is investor friendly
Georgia is an oil prone country with two major oil provinces:
– Kura basin in the east
– Rioni basin in the west plus the offshore area in the Black Sea
14
General / Supportive Aspects (2)
Except for one all available onshore blocks are awarded
Georgia’s petroleum potential is below the radar of major international oil companies
So, for the last 20 years the Georgian oil patch has been the playground for small (to mid size) oil companies with 2 different business models:
– Classical E&P companies
– ‘Financial investors’, often with limited financial and /or technical capabilities, just holding a license
15
E&P Licenses in Georgia
Where We See Room for Improvement (1)
Oil industry in Georgia is ‘underdeveloped’ – little continuous activity over years, very limited service industry
However, new players (e.g. Jindal, MND) have started ambitious and costly programs
Intensify cooperation with other oil companies to pursue common interests in the development of the upstream oil business in Georgia (avoid repeated ‘re-invention of the wheel’). Topics: technology, services, legal/admin issues, oil & gas sales, etc. – best to be done with / via GAPC
Build a network to share and optimize services especially from international providers (procurement, seismic, drilling, well services, production equipment, facilities, etc.)
16
Where We See Room for Improvement (2)
Increase short to mid term production via new wells, modern reservoir management methods and production technologies, well planned work-over jobs in old wells
Optimum utilization of modern seismic acquisition, processing and interpretation technologies and techniques for better understanding of complex geology and succeed in fracture identification before drilling best selection of new well location and well paths
Employ more Georgian graduates from technical faculties – current quality of education is not competive implement in-house & external training programs; support local universities
17
Challenges
Licenses issued in the mid 1990’s expire in 10 to 15 years – to be able to recover cost and make acceptable profit, new JV partners need to pursue aggressive work programs when partnering with such “old” license holders
High(er) risk and high cost for seismic and well operations due to technical challenges like complex geology, demanding surface topography, varying pressure gradients, hole instability, difficult to produce reservoirs between 1,000 and 5,000 m depth in combination with high environmental and safety requirements
Transfer the high oil potential to a corresponding reserves and production scenario
18
MND Outlook (1)
Georgia is a declared focus area for MND
MND, being a classical E&P company, is 50% partner in CanArgo and pursues an ambitious program (initial commitment: US$ 100 mln in 3 years)
MND is looking for cooperation with other companies and supports GAPC in its coordinating role for the industry
19
MND Outlook (2)
MND is open for additional opportunities in Georgia
MND is a technically and financially sound entity and strives to become a main player and oil producer in Georgia’s E&P industry
MND Georgia has an office in Tbilisi for coordination of all business related and technical issues
20
