Independents eye Ukrainian E&D projects

Dec. 29, 1997
CBM Energy's Donetsk License Blocks [61,110 bytes] Ukraine Block [143,602 bytes] Independent petroleum firms are showing increasing interest in oil exploration and development projects in Ukraine. Current projects include oil, gas, and coalbed methane development schemes. Odessa Petroleum Corp., Vancouver, B.C., acquired an 80% interest in the Belolessky block in southwestern Ukraine. The company has started drilling in the East Sarata-Yaroslav prospect on the block and is gathering data on
Independent petroleum firms are showing increasing interest in oil exploration and development projects in Ukraine. Current projects include oil, gas, and coalbed methane development schemes.

Odessa Petroleum Corp., Vancouver, B.C., acquired an 80% interest in the Belolessky block in southwestern Ukraine. The company has started drilling in the East Sarata-Yaroslav prospect on the block and is gathering data on wells drilled under the Soviet system (OGJ, Dec. 1, 1997, p. 108).

Meanwhile, Odyssey Petroleum Corp., Calgary, has terminated its agreement with Calgary's Trident (88) Exploration Ltd. regarding negotiation rights in Ukraine's Dolina oil field. Odyssey plans to continue pursuing the project by other means.

In a third project, Houston's CBM Energy Ltd. has embarked on a 5-year coalbed methane exploration and development project in eastern Ukraine's Donetsk coal basin.

East Sarata-Yaroslav

Odessa Petroleum agreed to acquire an 80% interest in Belolessky block from Tintex Capital Ltd., Calgary. Under the agreement, Odessa would pay Tintex $3.3 million in 1998 and $2.4 million in 1999.

In October, however, Odessa renegotiated the deal. The new agreement calls for a single cash payment of $500,000 in 1999. Odessa will pay the remainder of the $5.2 million selling price by awarding Tintex 10% of the net profits from production of oil from East Sarata (see map, p. 28). The payments will begin after payout of project investment costs.

Odessa now holds a 55% working interest in Belolessky-a 900 sq km block in southwestern Ukraine. The company may increase its working interest to as much as 80%.

Data on East Sarata and Yaroslav prospects are sketchy, as are data on many discoveries made under the Soviet system. Two wells-ES-1 and ES-2-were drilled before Odessa purchased a stake in the block.

Odessa says the Soviet Union collected 4,000 line-km of seismic surveys and drilled 26 deep wells on the block. The company has sent a team to Ukraine to obtain the previous results, study those results, and acquire new data.

Odessa Petroleum's vice-president of investor relations, Todd McMurray, said the company is redrilling ES-1, "to obtain a modern suite of information for the hole." East Sarata may be linked to nearby Yaroslav prospect, said McMurray.

A third well, ES-3, has been drilled. "During an initial production test on the East Sarata No. 3 well," said Odessa, "oil production rates of 450 b/d were achieved."

Despite its lack of data, Odessa Petroleum says East Sarata-Yaroslav oil field has combined proven and probable reserves of 23.4 million bbl, with an upside potential of 44.1 million bbl. This estimate was made by Dobson Resource Management Ltd., Calgary, in an independent study of the prospect.

"The Ukrainian State Geological Reserves Committee recognizes oil in place of 167 million bbl in the East Sarata oil field," says Odessa. "In addition, 24 million bbl of oil in place have been assigned to the Zheltoyar well to the south of East Sarata."

Odessa believes the block has potential for 800 million-1 billion bbl of oil.

Odessa's plans include additional drilling and a 3D seismic program. Depending on the outcome of Odessa's current program, the company will devise an exploration and development plan for the East Sarata-Yaroslav prospect.

"It's a little early to predict what those plans will be," said McMurray.

Odyssey/Trident deal

Odyssey Petroleum Corp., Calgary, has terminated an agreement with Trident (88) Exploration Ltd., Calgary. Under the agreement, Trident (88) was to transfer to Odyssey its rights to negotiate an exploration and development agreement with Ukrainian national oil company Ukrnafta for Dolina oil field in western Ukraine (OGJ, Apr. 7, 1997, p. 89).

Odyssey says a "protocol of intentions" on Dolina between Ukrnafta and Trident (88), executed Dec. 7, 1995, is invalid. In addition, at Odyssey's request, Trident (88) Pres. Nelson A.O. Meyers has resigned as a director of Odyssey.

"Odyssey's management remains confident that, properly explored and developed, significant potential exists within the Dolina field and the surrounding region to enhance the existing production of approximately 4,000 b/d of oil and to discover and develop additional reserves," the company said.

Odyssey is now negotiating directly with Ukrnafta. The company hopes to strike a joint venture agreement covering the entire Dolina region.`

Coalbed methane project

Coalbed methane producer CBM Energy has acquired five license blocks in Ukraine's Donetsk coal basin (see map, p. 26). The company signed a joint venture agreement with joint-stock coal companies DonUgol and MakeevUgol and with state geological exploration company Donbassgeologiya.

CBM Energy and its partners plan a three-stage project to gasify and produce coalbed methane from the blocks:

  • Evaluation and pilot project (up to 5 years).
  • Development (5 years).
  • Commercial degasification and production (at least 20 years).
CBM Energy plans to invest $25-30 million during Stage 1. Total investment over the life of the project will exceed $350 million.

Initial production of 290-483 MMcfd is targeted.

Stage 1

The evaluation and pilot project stage will be divided into three projects. First, the partners will establish:
  • The producibility of hydrocarbons from coal seams near current mining operations.
  • The producibility of hydrocarbons from sandstones and other surrounding strata.
  • The optimal method of draining hydrocarbons from so-called "gob" areas in active and inactive mining operations. (Gob areas are zones of highly fractured and broken coals and interbedded sandstones that overlie mined areas. Boreholes are drilled into the gob areas to produce gas, which is released into the open spaces by the collapsing and relaxing of strata.)
This portion of Stage 1 will take about 1 year, during which existing geological and other data for the five license areas will be analyzed. Plans include drilling four exploratory (vertical frac) wells to test the producibility of the sandstones and coals.

Coal seam wells will be drilled near current mining areas in the Donetsko-Makeevski and Krassnoarmeiskii geological regions.

"Extensive mining data, provided by our partners, will be used to determine targets where the coals are the gassiest (400 scf/ton) and have fracture-enhanced permeability," said the company. "Initially, targets will be chosen so that they are in closest proximity to the existing pipeline infrastructure and potential end-users."

The conventional gas wells targeting sandstone pays will be drilled on known domal structures in the Yuzhno-Donbassi and Krasnoarmeiskii geological regions, said CBM Energy. Previous testing of these areas by Donbassgeologiya indicated gas-bearing sandstones with good porosity (10%) and permeability (1 md).

Projected total cumulative production from these wells is 5 bcf, according to the company.

"In addition to the exploratory boreholes," said CBM, "five gob boreholes will be drilled, incorporating state-of-the-art reservoir modeling and the strategies currently used by our Ukrainian partners, who have drilled three such producing boreholes on properties included in our license areas with estimated ultimate recoveries of almost 60 MMcf."

The partners will acquire and reprocess existing seismic data on the license areas and run 3D seismic programs on the target areas where the exploratory boreholes are located.

"This data will be used to identify traps (both stratigraphic and structural), determine mechanisms influencing methane production, and to locate fracture patterns," said CBM Energy.

Although 3D seismic surveying will begin during this stage, it will continue throughout the project.

The second part of Stage 1, lasting 2 years, will involve an expansion of this program. CBM estimates partners will drill 10 vertical frac wells during the second year of the 5-year Phase 1 and 20 during the third year. These wells will be connected to a local gas gathering system under construction and to some local customers.

Additional gob wells will be drilled, and seismic data acquisition will continue.

The third phase of Stage 1 also will last 2 years, although it may be extended to 5 years. The partners plan to drill 40 vertical frac wells during Year 4 of the project and 60 during Year 5.

The drilling of gob wells will continue, says CBM. About 5 will be drilled in Year 4, and about 10 in Year 5.

Wells with commercial production will be connected to the local gas gathering system. Design and construction of the gas gathering system will also begin during the evaluation and pilot project stage.

Stages 2 and 3

During the second stage, the partners will begin development drilling on selected commercially viable areas. Plans call for drilling about 60 vertical frac wells/year. In addition, about 10 gob wells/year will be drilled, and all wells will be prepared for production.

The gas gathering system will be completed during this stage and connected to primary consumers and the main transmission system. At this point, all commercial production will be available for sale.

During Stage 3, the partners will continue to drill about 60 vertical frac wells/year. Ten gob wells/year will be drilled for 10 years. The number of gob wells will then decrease to 5/year for the next 5 years, with drilling to halt thereafter.

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