U.S. independent to explore Polish license area

Poland has assigned an exploration license on a large onshore tract in the eastern Baltic region to a unit of Frontier Exploration Co., Salt Lake City.

Frontier Poland Exploration & Producing Co. Ltd. formally received the 2 million acre tract at a ceremony Dec. 19 after approvals of the deal by local governments in the region.

Frontier is the first U.S. independent operator to sign such an agreement under Polands 1994 mining law. The license requires the company to pay a 6% fixed oil or gas royalty, 60% of which is to remain with local government entities.

Frontier and Polands Ministry of Environmental Protection, Natural Resources, and Forestry last August signed the license agreement covering the acreage. The two parties earlier in the year agreed in a letter of understanding to the general framework retained in the final license (OGJ, Mar. 6, p. 32).

Based on a new interpretation of regional geology, Frontier believes hydrocarbon accumulations in its license area will yield light oil, possibly with gas.

The company plans to focus exploration first in the heart of the license area, where structures with porosity of 10-20% occur at 2,200-3,000 m. Plans include spudding the first wildcat on the acreage in first half 1996.

Frontier is seeking a partner interested in operating the license.

License terms

Frontier says provisions of Polands new hydrocarbon law minimize up front costs, including required fees and capital spending.

Under the work program laid out in the license, Frontier this winter will conduct seismic surveys on the tract. The company will correlate this new seismic with about 480 line km of reprocessed seismic data collected since 1978. Frontier also plans to reprocess certain other geophysical data on the area.

Under terms of the license, geological and geophysical spending in the first 18 months of the contract must amount to $250,000.

The exploration license allows a two phase, 6 year exploration period and an exploitation term as long as 30 years in event of a commercial discovery. Production may be sold domestically or exported. Polish law allows full repatriation of profits.

Frontier must drill one well in each 3 year exploration phase and must relinquish 50% of the acreage after 3 years.

In addition to the 6% royalty, the tract operator is to pay a 40% tax on net income. Deductible exploration and drilling costs may be carried forward for 10 years.

There is no government back in if a commercial discovery occurs.

Regional geology

The Baltic syneclise, where Frontiers tract lies, is a large basement sag on the southwest flank of the pre-Cambrian East European craton.

Pre-Cambrian rocks outcrop in the northeast part of the basin and dip gradually toward the southwest to a depth of about 5 km at the edge of the Polish trough. Frontiers acreage is within the Polish sector of a large onshore area that overlaps into parts of Latvia, Lithuania, and Russia on the eastern flank of the basin.

Cambrian, Ordovician, Silurian, and Permian source rocks occur within the Baltic syneclise, with lower Paleozoic strata generally within the main oil generation zone. Frontier says middle Cambrian sandstones are the regions best reservoir rocks.

A joint venture of Polands Petrobaltic Co. and Soviet and East German partners in the 1970s discovered 10 oil and condensate fields offshore and just north of Frontiers acreage.

Polish Oil & Gas Co. (POGC) says three small oil fieldsBialogora, Zarnowiec W, and Debki-Zarnowiechave been discovered onshore in Polands share of the syneclise. Sixteen wells have been drilled in the license area, including 10 by POGC.

Frontiers interest

Traditional interpretations of regional geology show the greatest potential in offshore parts of the Baltic syneclise. However, Frontier believes there are possibilities in its license area for successful exploration in structural-tectonic and lithologic traps.

Frontier based its decision to apply for an exploration license in the onshore Baltic syneclise mostly on these reasons:

• Poland terminated the main phase of exploration, during 1965-72, because glacial till prevented seismic data of the day from adequately imaging the regions lower Paleozoic structures.

• Reprocessing digital seismic data from the 1970s and studies of field tests in the area showed that modern seismic collection and processing could overcome many previous limitations.

• Gravity, magnetic, and refraction data define a crystalline basement structure underlying the exploration tract similar to that associated with most Russian fields in the Baltic syneclise system.

• Reanalyses of electrical and radioactive logs show that some old wells may contain previously unidentified hydrocarbon bearing formations, perhaps damaged by overbalanced drilling muds.

POGC says Frontiers acreage covers the apparent best onshore lithofacies for middle Cambrian sand reservoirs: the westernmost slope of the eastern Polish syneclise and the Gdansk depression between Gdansk and Wisloujscie meridians. Copyright 1995 Oil & Gas Journal. All Rights Reserved.