JKX marks progress in F.S.U. field developments

Where JKX is operating in Georgia.[40356 bytes]

A British independent operator has established oil production in Ukraine and Georgia and is considering a radical change into an integrated company.

Early last year, JKX Oil & Gas plc of Guildford, U.K., became the first foreign operator to produce oil in Ukraine, in one of three fields in the Poltava area (OGJ, Jan. 23, 1995, p. 20).

JKX last month marked another milestone, resuming production from Ninotsminda oil field in East Georgia under the first production sharing agreement between the Georgian government and a western operator (OGJ, Apr. 8, p. 34).

David Robson, JKX chief executive officer and managing director, told Oil & Gas Journal the company is considering a move into oil processing through deals with local refineries.

Poltava oil sells at a price similar to Brent crude, minus transportation costs. Poltava has been the focal point for JKX, but that project is becoming a cash source to back further work.

Test production, gas sales

Throughout last year JKX carried out test production from Poltava's Novo-Nikolaevskoye complex. The operation officially became commercial when associated gas could be produced.

"There was a delay," Robson said, "because we had to negotiate the first gas transportation and substitution operations by a western company in the former Soviet Union."

Ukraine has a high industrial demand for gas, and the company has been selling gas locally for about $1.80/Mcf.

JKX sells gas at the field to a U.K.-Ukraine joint venture steel and chemicals trader. The trader provides the gas to nearby steel mills and chemical plants in return for products.

JKX has three drilling rigs operating in the Poltava area. Two are at work on a program calling for an expected 60 development wells with a view to reaching peak production in 1999. The other rig is conducting workovers.

Martin Miller, JKX executive director, said Novo-Nikolaevskoye is producing about 2,000 b/d of liquids and 20 MMcfd of gas. The complex is producing from six wells, including one newly drilled hole.

Ninotsminda field has resumed production via well workovers. If this program continues to be successful, JKX will embark on full development drilling this year, Robson said.

The company is gaining reservoir experience to enable it to judge the number of extended reach wells needed for full scale development.

Other operations

Once Ninotsminda development is complete, Robson said, there are other exploration prospects in the same concession, including shallower formations and the field's gas cap.

Samgori field, west of Ninotsminda, is estimated to hold reserves of 200 million bbl of oil. JKX refers to South Samgori and Samgori-Patardzeuli fields as simply Samgori.

Meantime, the East Rustavi discovery to the south has had two wells drilled but has not been fully appraised. East Rustavi lies just east of West Rustavi field.

JKX intends to focus on those projects in East Georgia soon but later this year will complete testing of a suspended well in Shromis-Ubani field on its West Georgian acreage

JKX drilled its Shromis-Ubani 101 well to 3,500 m. The well was suspended after flowing 100 b/d of oil. Testing of the well's upper pay zones is planned later this year. After that, JKX is looking to integrate its production with nearby Supsa field oil production and evaluate Shromis-Ubani further.

"Ukraine and Georgia will continue to be our focus," Robson said. "Within Poltava we have numerous other projects-enough to keep anybody going. We will develop these, after which we have priority rights to tender for further fields near Poltava."

JKX has drilled one well on its Delphin prospect in the Black Sea off Ukraine. This was a dry hole, but JKX plans to acquire further seismic data on the block to pave the way for drilling of four other prospects.

In Stormovoye condensate field north of the Delphin block, currently under development by JKX's joint venture partner Chernomorneftgaz, JKX has secured an initial agreement with the government to process gas production from the field.

Miller said Stormovoye, with about 1 tcf of gas in place, is producing 20-30 MMcfd of wet gas. JKX sees an opportunity to increase this through further development.

There is one main platform and one satellite platform in Stormovoye. Miller said, "We would need to drill more wells, but no more major infrastructure would be necessary."

Modifications would be required to Stormovoye's topsides, and there would be "quite a lot of work" involved in completing development of the field.

Robson said, "We are also looking to develop activities in other parts of Ukraine and potentially to move downstream into oil processing. Unlike many parts of the world, there are good margins to be made here downstream."

An eye on Russia

Robson said that in the long term JKX will look toward Russia for further exploration and production projects, probably focusing on the Volga-Urals area.

"We would need to work in Russia with local partners so we would not have to export. Prices of products are now pretty good in Russia.

"We could remain an exploration and production company, but there are opportunities in the F.S.U. to become an integrated energy company.

"The F.S.U. is a massive market. We are losing margins by selling oil before processing. But we would do deals with local refineries rather than invest in plants.

"We would be reluctant to do anything without a local partner. Some of the smaller Ukraine refineries are okay and some need upgrading, but they all need good quality crude oil, which JKX has."

The company has an agreement with the Russian government to explore and develop Inchke-More discovery in the Caspian Sea off Dagestan. JKX is waiting on clarification of Russia's production sharing laws before getting under way.

JKX is working on a development plan for Inchke-More. One problem is the field's shallow water-only 10 m deep. In addition, the field is too far offshore to be drilled with extended reach wells from onshore sites.

"The preference is for conversion of a jack up rig," Miller said. "But the problem is in finding one, so we may have to revisit the plan."

Onshore Dagestan, JKX also is waiting on government's clarification of production sharing laws. Field economics under joint venture agreements are not as attractive.

JKX also has begun negotiations with the Azeri government for onshore and offshore projects, some near the company's production infrastructure in East Georgia.

U.K. independent JKX is producing in Georgia through its Georgian-British Oil Co. joint venture with state oil concern Georgian Oil. This is Supsa field, where present production is low but could be increased. The Supsa reservoir was discovered in 1889 at a depth of 200 m. JKX says other reservoirs are known at about 2,000 m.