Energy short Ukraine lists opportunities in three basins

Merle Grabhorn
University of Tulsa at National Institute of Petroleum and Energy Research
Bartlesville, Okla.

Dissolution of the Former Soviet Union (FSU) has had a serious effect on the country of Ukraine. Accustomed to unlimited and subsidized oil and gas from Russia, Ukraine acquired an energy crisis with its independence.

Ukrainian gross national product reportedly declined 3% in 1990, 11% in 1991, 17% in 1992, and 34% in 1993. Payment for imported energy was part of the reason.

The decline is expected to continue as Ukrainian self-sufficiency in energy is predicted to drop from 48% in 1990 to 35% in 2010.1

Ukraine imports about half its energy requirements from Russia. The situation has been complicated by political relations between Ukraine and Russia and Ukraines inability to pay for oil and gas. Interruptions in Russian supplies have made the Ukrainians very aware of over-dependence on imports.

With a shortage of hard currency and exports, the country is forced to maximize its use of domestic energy resources, no matter how distasteful. Ukraine is forced to continue using the Chernobyl nuclear power plant despite the previous accident and claims it produces only 2% of the countrys electricity.

In order to form an energy strategy, the Ukrainian government has asked for international assistance. The World Bank compiled a report and action plan on the energy sector. Five major points focused on oil and gas:

Adjust energy prices to fully reflect the cost of imported and domestically produced energy, including expenditures on rehabilitation and investment projects.
Develop a domestic capability to provide energy efficiency improvement services and incentives for energy utilities.
Separate the governmental policymaking, ownership, and regulatory functions.
Promote competition in oil and gas production, oil refining, and marketing.
Improve energy security by diversifying energy imports.

Attracting investment

Ukraine, in order to follow this plan, has begun efforts to stimulate international petroleum exploration investments.

In all of its investment scenarios, it is looking to the West for investment money and technology. Ukraine is in a more difficult situation than its oil producing neighbors, Azerbaijan and Russia. Exploration companies see the possibility of major oil and gas discoveries in the neighboring countries, and these possibilities more than offset the high political and economic risks.

Ukraine has never been a large oil producer and has been perceived to have small to medium sized fields. The potential for large undiscovered reserves has been considered moderate at best.

Thus, Ukrainian prospects have not been attractive to major international petroleum companies. However, the country warrants some serious consideration as a potential oil and gas investment, particularly for midsized and smaller independents who usually develop smaller prospects.

There are opportunities for investment, particularly in the rejuvenation of older fields. Some fields have produced less than 10% of the recoverable oil in place due to inefficient engineering practices. Oil pay zones were passed by in order to develop deeper gas pay zones.

Ukrainian deep drilling technology is still not up to western standards, resulting in unexplored deep horizons. Discovered gas fields with high pressures are largely beyond the ability of the Ukrainians to develop.

A lack of the latest exploration and production technologies such as 3D seismic or horizontal drilling, combined with poorly designed well stimulations and overbalanced drilling, resulted in bypassed pay zones. Potential exists for identifying and producing more reserves and, despite extensive drilling in Ukraine, exploration potential remains.

Oil and gas occur mainly in three regions (Fig. 1 [52279 bytes]):

1. Dnieper-Donets basin, bordering Belarus and Russia;

2. Carpathians, bordering Romania and Poland; and

3. Black Sea Maritime-Crimea.

Dnieper-Donets basin

The Dnieper-Donets rift basin is Ukraines main producing region. The basin contains more than 120 fields and accounts for 90% of Ukrainian hydrocarbon production. The basin is estimated to have produced 47 tcf gas and 1.2 billion bbl of oil2 and has been explored by over 3,000 wells.

Exploration began in the Dnieper-Donets basin during the 1930s after the discovery of salt domes. The first discovery was reported as a small oil pool in dome cap rock in 1936, but significant discoveries were not made until the 1950s.

The largest known oil field, Prilukskoye, containing 600 million bbl, was discovered in 1959. The Carboniferous sandstone reservoir at 5,900 ft was over a deeper Devonian salt structure. The largest gas field, Shebelinka, containing 18.6 tcf, was discovered in 1950. The Permian sandstone reservoir at 5,000 ft was deposited over a faulted salt anticline. Several giant gas fields were discovered in the 1950s and 1960s. Many of these large fields are considered depleted.3

Petroleum geology

The Dnieper-Donets oil and gas province is part of the Paleozoic Dnieper-Pripyat aulacogen on the north flank of the Ukrainian shield. The aulacogen, oriented northwest-southeast, consists of the Dnieper-Donets basin to the southeast and the Pripyat basin to the northwest.

The two basins are separated by the Chernigov-Bragin high. This separation places the Pripyat basin outside the border of Ukraine near Chernobyl and Chernigoe. The distribution of oil and gas fields in the basin with Ukraine is shown in Fig. 2 [24784 bytes].

The Dnieper-Donets basin is an intracontinental rift basin. The rift basin consists of a central graben bounded by large displacement faults and monoclinal flanks dipping into the graben. Depth to basement is reported to be 15,000-20,000 ft on the highs and more than 40,000 ft in the lows.

The monoclinal flanks dip toward the center of the basin at 1-2, and dip increases when approaching the faults bordering the central graben.

The basin was first formed in the early Paleozoic as a narrow graben and then uplifted. Rifting continued during the Devonian and Carboniferous. During Carboniferous, the basin was downwarped. Sediments are mostly upper Paleozoic and Mesozoic clastics. However, upper Devonian sediments consist of limestones, dolo- mites, and halites.

The Devonian salt formed domes, ridges, pillows, and turtle structures similar to the salt basins of the U.S. Gulf Coast. These salt-related structural features form the major trapping mechanism for the basin; however, because of lateral discontinuity of reservoir rocks, many pools are controlled by combination rather than structural traps.

The reservoir intervals are located in the Permian through Devonian intervals with the Carboniferous containing most of the productive intervals. A regional Permian salt above the Devonian salt provides a regional seal for the hydrocarbons. In Fig. 3 (69960 bytes), two cross sections depict typical traps within the southeast, northwest, and central parts of the basin.

The primary hydrocarbon source intervals in the basin are the Upper Devonian-Tournaisian marine shale, marls, and limestones with Type II kerogen dominant. This source association is often called the black shale facies. These source rocks are quite similar to the major source rock in the Alberta and Williston basins. Although these source rocks are primarily oil prone, the Dnieper-Donets basin is largely gas prone because of overmaturity.

The fields in the northwest part of the Dnieper-Donets basin tend toward oil and condensate, while the fields in the southeast part of the basin are primarily gas.

Search opportunities

The Dnieper-Donets basin is in a mature stage of exploration with new discoveries not replacing produced reserves. The primary exploration target has been the Lower Carboniferous section and, during the early 1980s, it was difficult to find sufficiently large fields.4

Ulmishek and Masters2 estimate undiscovered oil ranging from 0.2-1.5 billion bbl, with 0.7 billion bbl most likely, and undiscovered gas as 10-40 tcf, with 23.2 tcf most likely. Since the basin has been intensively explored to about 11,500 ft, the remaining potential is for deep gas from 11,500-20,000 ft.

A potential deep target is the Devonian synrift interval, poorly tested by the Ukrainians because of difficulties with deep drilling and high pressures. Although some deep structural plays exist, these plays may have a significant stratigraphic component and reservoir quality problem that would increase risk.

Lower Carboniferous potential in the form of stratigraphic traps in updip and lateral pinchouts is known, but little exploration has been performed specifically for these subtle traps. A variety of stratigraphic traps related to river channels, deltas, and offshore bars should exist in the transition zone of the alluvial facies in the northwest part of the basin to the deepwater facies in the central part. Additional stratigraphic plays may lay on the marginal monocline and the slopes of large synclines. These subtle traps may have significant exploration potential.

Companies experienced with exploration in the mature U.S. salt basins should be able to explore successfully using western technology such as 3D seismic or horizontal drilling techniques, virtually unused by the Ukrainians. And those companies experienced in deep drilling and willing to test the deeper Devonian intervals may find that potential gas reserves have been underestimated.

Exploitation chances

Most of the opportunities in the Dnieper-Donets basin are for additional field development or step-outs. Development opportunities in the basin are identical with the U.S. onshore Gulf Coast salt basins. These are typically bypassed pay zones, untested fault blocks in existing fields, or salt domes with untested intervals.

An example is Reshetnyakovskoye oil field, discovered in 1964. The top of the salt is located at about 2,200 ft with pays from 1,800-9,500 ft. The 1,800 ft Jurassic pay sand over this dome, which has produced several million barrels, is shown on a seismic map (Fig. 4 [79128 bytes]). Several fault blocks are untested. Deeper production (8,500-9,350 ft) was found beneath a salt overhang. Ukrainian seismic data were not adequately able to delineate the salt resulting in wells that TDd while still in salt or too far down dip.

The untested shallow fault blocks could be tested quickly for a small capital investment and, if successful, could provide a quick return on investment. Additional work would include 3D seismic to locate additional fault blocks that either have updip potential or have been missed by drilling. Deeper, untested reservoir intervals may exist. Using 3D seismic for salt domes, so successful in the U.S. Gulf Coast, has not been done in Ukraine.

Carpathians

Exploration in the Ukrainian Carpathians began at the end of the 18th century with extraction of crude oils from Paleocene and Eocene sandstones in the allochthonous flysch.

Many large fields were discovered during the mid-19th century. Boryslav field, discovered in the 1860s, has produced 220 million bbl of oil. Large gas fields, such as Bilche-Volista (1.3 tcf), were discovered in the late 1940s and early 1950s.3

Ulmishek and Masters2 estimate cumulative production from the Ukrainian Carpathians to be 700 million bbl of oil and 8 tcf of gas.

Petroleum geology

The Ukrainian part of the Carpathians consists of a Tertiary thrusted foredeep and adjacent foreland.

The foredeep developed at the end of the Alpine orogeny and consists of mostly late Cenozoic conglomerates, sandstones, and shales derived from the Carpathians. The shales and turbidites deposited in the foredeep from the Carpathians are the classic flysch sediments. The foredeep is a folded and thrusted foreland resulting from the formation of the Carpathians.

The Carpathians were folded during the Cenozoic and consist of a sequence of shallow marine sandstones and shales from Late Jurassic to Miocene in age. The Carpathian foredeep and Carpathian overthrust belong to the largest petroleum provinces of central Europe.5

In Ukraine, the strongly folded thrusts are predominately oil-productive and have been explored to depths of 13,000-15,000 ft. Gas fields are controlled by broad uplifts on the foreland. This places the gas producing areas to the northeast and the oil provinces in the mountainous regions to the southwest.

An oil and gas field map of the Ukrainian Carpathian region appears as Fig. 5 (97139 bytes), with cross section A to A illustrating the complexities of the overthrusted area. The oil and gas fields are located in subthrust traps in the overthrusted region and on fault closures and anticlines in the foredeep.

Exploration potential

Recoverable reserves are estimated to be 400 million bbl of oil and 1.2 tcf of gas. Ulmishek and Masters2 give a mean chance of an additional 500 million bbl of oil and 2.3 tcf remain to be discovered. Russian and Ukrainian geologists believe the remaining unproduced potential to be over 2 billion bbl.6

The timing of migration is important for accumulations in the thrusted areas. Oligocene shales with Type II kerogen are the main sources of oil and gas in the Carpathian sector. These shales reached maturity early while still in their basinal prethrust position. Long distance migration helped form the foredeep oil fields. Oil in the overthrust is trapped in late structures. Oligocene shales, in response to additional sedimentation and overthrusting, were forced into the hydrocarbon generation window. Migration then took place over short distances towards the late thrust structures.

Larfarge, Ellouz, and Roure7 believe a Paleozoic source rock is present that holds promise for deep plays in the foredeep. Kolton8 has found that most of the hydrocarbons have been generated from the Oligocene source rocks deeper than 13,000 ft. This implies that deep subthrust structures, well within reach of western deep drilling practices, are prospective.

Lower Cretaceous sands have yielded gas shows at depths of almost 22,000 ft. The Borislav-Pokutian zone of the foredeep has recovered oil from depths of about 19,000 ft. The subthrust structures below 15,000 ft have not been adequately tested.

The use of 3D seismic, a technology unused by the Ukrainians, is the best method for searching for these structures. However, thick forests and mountainous terrain present extremely difficult obstacles, resulting in costly exploration programs. Limited access and narrow, substandard roads create severe difficulties in getting the drilling rig into the proposed locations.6

Exploitation

Like the Dnieper-Donets basin, most of the opportunities in the Carpathian area are for additional field development or step-outs.

For example, Bitkov-Babchenskoye field was discovered in 1951 by surface mapping and gravity (Fig. 6 [111978 bytes]). The largest reservoir interval, the Glubinnaya fold, is calculated to have reserves in excess of 550 million bbl; 52 million bbl have been recovered, representing a 9.5% recovery rate. Other reservoirs in the field have reported 2-3% recovery.

The low recovery rates stem from allowing reservoir pressure to fall below bubble point. An insufficient pressure maintenance system was installed 14 years after discovery.

Many wells are in disrepair and in need of workover such as paraffin and debris cleanup. Squeeze jobs, reperforations, and acidizing are needed. Some wells will need conversion from gas to oil because shallower oil-bearing reservoirs were bypassed for deeper gas.

Horizontal drilling may be an option depending on reservoir heterogeneity. An efficient reservoir management program should substantially increase the recovery from this field. The technology to obtain additional reserves from this field are within the reach of virtually any independent or major oil company.

Deeper potential may exist in this field. An untested subthrust anticline exists at depths below the field. A similar feature was drilled at Lopusnanskoye field in 1992, about 25 miles to the southeast. Production was ob- tained from the Jurassic and Upper Cretaceous fault blocks.6

Black Sea, others

The Ukrainian Black Sea shelf, considered by industry to be prospective for substantial oil and gas reserves, is the widest in the Black Sea. At Odessa, the shelf is 125 miles wide with water depths of 300 ft or less. Mild weather simplifies logistics and operations on this wide exploration fairway.

The adjacent onshore Crimea and PreDobrogea depression have had discoveries that imply potential for the offshore sector. The existence of large accumulations of hydrocarbons on the Black Sea shelf has been proven. Lebada oil field, on the Romanian shelf, produces 10,000 b/d of 35 gravity crude.

Lebada field reserves are thought to be about 50 million bbl. Two additional discoveries near Lebada bring the total reserve estimate for the three-field complex up to 100-150 million bbl of oil.

Exploration potential

The Ukrainian shelf is part of the Scythian epi-Hercynian platform, which extends from North Dobrugia on the west to the Central Caspian on the east. Within this region is the Cretaceous-Cenozoic Black Sea depression. This depression is older than the Black Sea, which formed at the beginning of the Paleogene.

Two stratigraphic complexes with oil and gas potential have been recognized by Ukrainian and Russian geologists.

The first complex is Cretaceous sandstones, siltstones, limestones, and shales up to 8,000 ft thick that were deposited in a transgressing and reducing environment in a shallow sea. The reservoir properties of the clastics are reported to be good. There are several regional stratigraphic breaks in the Cretaceous that may represent potential exploration targets. By analogy with the oil and gas region of the North Caucasus, the potential for large accumulations of oil and gas may be present in this interval.

The second stratigraphic complex is Paleogene carbonates and shales up to 6,300 ft thick. These were deposited during basin subsidence. Several gas and gas condensate fields have been discovered on the Ukrainian shelf in the Oligocene-Miocene.

Hydrocarbon source rocks exist in the Black Sea. The Oligocene Maykop formation, source rock for the North Caucasus province of the FSU and responsible for the significant reserves of the area, contains large quantities of organics and is possibly 4-5 km thick in the Black Sea region. In the Crimea area, Maykop was found to average 1.5% organic carbon corresponding to a Type III to II kerogen.9

Cretaceous argillaceous sediments on the Ukrainian Shelf have been found to carry 0.5 to 1.5% organic matter.10 Lower Devonian shales and Middle to Upper Devonian carbonates from the western Black Sea have shown fair to excellent source qualities. The maturity in these and other source intervals has yet to be resolved.

Some samples of the Campanian Yenipazar and Triassic Karakaya formations indicate that the hydrocarbons have been generated in the Sakarya basin of the southwest Black Sea basin.11 Basin modeling in some areas of the Western Black Sea region using regional heat flow data shows the Devonian source intervals to be within the top of the oil-generating window. Flows of oil have been recovered from Devonian carbonates in the Krylov depression of the Dobrogea downwarp. However, no commercial oil has been found on the Ukrainian shelf. Fields discovered thus far are mostly gas or gas condensate.

More than 250 structures have been identified by seismic surveys (Fig. 7 [34990 bytes]). Only about 5% of these structures have been tested. The sizes of some these structures are reported to be from 2 by 3 miles to 10 by 25 miles with closures of nearly 1,000 ft. Ukrainian offshore technology has been limited to water depths less than 250 ft, keeping offshore exploration near the coast. Thus, large structures in deeper water have been bypassed.

The potential of the shelf has attracted British energy companies such as JP Kenny and British Gas. JP Kenny plans an 11,000 ft test about 55 miles off the Crimean coastline.

Conclusions

There are oil and gas investment opportunities in Ukraine. There is no doubt that additional reserves can be recovered from the existing Ukrainian oil and gas fields by using western technology, and there is a possibility of discovering a large accumulation.

Attracting the type of investors that Ukraine needs will pose a challenge.

Political change and privatization or commercialization of many state oil companies have opened opportunities that have increased available acreage around the world. At present, there are more opportunities than there are companies willing to take them. This has resulted in a reduction in acreage price (in the form of government take) around the world.

Many governments are starting to learn that they must compete on a global basis if they desire oil and gas investments. Terms and conditions are becoming more negotiable, and the take it or leave it deal is less common. New agreements are being forged that offer larger degrees of stability and investment incentive beyond those offered in the past.

Ukrainian government officials admit that a key to solving its energy crisis is to reform the oil and gas industry, both technologically and legislatively. Clearly, the aim is to attract outside expertise and investment, but it is less clear if they can recognize, reach, and reassure their potential investor audience. The target group of investors for Ukrainian oil and gas projects is different from that of Russia, Indonesia, Vene- zuela, or other countries with high exploration potential.

The Ukrainian target group is independents familiar with technically similar opportunitiesexploration and production in mature to ultra-mature areas. Such companies traditionally operate in politically stable areas with well-known legislative environments and familiar investment requirements. These companies are sensitive to long payout periods, project delays, and political and financial risks. Not as well capitalized as major oil companies, they have few personnel to devote to high-risk projects or resolving complex host-government negotiations.

These are the issues that the Ukraine and other countries in similar situations must come to understand in order to attract oil and gas investments.

References

1. Dorian, J.P, Minakir, P.A., and Borisovich, V.T., eds, CIS energy and minerals development, prospects problems and opportunities for international cooperation, Kluwer Academic Publishers, The Netherlands, 1993.

2. Ulmishek, G.F., and Masters, C. D., Estimated petroleum resources of the Former Soviet Union, U.S. Department of the Interior, U.S. Geological Survey, Open-File Report 93-316, 1993.

3. Riva, J.P. Jr., Petroleum exploration opportunities in the Former Soviet Union, PennWell Books, Pennwell Publishing Co., Tulsa, 1994.

4. Paliy, A.M., Main directions of geological exploration for oil and gas in the Ukraine, Petroleum Geology, Vol. 20, No. 9, pp. 411-412, 1983.

5. Ulmishek, G.F., and Klemme, H.D., Distributional controls, distribution and effectivenss of worlds petroleum source-rocks, U.S. Geological Survey Bull. 1931, 1990.

6. Carpatksy Petroleum Corp., subsidiary of United Kiev Resources Inc., prospect summary, 1995.

7. Lafargue, E., Ellouz, N. and Roure, F., Thrust-controlled exploration plays in the outer Carpathians and their foreland (Poland, Ukraine, and Romania), First Break, Vol. 12, No. 2, February 1994.

8. Koltun, Y., Organic matter in Oligocene Menilite formation rocks of the Ukrainian Carpathians: Paleoenvironment and geochemical evolution, Organic Geochemistry, Vol. 18, No. 4, 1992, pp. 423-430.

9. Veto, 1987.

10. Sulimov, I.H., Larchenkov, P., Yesipovich, and Samsonov, V.I., Prediction of oil-gas potential of the Black Sea shelf of the Ukraine, Petroleum Geology, Vol. 29, No. 5-6, May-June 1995, pp. 203-208.

11. Gurgey et al. 1992.

The Author

Merle Grabhorn is a technology transfer engineer for Tulsa University, currently working within BDM-Oklahomas technology transfer group at the National Institute for Petroleum & Energy Research (Niper) in Bartlesville, Okla. He previously worked for a number of service companies and producing companies as an exploration geophysicist and geophysical consultant. He has a BS in geology from Wichita State University and an MS in engineering from Oklahoma.