Georgia Awards PSC With Downstream Aspects

Frontera's Kura Basin Acreage

Drilling and development activity and downstream infrastructure stand to advance in the Kura basin of Georgia with that government's award of a production-sharing contract (PSC) that includes rights to construct a new refinery.

Georgian state-owned oil company Saknavtobi awarded Frontera Resources Corp., Houston, a PSC covering 1.4 million acres.

The contract also grants Frontera the exclusive right to construct a refinery near the capital of T'bilisi.

Frontera officials said the award makes Frontera the first U.S. oil and gas company to invest in oil and gas rights in Georgia.

What's involved

Frontera's PSC covers Block 12 in eastern Georgia along the border with Azerbaijan and adjacent to the route of a planned 550-mile early oil pipeline being financed by Azerbaijan International Oil Co.

Much of the pipeline is in place, requiring only about 90 miles of new line to be laid.

Currently, terminals and related infrastructure are being built, and pipeline commissioning is set for late in 1998.

The so-called western route early oil pipeline, which will cross the western edge of the Frontera block, will link Caspian Sea fields with the Georgian port of Supsa on the Black Sea.

"This transaction uniquely positions our company to share in the blossoming trade along the 'Energy Road,'" said Steve C. Nicandros, Frontera president and CEO.

Block 12 contains two oil fields with identified rehabilitation potential and three other oil fields that require further study, according to Frontera.

The fields, one of which was discovered as recently as 1963, contain light sweet crude. They are Bayda, Taribani, Mirzaani, Nazaleri, and Patra-Shiraki.

The block also contains "significant numbers of undrilled generic structures," Frontera said.

The company, which has already analyzed a substantial amount of Block 12 data, officials said, is pressing a geological, geophysical, and engineering work program.

"We expect that advanced exploration and production techniques will prove the key to successfully increasing Georgia's oil production," said Reg Spiller, Frontera exploration and production vice-president.

Plans

Frontera, in conjunction with Saknavtobi specialists, will pursue a two-track work plan.

Objective is to spur early cash flow through rehabilitation of older fields, while ascertaining the potential for discovery of new reserves, Frontera said.

On the downstream side, Frontera will commence an integrated refinery market study and technical analysis.

It has the exclusive right to build a refinery, if warranted, based on study results.