Presentation at GIOGIE 2014 (Georgian International Oil, Infrastructure and Energy Conference) on Oil in Georgia.
By Wolfgang Nachtmann, Business Development, MND Georgia
1. GIOGIE, Tbilisi, March 26, 2014
An Investor’s View at Expectations vs Reality
Wolfgang Nachtmann
2. General view at oil in Georgia
Oil potential – resources versus reserves
MND in Georgia – CanArgo work & investment program
Risks and opportunities in the Georgian oil patch
General Aspects
To be improved
Challenges
MND’s outlook
Content
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Georgia – (Petroleum) Geologic Overview
Transcaucasian Intermountain Area
14 oil, 1 gas-oil, 1 gas fields: partly in production
4 oil discoveries: commerciality not given yet
5. Georgia’s Oil Potential – Some Estimates 1/2
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Tethys Petroleum estimates there could be an ‘unrisk recoverable resources of
approximately 3 billion barrels of oil’. GIOGIE 2014 website
Total initial oil resources on Georgian territory are projected at 850 million
tonnes [= 6.2 billion barrels], of which 450 million tonnes [= 3.3 billion barrels]
are onshore and 400 million tonnes on the Black Sea shelf. Initial gas reserves, the evaluation of
which has only so far been done in Eastern Georgia, are projected at 180 billion cubic meters.
Interfax, June 06, 2012
GOGC, the state oil company, numbers the ‘prospective resources’ in Georgia
with 677 million tons of oil [= 4.9 billion barrels] and 148 billion m3 of gas.
AAPG Conference Tbilisi, September 2013
Question:
Are the authors of these numbers really talking about the same?
6. Georgia’s Oil Potential – Some Estimates 2/2
6
Tethys Petroleum estimates there could be an ‘unrisk recoverable resources of
approximately 3 billion barrels of oil’. GIOGIE 2014 website
Total initial oil resources on Georgian territory are projected at 850 million
tonnes [= 6.2 billion barrels], of which 450 million tonnes [= 3.3 billion barrels]
are onshore and 400 million tonnes on the Black Sea shelf. Initial gas reserves, the evaluation of
which has only so far been done in Eastern Georgia, are projected at 180 billion cubic meters.
Interfax, June 06, 2012
GOGC, the state oil company, numbers the ‘prospective resources’ in Georgia
with 677 million tons of oil [= 4.9 billion barrels] and 148 billion m3 of gas.
AAPG Conference Tbilisi, September 2013
Resources is not Resources!
This is like comparing apples with oranges!
We need to implement international standards
7. Petroleum Resources and Reserves Classification (SPE)
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increasing uncertainty
increasingcommerciality
Technology+$$$$
Reserves: economically producible with
today’s technology and at today’s prices
8. Georgia’s Historic Oil Production
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Source: GOGC
3.33 mln tons / year
= 67,000 bbl / day
2013: 47,863 tons
= 957 bbl / day
Georgia’s oil industry employs about 1,000 people
ca. 1 employee / bbl oil / day
10. Ways to Increase Oil Reserves & Production
In an already proved oil region there are several ways to raise
production as well as reserves numbers:
Exploration new field discoveries new reserves
Field development delineation of a field / reservoir / reserves
optimize production (and investment cost)
Improved production methods stabilization / increase of net
production increase of recovery factor additional reserves
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11. 11
MND: 50% Partner in CanArgo – Work Program (1)
Entry in summer 2012 – committed to a $100 mln
work program:
Acquisition of some 423 km of 2D seismic
365 km completed in 2013 / 60 km to follow 2014
Studies
TECON Engineering: feasability study for replacement of
Ninotsminda processing plant, completed 2013
Montanuni Leoben: Maykop source rock study, in progress
Establish / improve HSE awareness and acceptance
introduced in 2013
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MND: 50% Partner in CanArgo – Work Program (2)
Entry in summer 2012 – committed to a $100 mln
work program:
Preparation of drilling projects in all licenses
ongoing – drill 1st well later in 2014
Reservoir management and production technical
measurements to improve oil recovery from the
Ninotsminda field
started implementation, problems (technical, service!)
Renewal & extension of production facilities in Ninotsminda
realization pending
13. CanArgo’s License & Activity Areas – Seismic
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Planned: 423 km 2D-Seismic
Accomplished in 2013:
Acquired 365 km
Employed < 420 people in the field
No LTI
Data quality is good to reasonable
Stayed well within approved budget
Access blocked
by villagers
14. General / Supportive Aspects (1)
The political situation in Georgia is considered stable
Georgia’s PSA law is investor friendly
Georgia is an oil prone country with two major oil provinces:
– Kura basin in the east
– Rioni basin in the west plus the offshore area in the Black Sea
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15. General / Supportive Aspects (2)
Except for one all available onshore blocks are awarded
Georgia’s petroleum potential is below the radar of major
international oil companies
So, for the last 20 years the Georgian oil patch has been the
playground for small (to mid size) oil companies with 2 different
business models:
– Classical E&P companies
– ‘Financial investors’, often
with limited financial and /or
technical capabilities, just
holding a license
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E&P Licenses in Georgia
16. Where We See Room for Improvement (1)
Oil industry in Georgia is ‘underdeveloped’ – little continuous
activity over years, very limited service industry
However, new players (e.g. Jindal, MND) have started ambitious
and costly programs
Intensify cooperation with other oil companies to pursue
common interests in the development of the upstream oil
business in Georgia (avoid repeated ‘re-invention of the wheel’).
Topics: technology, services, legal/admin issues, oil & gas sales,
etc. – best to be done with / via GAPC
Build a network to share and optimize services especially from
international providers (procurement, seismic, drilling, well
services, production equipment, facilities, etc.)
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17. Where We See Room for Improvement (2)
Increase short to mid term production via new wells, modern
reservoir management methods and production technologies,
well planned work-over jobs in old wells
Optimum utilization of modern seismic acquisition, processing
and interpretation technologies and techniques for better
understanding of complex geology and succeed in fracture
identification before drilling best selection of new well
location and well paths
Employ more Georgian graduates from technical faculties –
current quality of education is not competive implement in-
house & external training programs; support local universities
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18. Challenges
Licenses issued in the mid 1990’s expire in 10 to 15 years – to be
able to recover cost and make acceptable profit, new JV partners
need to pursue aggressive work programs when partnering with
such “old” license holders
High(er) risk and high cost for seismic and well operations due
to technical challenges like complex geology, demanding surface
topography, varying pressure gradients, hole instability, difficult
to produce reservoirs between 1,000 and 5,000 m depth in
combination with high environmental and safety requirements
Transfer the high oil potential to a corresponding reserves and
production scenario
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19. MND Outlook (1)
Georgia is a declared focus area for MND
MND, being a classical E&P company, is 50% partner in CanArgo
and pursues an ambitious program (initial commitment: US$ 100
mln in 3 years)
MND is looking for cooperation with other companies and
supports GAPC in its coordinating role for the industry
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20. MND Outlook (2)
MND is open for additional opportunities in Georgia
MND is a technically and financially sound entity and strives to
become a main player and oil producer in Georgia’s E&P
industry
MND Georgia has an office in Tbilisi for coordination of all
business related and technical issues
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