Business news from Ukraine

UKRGAZVYDOBUVANNIA REDUCES PRODUCTION OF GAS BY 0.5%

JSC Ukrgazvydobuvannia, part of the Naftogaz Exploration and Production division, reduced the production of marketable gas by 0.5% (by 47.8 million cubic meters) in January-September 2020, as compared to the same period last year, to 10.135 billion cubic meters.
Naftogaz noted that it will be more difficult to maintain production at last year’s level in the fourth quarter due to the cumulative effect of negative factors associated with the four months’ lack of approval of the permits required to start drilling, as well as low prices for energy with a consequent reducing of investment in production activities, and a delay of the delivery of equipment and materials due to quarantine restrictions.
In general, it was possible to maintain production volumes over the nine months due to the modernization and construction of ground infrastructure facilities, the implementation of the development program and additional exploration of existing fields, as well as work on new areas.
So, since the beginning of 2020, the divisions of Naftogaz Group have completed the drilling of 27 wells, performed 210 workovers of wells, 75 hydraulic fracturing operations, and 551 coiled tubing operations, completed the reconstruction of four gas treatment units, the construction of four gas pipelines and 66.8 km of plumes.

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UKRGAZVYDOBUVANNIA MAINTAINS COMMERCIAL GAS PRODUCTION IN Q1 AT LAST LEVEL

JSC Ukrgazvydobuvannia in January-March 2020 reduced commercial gas production by 0.4% (by 13.6 million cubic meters) compared to the same period of 2019, to 3.401 billion cubic meters, which was transmitted for the needs of the population and heating companies, the press service of the company said.
Ukrgazvydobuvannia said that it was possible to maintain commercial gas production at last year’s level due to the commissioning of 14 wells, some 158 coil-tubing operations, some 30 overhaul of wells operations and some 29 hydro fracturing operations for three months.
The first deputy director general of the company, Oleksandr Romaniuk, said that the revenues of oil and gas companies will decrease due to reduced demand in the markets, followed by lower oil and gas prices, which will lead to a decrease in investments.
“In addition, due to the coronavirus [COVID-19] pandemic, contractors cannot always follow the contractual terms of work and supplies. Until the end of the year, we will feel the negative impact of these factors on production indicators,” he said.
Romaniuk also said that the recently concluded service contract between Ukrgazvydobuvannia and Expert Petroleum international company will allow involving foreign investment and management practices of the company’s depleted fields in 2020.
The company also continues to modernize its ground infrastructure, in particular it plans to re-equip existing and construct new gas processing plants. Joint projects are continuing with Schlumberger to drill well No. 888 of Shebelynka gas field and Halliburton to rehabilitate wells from an out-of-act ion stock by drilling offshoots.

UKRAINIAN GOVERNMENT COULD SELL SHARES IN UKRTRANSGAZ, UKRGAZVYDOBUVANNIA, UKRTRANSNAFTA

The Ukrainian government on Wednesday will consider the revised bill on the list of state-owned facilities that are not subject to privatization, which envisages the retaining of at least 50% plus one shares in Ukrtransgaz, Ukrgazvydobuvannia and Ukrtransnafta and 100% in Ukrhydroenergo, Ukrenergo and Energoatom.
According to an explanatory note to the document available at Interfax-Ukraine, after the first consideration of the bill at a meeting of the Cabinet of Ministers on December 27, 2019, a conciliation meeting and a meeting of the government committee took place, as a result of which the lists underwent significant changes.
If in the first version the Ministry of Economic Development, Trade and Agriculture allowed selling up to 50% in all facilities, now their number has been reduced to 22, while for 135 facilities it is proposed to fix all their shares in state ownership.

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STATE-RUN UKRGAZVYDOBUVANNIA TO DRILL 80 NEW WELLS IN 2020

JSC Ukrgazvydobuvannia (UGV) in 2020 will drill 80 new wells, Head of Naftogaz integrated gas business unit Andriy Favorov has said. “In 2020, we will drill and launch about 80 new wells. Earlier, to do this without modern drills, the drilling speed of which is two or three times higher than our old drills, was difficult,” he said in an exclusive interview with Interfax-Ukraine.
According to him, the company has changed its approach in this direction, and now it will not drill wells which drilling costs are disproportionate to the investments spent.
Naftogaz is not a charitable organization created to drill as many wells as possible… When we sit down and consider the economic return on our investments, we must be sure that it will be positive. Therefore, the wells that were planned to be drilled in order to increase production “by any possible amount” and their costs at a gas price of $200 per 1,000 cubic meters turned out to be unfounded. Yes, we cut them off. Yes, I will not drill them,” he said.
Favorov also said that on the basis of the analysis, of the existing 3,500 wells in the UGV portfolio, about 1,000 are already at zero production. “They need to be closed and written off, which is what we will do next year. We analyzed another 2,500 and, unfortunately, the most low-risk and most debit works have already been carried out on them in 2015-2016: hydraulic fracturing, coiled tubing, repairs… This lemon is squeezed, plus or minus this story is closed, and we need to move on to the next stage of technically more complex decisions,” Favorov said.
In this regard, the company analyzes deep-hole drilling and development projects for unconventional and offshore gas, to which it is planned to attract international companies with relevant experience. In particular, already in 2020, the UGV plans to drill two exploration wells at the Sviatohirsk field with tight gas reserves.
“We conducted a seismic survey, planned two exploration wells for next year to test our hypotheses. We will not invest billions in drilling without learning the small things, this is stupid. I will not go into details, but in the first half of the year we will test a sufficient number of our hypotheses to be sure that these and other unconventional deposits are economically efficient,” Favorov said.
He also called on the government to actively promote offshore mining.
“We have a great undisclosed potential for the shelf. The UGV has shelf licenses, some are disputed in courts and we have limited work opportunities. If the government is set to increase production, then discussion around the shelf must be mandatory. Unconventional gas, deep drilling and the shelf is a potential, and it must be converted into production,” he said.

CANADIAN VERMILION, UKRGAZVYDOBUVANNIA ENTER 50/50 PARTNERSHIP IN UKRAINIAN OIL&GAS PSA

The partnership of Canadian Vermilion Energy Inc. and Ukrgazvydobuvannia in a joint project on development of three oil and gas fields in Ukraine under production sharing agreements (PSA) is now 50/50, according to its second quarter year report.
“Entering Ukraine aligns with our strategy to capitalize on opportunities in under-exploited basins by using modern technologies to improve success rates and recovery,” reads the document.
Vermilion said that subsequent to the end of the second quarter of 2019, it entered into a 50/50 partnership with Ukrgazvydobuvannia and were awarded two exploration licenses in Ukraine, subject to a final production sharing agreement.
“The licenses cover approximately 585,000 gross acres situated in one of Europe’s most prolific natural gas regions (Dniprovsko-Donetsky Basin). The new licenses are in close proximity to several multiTCF gas fields with most of the basin (and awarded license areas) still uncovered by 3D seismic. The terms of the licenses include a modest capital commitment, back-loaded over a five-year time frame,” reads the report posted on the company’s website.
As earlier reported, Canada’s Vermilion Energy jointly with a Ukrainian company (Ukrgazvydobuvannia) has won the right to develop three oil and gas fields in Ukraine.
On July 1, an interdepartmental commission for organizing the conclusion and implementation of the product sharing agreements (PSA) prepared for the government proposals on the winners in nine continental hydrocarbon sectors put up for auctions. Among them are Ukrgazvydobuvannia in alliance with Vermilion for Balakliyske and Ivanivske fields, Ukrgazvydobuvannia for Berestianske and Buzivske, private company Ukrnaftoburinnia for Rusanivske, U.S. Aspect Energy for Varvynske, DTEK for Zinkivske, Geo Alliance for Sofiyivske and Zakhidnadraservis for Uhnivske fields.
The head of the office of the National Investment Council, Yulia Kovaliv, said that now within two months companies must agree on the contracts themselves and sign agreements with the government in order to start exploration as soon as possible and to start work as soon as possible. She also said that the volume of investments of the winning companies is $430 million in the pessimistic scenario.
According to Vermilion report, its quarterly production volumes by approximately 1,300 boe/d and FFO by approximately $11 million, we recorded corporate production of approximately 103,000 boe/d, little changed from the previous quarter.

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UKRGAZVYDOBUVANNIA OPENS TWO NEW FIELDS

JSC Ukrgazvydobuvannia in June 2019 opened new fields in Kharkiv and Poltava regions.
According to the press service of the company, in particular, in Kharkiv region, after testing an exploratory well with a depth of over 3,700 meters, an oil inflow was obtained. Oil resources in the field are about 130,000 tonnes.
In Poltava region, after drilling the first exploratory well with a depth of 6,300 meters, an industrial gas flow was obtained. The resources of the open gas condensate field exceed 2.7 billion cubic meters of gas.
“Ukrgazvydobuvannia significantly intensified exploration work, in particular, seismic exploration in all promising areas of the subsurface, which made it possible to open eight new fields in the last three years, six of which in 2018,” the company said.
As reported, Ukrgazvydobuvannia in 2018 increased gas production by 1.2% (by 176.2 million cubic meters) compared to 2017, to 15.420 billion cubic meters. The company’s share in total production in Ukraine in 2018 was 73.8%.