Frontera Resources: Georgia’s Energy Ministry an Obstacle

GEORGIA TODAY has been following updates from US independent oil and gas exploration and production company ‘Frontera Resources’ which announced a find of around 5.31 trillion cubic meters of gas in the Georgian region of Kakheti last year.

In October 2015, the American company announced that ongoing work had assessed the gas resources associated with its exploration and production efforts at the South Kakheti Gas Complex to be as much as 135 trillion cubic feet (3.8 trillion cubic meters) of gas, found in reservoirs between 300 meters and 5,000 meters in depth.

In late December 2015, Frontera declared that the extensive integrated gas resource potential was larger than previously identified in October - with as much as an additional 52.5 trillion cubic feet (1.5 trillion cubic meters) leading to an overall estimate of 187 trillion cubic feet (5.31 trillion cubic meters).

On May 16, Frontera made a corporate update announcing considerable progress in executing its work program on the South Kakheti Gas Complex and advancing the asset towards a stage of full scale development.

“Efforts are currently underway to secure financing for these previously announced oil window and gas window exploitation drilling plans,” Frontera said. “Since the beginning of the year, the Company's exploration works have produced a peak production of 750 barrels of oil equivalent per day (boepd) from its various testing operations.”

However, Frontera is claiming that previously announced expectations to achieve a daily gas production in excess of 7 million cubic feet per day from operations during Q1 of 2016 have been consistently delayed due to reluctance from Georgia’s Energy Ministry to encourage investment in the ongoing exploration of natural gas resources.

Frontera declares that discussions are ongoing to alleviate the Ministry's opposition to this work. “In the meantime, Frontera has the capacity to deliver this volume of production from its exploration operations as announced on 23 December, 2015, and the Company is hopeful that a swift resolution can be found in order to continue to progress gas exploration efforts.”

The American company further accuses the Ministry of Energy of giving misinformation of an unreliable and misleading nature to local and international public media related to Frontera's identification of extensive natural gas resources in the country. “Frontera reiterates that these natural gas resources have been independently verified by Netherland Sewell & Associates Inc., a highly credible international industry consultant, and have been accurately reported in accordance with its obligations as an AIM quoted company. The Company therefore advises that reliance should only be placed on official notifications made by the Company.”

Steve Nicandros, Frontera CEO, says that his company’s ongoing work continues to move the Company closer to realizing significant value from the development potential in both the oil window and gas window areas of the South Kakheti Gas Complex. “The Company has invested over USD 400 million in these assets since assuming operatorship and we are excited about the near term prospect of reaping the benefit of this historic capital.”

The CEO declares that, to date, Frontera’s operations have largely been classified as exploration activities and these have greatly helped to technically understand the progression towards development. “Exploration operations carry an inherent risk association which impact certainty with regards to forecasting possible outcomes such as production forecasts and associated timelines. We have significantly reduced the subsurface risk of our holdings through our exploration and associated technical work and feel confident that we will be able to deliver on our operational objectives as we move into the next development phase of our work.”

The company leadership say in the case of their gas window operations, their work to date has shown them what is possible from a technical perspective in terms of producing gas from a pilot project, the results of which are both positive and encouraging. “At the same time, our work has also revealed political challenges in the domestic gas market monopoly that has provided a perspective on what must be done to overcome such challenges before full-scale development can confidently be undertaken.”

The potentially groundbreaking discovery by Frontera Resources has become a matter of debate by the government and expert circles in Georgia and beyond.

Zviad Adzinbaia


23 May 2016 19:32