Oil and Gas in Ukraine

By: Stig Kristoffersen

Capital Oil is at the moment exploring for oil in two licenses called Kubash-Lukva and Maydan, outside Ivano-Frankivsk in the western Ukraine.

On the 7th of December 2006 Capital Oil signed an exclusive Joint Activity Agreement (JAA) with the Ukrainian state and Oblast owned company Bohorodchanynaftogaz (BNG). This agreement outlines that Capital Oil will have the operative responsibility for BNG in the exploration of oil and gas in the two licence blocks that is owned by BNG. BNG.

The oil fields are shallow, and contains low sulfur oil of good quality, around 36? API. Together the proven resources are assumed to be around 19 MMBO in a pessimistic scenario and up to 57 MMBO in a most likely scenario. This estimate is outlined in a totally independent report given by the Moscow office on behalf of the scottish oil consultancy company TRACS International Ltd. The resource estimate has its basis in analysis of 15 wells drilled during the 1960s and 70s.

The licenses are prospective and has an acreage of 44,5 km2. The concession owner can produce up to 10 percent of the total resources proven. License owner is BNG, but all operations are handled by the organization established within the framework of the JAA with BNG, Svenska Capital Oil AB and LLC Capital Oil Ukraine. Swedish Capital Oil AB will keep86 percent from the net profit from the JAA., LLC Capital Oil Ukraine will have 1 percent, while BNG will maintain the remaining 13 percent.

The exploration licenses of Capital Oil are located in the north western part of Ukraine at the foothills of the Carpathians. The well developed hydrocarbon prolific basin stretches from Poland to Ukrainian and then into Romania. This region was the first region to be set into production in Europe already at the second half of the 19th century.

The Ukrainian part of the basin was active up to 1960s when the focus shifted to the then newly discovered huge resources in Siberia.

The licenses of Capital Oil had a relatively low production from layers at a couple hundred meters up to the late 1950s. During 1960-70 a larger number of exploration wells were drilled in order to explore horizons at around 2000 meters depth or more.
The Carpathians were formed around 20-30 millions years ago during the Alpine development. The geology is characterized by trusted fold belts. Sediments of interest as reservoirs were developed during Cretaceous to Tertiary time. The sedimentary environment was deep marine sandstones and siltstones together with claystones.

The fold belt has introduced several opportunities for oil traps were oil and gas from deeper layers have been migrated up into and been trapped in porous layers capped by impermeable clays.
Capital Oil explores for oil below the old production levels were oil shows are seen in wells drilled during the 1960-70s.

The larger anticlines ( in range of several kilometers) of Kubash-Lukva and Maydan-licenses forms trap mechanisms which are drilled at the moment. The anticline of Kubash-Lukva is situated to the west and Maydan one in the east part of the area of exploration. The first exploration well of Capital Oil will test the layers in the Kubash-Lukva anticline as in Maydan these layers explored in Kubach-Lukva are eroded and deeper reservoir layers are explored here at a later stage.
In a press release of April 4th, Capital Oil reports that oil has been encountered in the second exploration well in the license.

As in the first exploration well there are indications of several oil layers and in the second well ranging from 215 to 366 meters depth.

In January 2008 Capital Oil started the second exploration well drilling in the license. Preliminary results from the well logs and cores proves several oil layers ranging from 215 meters to 366 meters depth.

Leif Larsson, general manager of Capital oil proclaims that these indications proves possibilities for production is good.
As in their first exploration well, the oil layers are relatively shallow. This is in line with Capital Oil assumptions and assumptions of low production cost as well.

The exploration well is planned to 1050 meters depth for test of the deeper layers as well.

The well test is assumed to finish during April month this year.
The drilling of the third well will start immediately after finishing the second well.

In a press release of April 21st, Capital Oil announces production of oil from its first well in the license.

A revitalization of Europe's oldest oil province is ongoing now. The first test production of oil from the first exploration well in north western part of Ukraine has been performed.

The test production of the first exploration well in Kubash-Lukva prospect area has been initiated. The drilling was initiated in October 2007 and finished in January 2008 within indication of oil layers within it.

In the beginning of April Capital Oil proved oil in its second exploration well and in April the third exploration well was initiated. A total of four exploration wells are planned in the initial exploration campaign.

The General Manager Leif Larsson comments that so far they have gotten the results they expected, and that the findings are a result of thorough geological analysis of wells in area as well as seismic interpretation.

In the next phase Capital Oil will drill production wells, which are going to be shallow only down to oil layers and hence not so expensive and faster to drill.

The oil which is produced from the first exploration well comes from layers which are 150 to 350 meters depth and is of same high quality as certain North Sea oils. The company states it is too early to comment on the size of the field.

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