KOGC expects to begin drilling in southern Russia in 2014

By Katherine Scott, associate editor

In a country that’s roughly 6.602 million sq miles – the largest in the world ­– Russia’s oil and gas industry is eager to tap into the country’s unexploited areas, with most eyeing the Arctic for big finds. However, new fields also exist inland, such as the Karpinksy Ridge in southern Russia, where foreign companies like Norway-based Karpinsky Oil and Gas Co (KOGC) continue to search for additional hydrocarbon resources. The company, which expects to finalize seismic studies of the area in the autumn, hopes to begin drilling on its Gashunsky and North Donskoy license blocks in the first half of 2014, KOGC chairman Tom Haugen said.

The company is currently seeking companies to collaborate with to develop its licenses, which cover an area of 4,958 sq km. KOGC, the majority shareholder in CJSC Rostneftegaz Geo (RNGG), which holds 100% of both licenses, is selling a minimum of 10% stake.

KOGC has been operating solely in the Karpinsky Ridge, located between the Black Sea and Caspian Sea, since 2006. “We have been shooting some 1,500 km seismic over the last seven years and going back over a lot of older seismic data from the Soviet times. New technology has enabled us to go deeper and identify a lot of ‘reef’ structures in the lower to middle Carboniferous period. On average, around 4,500 meters (depth) are where the most prospective objects are, but shallower leads within the Cretaceous and possibly Tertiary periods have also been identified.”

Early 2D seismic studies indicate strong drilling prospects within the license blocks, the company believes. “Through our third-party evaluations, we see that the potential within our own licenses is 4.5 billion barrels (boe),” Mr Haugen said. “That’s what attracted us ­to the Karpinsky Ridge – the possibility to find huge volumes in an unexploited area. So far, all that we have seen has strengthened those original theories.”

The company is seeking industrial partners to assist in the drilling phase. “What we would like to do is expand our organization with a new partner onboard as shareholder and then develop further because, in this area, the demand for the gas and oil in the domestic market is much higher than what we saw. The infrastructure in the area is also well developed.”

KOGC plans to drill at least one well in each block to start with, he said. “If we find something then we’ll need to drill appraisals in those blocks. There are also some licenses bordering or pretty close to our own area that we’d like to obtain.”

Mr Haugen noted that, over the past year, Russia’s state-owned companies have become more active in acquisitions, particularly for small, privately owned companies, in order to obtain rights to exploration areas. “You can’t deny the potential size of resources in Russia. State companies and major international operators enters partnerships to focus on  areas with large target potential.”

With regions like the southwest being fairly mature, most players in Russia are now looking at the Arctic, he said. He cautioned, however, that this means high project costs due to the lack of infrastructure in the Arctic. Still, he believes that unexploited areas will be key to Russia’s oil and gas industry in the future. “I think the Russian domestic market will be quite attractive for some time because the demand is so high,” he said. “We have been approached by some of the local communities of about 200,000 people, and they see what’s going on, and they cross their fingers and hope we can find something and start delivering to them.”