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Fire it Up! Estimates for the Kakheti Gas Find Grow

Georgia Today continues to inform its readers about the recent groundbreaking finding by US independent oil and gas exploration and production company ‘Frontera Resources’ of more than 3.8 trillion cubic meters of gas in the Georgian region of Kakheti early in October.

Late December, Frontera Resources announced an exciting operations update for its work in Georgia.

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

According to the recent update, since then extensive integrated geologic and geophysical studies conducted by the Company have continued within the Complex. “This ongoing technical analysis has provided a more detailed understanding of the extensive integrated gas resource potential that continues to evolve and now appears larger than previously identified in October- with as much as an additional 52.5 trillion cubic feet (1.5 trillion cubic meters) of gas in place added to the Company’s previous estimate. The overall estimate now stands at 187 trillion cubic feet (5.31 trillion cubic meters),” said Frontera representatives.

Frontera says it is now in the process of completing the second independent assessment of its gas resource estimates associated with the South Kakheti Gas Complex.

The South Kakheti Gas Complex is part of a prolific hydrocarbon region known as the Kura-South Caspian Megabasin that extends eastward from Eastern Georgia and through Azerbaijan to the South Caspian Sea and Western Turkmenistan. This regional megabasin contains the prolific Shah Deniz gas field that is situated approximately 400 kilometers to the east of the South Kakheti Gas Complex. Operated by BP, this field is estimated to contain approximately 40 trillion cubic feet (1.13 trillion cubic meters) of gas in place.

According to the study, together with ongoing well operations, expansion of existing processing facilities has progressed and it is now anticipated that operations will bring daily gas production in excess of 7 million cubic feet per day during the first quarter of 2016.

Frontera continues to advance evaluation of commercialization options to expand and accelerate efforts to bring this resource to not only Georgia’s domestic market, but also to nearby regional markets in Turkey and Europe.

At the same time, Frontera has continued work related to a strategic Memorandum of Understanding that was signed with Ukraine’s national energy company, the National Joint Stock Company Naftogaz of Ukraine, as announced in July 2015. In addition, an engineering study continues with Naftogaz relating to the possibility of bringing liquefied natural gas (LNG) to Ukraine from Frontera’s ongoing gas work in Georgia.

Steve C. Nicandros, Frontera’s Chairman and Chief Executive Officer commented, “Our gas holdings continue to materially grow in size, thereby establishing the basis for a strategic development initiative.”

According to Nicandros, [their] oil holdings are experiencing breakthrough technical results that he continues to equate to similar advances in the United States that have transformed the country’s energy independence trajectory. Because of this, “we continue to believe that our ongoing work will serve to uniquely distinguish Frontera’s significant value and further serve to establish Georgia’s domestic energy independence in the years to come, making it a strategic supplier of oil and gas to Europe and Turkey’s nearby consumption markets.”

Analysis

Exploring the topic in depth, last year Georgia Today exclusively interviewed Dr. Ariel Cohen, Senior Fellow at the Atlantic Council and Director of the Center for Energy, Natural Resources and Geopolitics at the Institute for the Analysis of Global Security.

The expert said if the resources are proven and commercialized, Georgia, which is currently a mid-income country, would become a high mid-income country in terms of GDP per capita comparable with Azerbaijan and Kazakhstan.

Cohen, asked whether Georgia needs to diversify its gas sector through Russia’s Gazprom, stated that Georgia has a conflict with Russia over Abkhazia and South Ossetia (Tskhinvali region), relations are tough and he does not understand why Georgia needs to diversify its gas sector away from friendly Azerbaijan.

In search of an expert opinion on the subject, Georgia Today also interviewed a London-based energy expert and scientist working in the field of energy.

The expert declared that the South Kakheti Gas Complex is truly a world-class play, comparable with many of the larger fields in the world. “The Georgian gas potential can only strengthen relations between countries in the region as it contributes to the regional success as an energy supplier to mainland Europe through TANAP and other regionally significant projects.”

The discovery by Frontera will almost certainly confirm that this field is one of the largest gas fields on the planet. Some American experts say this field will probably rank as the 6th largest, just behind Russia’s giant Shtokman field, while Azerbaijan’s Shah Deniz field is currently ranked 18th largest at 42 tcf (Trillion Cubic Feet).

The Shah Deniz field is currently the key reserve for the Southern Gas Corridor project, an initiative of the European Commission for gas supply from Caspian and Middle Eastern regions to Europe. Conveniently, the designated pipeline route of the Southern Gas Corridor travels across this new field in Georgia using existing infrastructure; relatively, the status of Georgia as a transit country will quickly be redefined as ‘key supplier.’

Energy experts believe that even though the South Kakheti Gas Complex is still in relatively early stages of development, possible high-caliber global interest is likely to guarantee that this strategic asset will be very quickly developed.

The occasion may literally change the entire geostrategic picture not only in the region of the Caucasus, but also the Black Sea and Europe. More lucidly, Europe, which currently suffers from an over-dependence on Russian energy resources, will be able to diversify its energy sector through Georgia, previously considered no more than a transit corridor for various projects including Trans Anatolia Pipeline (TANAP) which is due to open in 2018.

Yet Georgian Energy Minister Kakha Kaladze has been negotiating with Russia’s energy giant Gazprom, which is believed to be widely utilized for fulfilling Putin’s government’s political and geopolitical interests. The Minister declares that Gazprom could fill a “gap caused by the energy shortage of Azerbaijan”, Georgia’s main gas and oil supplier since 2006, when Russia endeavored Georgia to pay its political price for Euro-Atlantic aspiration and, as a result, cut gas supply during a very cold winter.

Likewise, U.S. External Policy Council Expert Stephen Blank this week told Georgian newspaper Kviris Palitra that gas import from Russia will negatively impact Georgia-U.S. relations.

There is a reasonable notion that the case could be politically ‘muted’. At this stage, disclosing this world-shattering information could be exceedingly risky for both the Georgian government and the country’s national security, while economic lucrativeness and development of the field is the second main issue.

Zviad Adzinbaia is an Analyst at Georgia Today newspaper covering regional politics, security, Russia-Georgia affairs and issues of Georgia’s Euro-Atlantic integration. He is also a fellow of a number of high-caliber programs at the Georgian Foundation for Strategic and International Studies (GFSIS).

Related stories: God's Gift Revealed: Georgia Could Become a Key European Energy Supplier 

Ariel Cohen: Georgia Could Become an Energy Exporter 

Georgian Gas Potential a World Class Play   

Go here to read Frontera’s official update

Zviad Adzinbaia

11 January 2016 19:22