From the web site Proactive Investors in the U.K.

Transeuro Energy's approach could open up Ukraine's tight gas reserves

Tue 10:38 am by Ian Lyall

For if all goes to plan, it could potentially provide the key to other opportunities in the former Soviet state

Transeuro Energy (CVE:TSU) is hoping that the application of modern, multi-zone fracture stimulation technology will do more than liberate a section of the Ukraine’s notoriously tight gas reserves.

For if all goes to plan, it could potentially provide the key to other opportunities in the former Soviet state.

Transeuro is at a tipping point with fracking expected to get underway in the Karlavskoye field, on the Karl 101 well in the next few weeks.

The company has hired Schlumberger to carry out the work, which reflects a more open attitude from the local authorities towards the use of foreign contractors on Ukranian soil.

The well has been drilled and has flowed natural gas and condensates and stable flow rates from all five reservoir intervals. But fracturing is required to increase the flow rates and to make the well commercial.

The overall programme of rig operations and fracking is expected to cost US$3.5 million, and has already commenced.

Karlavskoye, which is in the Crimean Peninsula, is one of many fields discovered and appraised in the Ukraine during the 1960s and 70s that were deemed uneconomic because the technology didn’t exist to achieve commercial production.

It is estimated to contain 472 billion cubic feet of gas in place, so this initial target is reasonably significant.

However, the bigger prize is the opportunity it opens.

There are scores of fields in the Ukraine with broadly similar characteristics to Karlavskoye, which offer the potential for fracking.

These aren’t exploration targets. In many cases, wells have already been drilled on the field, and a huge amount of data compiled, although the quantity and quality of this data is sparse by modern standards.

“In Crimea there are about 10 of these licences we are interested in,” said chief executive David Worrall.

“In all cases they have been discovered. We need to drill a modern well so we can compare the results to the old wells and then apply the appropriate stimulation technology.”

Its relationship with the state-owned Crymgeologia is crucial to these plans, as is the local knowledge built up during the six years in the Ukraine.

“The great thing about having worked there for so long is we know the people, they know us,” said Worrall.

“With the support of our partners and the government authorities we should be able to conclude deals quite quickly.”

Before this happens, however, Karl 101 must be successfully fracked to prove commercial flow rates are achievable. The technical risks associated with the project at this point are “largely related to the rig operation”, said the Transeuro CEO.

“So this is preparing the well for the fracking, but installing the down hole necessary equipment and tubing, setting it properly and getting it pressure-tested ready,” he explained.

“Once this is done, and so long as things go smoothly, the risks are really quite small.

“What we are going to do then is bring Schlumberger’s pumping trucks in, connect a pump to the well-head and pump.

“There is no downhole work required if things go smoothly and there are less things that can go wrong.

“The well flowed gas during testing so we know it is there and produceable and the bigger uncertainty is how successful the frack will be.”

Tying into the main export line for gas should be a fairly simple process if Karl 101 is a success as the main export line is a mere 500 metres from the well.

And five kilometres away is a gas storage facility currently used to receive gas from the offshore fields.

“We are currently negotiating with the operator to see if they will process our gas for us, or if we should build our own gas plant,” revealed Worrall.

With investors here in the UK, the Ukraine oil and gas is associated with failure and missed opportunities as the likes of Cadogan and Regal Petroleum have struggled.

Worrall admits that the Ukraine is a difficult place to work: “The politics are confusing to Westerners and the access to equipment is limited as in the past they have protected their own industry.”

However, both these constraints have improved considerably in the last two years.

International service and equipment companies have become established and import tax laws have changed that make it much easier and cheaper to import equipment on a temporary basis.

And the political landscape is also changing with Russia’s Gazprom building a pipeline system that by-passes the Ukraine on its long journey to western Europe.

“It means the (Ukraine’s) pipe network and storage facilities will be nowhere near as economically or strategically valuable as it was,” said Worrall.

“We have seen an enormous political shift in the Ukraine just in the last 12 months as the government is now promoting domestic gas production and supporting and encouraging the foreign companies in their investments and activities.

“There is a much more amenable attitude from the officials we have talked with to the extent that they are now pushing us to deliver success and production more than just investing.”