Georgia: Georgia Oil Profile 2011

Facts about Oil

First facts about oil production are observed in Greek Mythology. In his records medieval Italian traveler Marco Polo describes Georgia extracting and exporting oily substance (oil) used by inhabitants for household (fuel, lubricant, and lighting) as well as treatment purposes.

In the past oil was produced unprofessionally in small quantities only in the areas with surface oil leakage (pits).

In the second half of the 19th century oil industrial production was initiated at low depth drilled wells in some Kakheti regions (Mirzaani, Shiraki, Eldari) with up to 2000 t of annual production. For the oil extraction operations were conducted without prior geological investigations of the oil fields and the unprofessional methods applied were unsuccessful to develop the fields to the full extent, it was impossible to increase scale of production.

Regular investigations to estimate oil and gas resources, drilling operations to discover wells and oil production was launched in 20s of the last century following the forming of special enterprise Saknavtobi.

During last 70-80 years a number of exploration works were carried out (geological-geophysical investigations, core and long hole drilling). As a result 1 gas, 1 gas and oil and 16 oil fields were discovered.

In 30s and 60s oil production operations were conducted at 7 small fields (Mirzaani, Patara Shiraki, Supsa, Norio, Satskhenisi, Taribana and East Chaladidi) with annual production ranging between 22-25 thousand tons.

The first half of 70s and 80s is the most remarkable and successful stage in oil production history in our country. During that period several prolific oil fields (Samgori-Patardzeuli-Ninotsminda, Samgori East Dome, Teleti) were discovered at the territory nearby Tbilisi, considerably increasing oil production after they became operational. The maximum oil output of 3.2-3.3 tons was observed in 1980-1983. Since that period oil production has been dramatically decreased and the annual production varies between 60-140 tons, since the new fields are not discovered for some objective or nonobjective reasons and the production rate at the already existing fields reduces, due to general developments.

During last 10-15 years foreign oil companies started operating in Georgia after concluding PSAs with the government. Although these companies have already carried out significant exploration works at their licensed territories (Anadarko - Black Sea shelf, CanArgo - Tbilisi adjacent area, Frontera - Kakheti region) new fields have not been discovered yet, despite the promising geological examinations.

Oil Pipeline

Baku-Tbilisi-Ceyhan Oil Pipeline Project

Baku-Tbilisi-Ceyhan Main Export Pipeline is transporting crude oil from Azeri-Chirag-Gunashli oil field in the Caspian Sea. BTC pipeline is the first direct transportation link between Caspian and Mediterranean Seas. The construction costs of BTC exceeded 4 million USD. The overall length of Baku-Tbilisi-Ceyhan Pipeline is 1768 km. Georgian section of the pipeline is 249km, Azeri section is 443 km and the Turkish section is 1076 km. The diameter of the pipeline is 42-46 inches. It is one of the longest pipelines in the world. The pipeline comprises 8 pumping stations (2 in Azerbaijan, 2 in Georgia and 4 in Turkey) and its extended height from the sea level is 2800 meters.

BTC pipeline became operational in May, 2005 and in October, 2005 the presidents of Georgia, Azerbaijan and Turkey conducted an official ceremony of oil entering the Georgian section of the pipeline.

As a result of its operation, the tariff revenues from BTC pipeline project will flow directly into Georgia's budget and will amount $ 50 million USD annually. Within the framework of Baku-Tbilisi-Ceyhan Main Export Pipeline project, the investors are developing social programs, aiming to help to overcome poverty among the socially vulnerable population of the villages located along the pipeline route.

West Route Export Pipeline

West Route Export Pipeline (WREP), otherwise known as Baku-Supsa Early Oil Pipeline is the first BP-led project in Georgia that has been successfully and safely operating since 1999. Georgian Government receives significant tariff revenues from WREP project.

The construction of Baku-Supsa Early Oil Pipeline was financed by Azerbaijan International Operation Company (AIOC). The Supsa Onshore Terminal was also constructed within the framework of the pipeline project's construction. The overall length of the Baku-Supsa Early Oil Pipeline is 830 km (Georgian section 375 km). The capacity of Supsa Terminal is 1 million barrels.

Crude oil produced from oil filed Chirag in the Caspian Sea is carried from Sangachal oil terminal through WREP and ultimately to Supsa Onshore Terminal. The transportation of the first volumes of crude oil from Sangachal oil terminal through WREP began in December, 1998 and reached Georgia in January, 1999. Currently 150 000 barrels of oil is transported through Baku-Supsa Early Oil Pipeline.

Oil Extraction

Oil extraction and exploration works are conducted by seven companies in Georgia. Among them: Iori Valley - Oil and Gas Ltd, CanArgo, Frontera, Anadarko, Strait Oil and Gas, Global Oil and Energy, Aksai BMC.

Iori Valley - Oil and Gas Ltd

Iori Valley - Oil and Gas Ltd. is one of the major Georgian oil companies, with 100 % of its shares fully owned by the State. It was established in July, 1995 jointly by Georgian and Swiss sides: Georgian Oil Company Saknavtobi and National Petroleum Ltd (NPL). Since April 2007 Iori Valley - Oil and Gas Ltd. is owned by Georgian Oil and Gas Corporation. The company operates at Samgori-Patardzeuli, Samgori south dome and Krtsanisi fields including Teleti field since August, 2007 with total licensed territory of 367.395 square kilometres out of which 133,27 square kilometres already developed and -234,125 yet unexplored. The licence of the company is valid until 2021.

CanArgo

CanArgo Energy Corporation is an American New York based oil and gas exploration and production company. It has been conducting exploration and extraction operations in Georgia since 1996. CanArgo is operating on the bases of Production Sharing Agreement, provided that the profitable oil is shared among the government, comprising 70% and the CanArgo 30%, subject to export by the company itself. CanArgo provided drilling operations on the 6 wells in Manavi, Norio and Ninotsminda. In Georgia, the company provides the deepest (5,209 meters) drilling and is the only company to apply the technology of horizontal drilling.

Frontera

Frontera Resources is a US based company that was founded in 1996. It has been operating at the License Block 12 (Dedoflistskaro region) since 1997. Frontera's activity is exclusively focused on exploration, extracting and exploitation of oil and gas volumes. It has already extracted 32 thousand tones of crude oil. Frontera has carried out drilling operations of one well already and is planning to drill up one more test hole located at the Tariban valley. It has discovered about 20 sections potential reserves. After concluding the 25 years Production Sharing Agreement with Ministry of Energy of Georgia and Georgian National Oil Company, Frontera acquired the exclusive right of exploring and extracting of crude oil reserves on the 5,500 sq meters of the Eastern part of Georgia. On the basis of this agreement company has the right to undertake exploration and extracting operations and to cover all the expenses with the income accrued from realization of oil products. The rest of the income amount resulted from realized oil products are shared among Georgian Oil and Gas Corporation (GOGC) 51% and Frontera Eastern Georgia 49%. Frontera has invested $ 75 million USD in Georgia.

Anadarko

On the basis of Product Sharing Agreement between Anadarko and Government of Georgia, dated June, 2000 Anadarko was granted the right to initiate exploration works on three Blocks (IIa, IIb and III) of Georgian section of the Black Sea Shelf. After signing the agreement, the company has been conducting a seismic survey of the given fields. For the exploration purpose it is scheduled to launch initial drilling operations at the first test hole at approximately 3200m from sea bottom. The cost of exploration works is estimated for to be 100 million USD. Currently, Production Sharing Agreement is signed between Anadarko (48%), BP (28.5%), Turkish Petroleum Overseas Company (13.5%) and Unocal (10%). Hydrocarbon proven reserves per each field is estimated between 10 and 200 million tones. Oil shares between the government and the investors are determined by drilling depth, incurred costs and relative income. The company set forth three most promising areas. Estimated nonhazardous hydrocarbon reserves for each area range between 70 million and 1,3 billion barrels.

Strait Oil and Gas

The Cooperation Agreement with Strait Oil and Gas was concluded in 2007. Company has the right to undertake exploration and extracting operations at Block VI and Block VI-B (western Georgia). Strait Oil and Gas is responsible for carrying out geophysical and geological investigations, rehabilitation of old wells and conducting well drilling operations at the license blocks.

Global Oil and Energy

The Cooperation Agreement with Global Oil and Energy was concluded in April, 2007. Company has the right to undertake exploration and extracting operations at Block VII-B (western Georgia) and Block VIII (eastern Georgia). Global Oil and Energy is responsible for carrying out geophysical and geological investigations, rehabilitation of old wells and conducting well drilling operations at the license blocks.

Aksai BMC

The Cooperation Agreement with Aksai BMC was concluded in April, 2007. Company has the right to undertake exploration and extracting operations at License Block V (western Georgia). Aksai BMC is responsible for carrying out geophysical and geological investigations, rehabilitation of old wells and conducting well drilling operations at the license blocks.