French Firm Wins Ukraine Upstream Tender

Naftogaz Ukrainy has awarded French Expert Petroleum (EP) a tender to work on depleting gas fields in western Ukraine, reversing declines in output, the state company said April 21. The two have signed the country's first-ever production enhancement contract, committing EP to spend about hryvnia 1bn ($30mn) on drilling and infrastructure in the first five years of co-operation and, potentially, make additional investments after that. The contract is due to expire after 15 years but may be extended for another ten.

The partnership is expected to yield "at least" 300mn m³ of additional gas within five years from 13 small fields and the payment marks the biggest foreign investment in the country's upstream over the last five years, Naftogaz said. It will also mean a boost for the national and local economy of perhaps four times as much as the investment.

Naftogaz said the new technologies and European standards for management of "old" and "small" deposits may be extended to other fields. "After all, most of Ukraine's oil and gas assets are depleted and small in size. This is an important event for stabilising the situation not only in the industry but also in the Ukrainian economy. And this is an example of innovative anti-crisis solutions that the country needs today,” said Naftogaz' restructuring boss Otto Waterlander.

Expert Petroleum said it had a successful track record in Romania and Hungary in particular, where it has invested over $100mn in some projects and increased output by up to 150% above the baseline. "We hope this agreement will lead the way to many more partnerships like this one," said CEO David Martinon.

Naftogaz  will approve the development plans and budget and pay the operator a fixed fee for support of the baseline production, which will be equal to what it now costs its subsidiary Ukrgazvydobuvannya, adjusted for inflation and for achieving incremental production. But the gas, licences and assets will remain with Ukrgazvydobuvannya.

Expert Petroleum is part of GMS holding group, an investment group. It manages production at 25 depleted fields, operates 1,200 wells, and produces 8,500 barrels of oil equivalent/day. It has about 1000 employees.