Georgian Producer Finds Purchaser

Georgia-focused Block Energy has signed a memorandum of understanding with Bago, one of the largest private gas suppliers and purchasers in Georgia, to buy Block's West Rustavi gas output, it said October 5.

Block owns a 25% working interest, rising to 75% after earn-ins. The licence's proven reserves and gross, unrisked contingent resources are 608bn ft³ gas and 37.9mn barrels of oil.

The deal will commit Bago to buying all the output, subject to a minimum 1,000 m³/day.  In addition, Bago is considering financing wholly, or in part, required gas infrastructure at West Rustavi, including pipeline tie-backs to local infrastructure and gas processing plant solutions.

A final offtake agreement will be subject to final price negotiation that is expected to be at a similar level to those agreements already in place with neighbouring contractors and which are in line with the company’s internal forecasts, it said. The final agreement will also be subject to successful gas appraisal work on existing discoveries located within West Rustavi and all relevant government permissions being obtained.

Block also holds a 100% working interest in the Norio licence and a 90% working interest in the Satskhenisi licence. A low cost, multi well workover programme is due to start shortly at Norio and Satskhenisi. Block is aiming to increase net production of oil to 900 barrels/day within 18-24 months.   

Block director Paul Haywood said he was "highly encouraged" by the progress made towards securing a final offtake agreement with Bago, one of Georgia’s largest domestic private gas traders with extensive infrastructure capable of handling large volumes of gas. With rig contracts now in place, Block may very soon start the work of upgrading resources to proven reserves. He said there had been a number of gas discoveries within the licence which lie on trend to the same play now being targeted by Schlumberger on a neighbouring licence, Block XIb.