LNG Energy and TransAtlantic Petroleum Deal on Bulgarian Shales
LNG Energy Ltd. announced that it has entered into an exclusive term sheet with TransAtlantic Worldwide Ltd., a wholly owned subsidiary of TransAtlantic Petroleum Ltd. to earn a 50% interest in a future gas shale formation production concession in northwest Bulgaria.
LNG will initially fund up to US$7.5 million to immediately drill, core and test a 3,200 meter (approximately 10,500 foot) exploration well on the A-Lovech exploration license in Bulgaria targeting the Middle Jurassic Etropole shale formation.
As required in Bulgaria, on a successful result from this well, TransAtlantic’s subsidiary, Direct Petroleum Bulgaria EOOD will apply to the government of Bulgaria for a production concession (the “Etropole Concession”). The Etropole Concession is expected to cover an area up to 1,640 square kilometers (405,080 acres) for a term of up to 35 years.
Subject to certain conditions, including the issuance of the Etropole Concession, LNG is expected to form a subsidiary in Bulgaria (LNG Bulgaria) which will fund up to an additional US$12.5 million, of which US$7.5 million is expected to be used to drill a second well or for other exploration activities on the Etropole Concession. In return, and subject to Bulgarian government approval, LNG Bulgaria will acquire a 50% undivided interest in the Etropole Concession. LNG is currently negotiating definitive agreements with TransAtlantic in respect of the Transaction.
LNG has paid a non-refundable deposit of US$1.5 million and has been granted the exclusive right to negotiate and finalize the definitive documentation in respect of the proposed Transaction until September 23, 2011. The non-refundable deposit will be applied against the initial US$7.5 million which is payable by LNG to fund the costs of the exploration well on the A-Lovech exploration license.
The Etropole Formation, especially its organic-rich lower part (Stefanetz Member), is the targeted interval for a gas resource. This formation is the proven source rock for major oil and gas fields in northwestern Bulgaria. The Etropole formation is a thick, black organic rich source rock lying at depths ranging from less than 2500 meters to greater than 5000 meters; it shows appropriate maturity for gas generation and is also over-pressured throughout much of the region. The Etropole shale is calcareous in nature similar in characteristics to the Upper Jurassic Haynesville shale in the US.
LNG commented that the proximity to an established gas market, an existing gas pipeline infrastructure and gas prices of over $10/mcfg make the Etropole play an economically attractive target. Significant gas shows were detected while drilling the Etropole formation in the most recently drilled well by Direct Bulgaria (Deventci R-1).
The company said that many older wells have also encountered shows while drilling in the play area. Given the rock properties of the Etropole, it is believed that it will respond favorably to modern completion and stimulation techniques and may yield significant economic gas resources.
Source: LNG Energy