Range Resources: Georgia on My Mind

European unconventional gas opportunities beyond Poland, even further east?

No, we’re not talking about Ukraine.

In an exclusive interview with Natural Gas Europe at Shale Gas World Europe in Warsaw, Poland, Anthony Eastman, Director at Range Resources Ltd. offered his thoughts on unconventional gas in Europe and what Poland’s success could mean for shale gas E&P further east.

He commented: “Obviously, Poland’s the main country at the moment in terms of shale and it’s certainly bringing international focus to the shale potential in Europe. A lot of the big guys are already here and I suppose some of the opportunities have already been taken, some may be looking elsewhere in Europe, at some countries and regions not thought of to have the potential shale that they could be shifting their focus to.”

Given Range Resources’ concessions in the Republic of Georgia, Mr. Eastman said the country’s shale gas potential is definitely worth looking into.

“We have two licenses with 7,000 square kilometers across the country, which represents about 10% of the land area of Georgia; we’ve shot 410 kilometers of 2D seismic and are looking to embark on another seismic program next year, where we look to extend the lines up into the north, where we believe we have some shale potential.”

He continued: “We’re at the moment chasing the conventional play through this next well and another two wells next year, and looking to attract potentially interested parties to come in and look at the potential shale opportunities in the north of the two licenses. We’re more than happy to open up the doors to them and look at some potential farm-ins.”

Eastman said that based on the RPS report released in December 2010, on the basis of seismic there were 68 multifold structures, and that the best estimate of oil in place at this early stage was at around 2 billion barrels of oil equivalent.

“With an additional seismic program that we’re kicking off next year, we could potentially look to add to that,” he said. “Having 7,000 square kilometers is a large area, so there’s potential to grow that base.”

He described the kind of partner Range Resources would seek to attract to Georgia.

“The willingness to come in, and with shale experience,” explained Eastman. “To partner with us and also to partner with the locals. We have successfully teamed up with the locals: about 95% of our employees are Georgian. So our partner would need to have the expertise and obviously the financial backing to come in.

According to him, the Georgian government has been tremendously supportive of Range’s activities.

“We have fantastic relationships in country there. They are fully behind us with what we’re doing as evidenced by the licenses that were originally negotiated and awarded around 2002-04.”

The Georgian government was accommodating, considering its conflict with Russia a couple of years ago over a disputed territory.

He continued: “Obviously there was the invasion of South Ossetia. The government agreed to extend the time of the production sharing agreements, plus also the GFC. They recognized the need to extend the terms. They’ve been fantastic, very accommodating and very supportive of the programs that we’re currently undertaking and would be very supportive of us to attract farm-in partners.”

He said Georgia was an easy place to do business, naming multinationals like BMW, Volkswagen and HSBC.

“It’s certainly an attractive place to do business and has improved over a number of years,” said Eastman. “We find it easy to do business. You’ve got BP with the construction of the pipeline going cross country, and on the security side we haven’t come across any issues at all and believe the government are accommodating and willing to attract further international companies in. It’s a fantastic place to operate.”

Eastman said he believed that tapping into Georgia’s unconventional gas could help the country supply it’s domestic market, for one thing.

“It could also provide jobs and economic development there. The interesting thing about Georgia is that in terms of monetizing any discovery you’ve obviously got the pipelines going through from Azerbaijan to the Black Sea,” he explained, “so the infrastructure and the expertise in getting the hydrocarbons to market is there, which is obviously very promising for Georgia to monetize any potential discovery.”

“One of our licenses is in the second largest town of Kutasi on there, so we would look to supplying there as well as some of the trans Caucasus pipelines.”

Range Resources’ Director in Georgia, Alan Hitchins said the country was not dependent on Russian gas at all. “In fact, the Russians cut their gas supply some time ago and they take their supplies from Azerbaijan. Despite the fact that there’s the big Baku-Tblisi-Ceyhan pipeline, they don’t receive supplies from that but from other smaller pipelines, and they certainly do not have any shortages at the moment.”

He reported that there had been a move by the Georgian government to encourage exploitation of the country’s shale potential.

“We were asked actually to explore this on our blocks, as have other license holders. So we think that’s quite an upside potential really and there’s a very favorable tax regime and all sorts of breaks and incentives provided by the government to do this.

Referring to the protest disruption before the conference in Warsaw, Mr. Hitchins added, “And I can’t see us having a protest there.”

Range Resources, explained Mr. Eastman, was a dual Australian and UK listed E&P development company with interests in Texas, Trinidad, Republic of Georgia and Somalia. Currently it is conducting a drilling program of three exploration wells across Georgia and Somalia, and a big development plan in Trinidad on three recently acquired onshore licenses. Range also has two development wells on its North Chapman Ranch project in Texas.

“Currently we have P3 reserves across the licenses of almost 30 million barrels and a good balance of development low risk play with the high risk, high reward upside of exploration potential in Georgia and, in particular, Somalia, where through our operator, Africa Oil, we’re looking at drilling the first well in 20 years.”

Range started off as an E&P when it secured the mineral rights of onshore Puntland in Somalia, was able to farm out to Africa Oil and had been known for that for a long time, before it diversified.

Mr. Eastman recalled, “We recognized the need to diversify away from the single asset of Puntland and were introduced to the current parties that we’re involved with in Georgia, who are farmed in there for 50% to assume the phase two commitments of the PSA which involved a minimum of 350 kilometers of 2D seismic across the two license, we in fact successfully completed 410 kilometers and had to do a well on each of the licenses; have recently completed the  first well which has been plugged and suspended pending further seismic and the possibility of a sidetrack, we’re going to do a second well on block 6A and then move into some more seismic and the commitment well on block 6B next year.”