Tethys Petroleum to acquire
Kura basin block interests
Tethys Petroleum Ltd. will acquire interests in and become
operator of several production sharing contract areas in the
Kura basin near Tbilisi in eastern and central Georgia.
Through subsidiaries, Tethys will acquire a 56%
interest in PSCs covering blocks XI-A, XI-M, and
XI-N (Project Iberia) in eastern Georgia near Tbilisi. In a separate transaction Tethys Petroleum will
acquire a 100% interest in PSCs covering blocks
VIII and XI-G (Project Tamar) near Tbilisi and in
the Kartli area farther west.
The blocks cover a combined area of more than
6,400 sq km. The transactions are subject to approval of appropriate Georgian authorities and other conditions including rescheduling of the work
programs on blocks VIII and XI-G. Tethys Petroleum refers
to the blocks as Project Iberia and Project Tamar and did not
name the seller(s).
Tethys Petroleum said the partners in the Project Iberia
blocks are well-established Georgian oil and gas companies
and that it expects to work closely with their specialists in
implementing operatorship. All participants are discussing
the swapping of equity to give shared ownership in all of
The company said the areas have potential for conventional and unconventional oil and gas in several horizons. It
said they provide good commercial terms and international oil pricing in proximity to two large oil pipelines, a gas
trunkline, and a railway.
is conditional upon this work program being satisfactorily
restructured to Tethys Petroleum’s satisfaction.
Closing of the transactions is expected to take place in
the third or fourth quarter of 2013.
Tethys Petroleum calls the commercial terms
“very attractive.” On the Project Iberia blocks,
100% of costs can be recovered from up to 50%
of production and the investor takes 50% of the
remaining production, this falling to 40% after
cumulative revenues exceed cumulative costs. All
taxes, levies, and duties are included in the state’s
share of production with the only other tax being a stabilized royalty of 24. 19 Georgian Lari/ton
Commercial terms are similar on the Project Tamar
blocks but with the investor share of profit oil being 40%
before and 35% after payback.
Georgian work programs
The initial work program on blocks XI-A, XI-M, and XI-N is
to involve 350 line-km of 2D seismic acquisition and a contingent exploratory well. Initial seismic is expected to start
this summer and be completed by mid-2015. The data will
complement the large existing volume of 2008-11 seismic
and geological studies and would satisfy the minimum work
program. Drilling is to start in the second half of 2014.
The current minimum work program on blocks VIII and
XI-G totals 500 line-km of 2D seismic plus further 3D detailing. One wildcat on Block XI-G and one exploratory well
plus one exploratory/appraisal well on VIII are a contingent
The seismic commitment is currently to be completed by
September 2014 but a condition for completing the Tamar
transaction is to restructure this schedule with the Georgian
government to provide for more time to complete this program and afford flexibility. Completion of this transaction
Geology of the blocks
The blocks lie in the ESE-WNW-trending Kura basin, where
the geology is that of a late Tertiary intermontane basin between the Greater Caucasus mountains in the north and the
Lesser Caucasus to the south that compress Tethyan sediments between them, Tethys Petroleum explained.
The compression has produced a number of exciting
fairways for petroleum deposition including subthrust and
overthrust plays, anticlinal pop-up structures, and deeper
fault blocks, the company said. The area has a number of potential reservoirs of different ages and several prolific source
The Kura basin continues into Azerbaijan to the east
where there are numerous oil fields, and the plays continue
to the north forming the prolific fields in the North Caucasus. A total of 18 oil and gas accumulations have been
discovered in Georgia to date, with 15 in the Kura basin,
including the Samgori field complex that has produced some
210 million bbl of crude oil to date at rates up to 70,000 b/d.
Oil quality in the area is good with crudes being sweet
and light. Samgori crude is 40° gravity.
Most of the fields are in Middle Eocene fractured volcani-clastic sands and tuffs, but oil has also been produced from
Upper Eocene, Oligocene, and Miocene sediments and from
the Cretaceous. Production from fracture permeability remains a challenge in some reservoirs, and modern technology is required to maximize production rates.
The Maikop/Upper Eocene shale oil play is potentially
analogous to both the Bakken and Eagle Ford plays in the