|
The Licenses
Over the past few years, the federal government has transferred ownership of state owned assets to private and public companies. As a result, producers have not had to apply for exploration rights on existing production blocks. However, in the post state-owned firm environment, all new exploration must be conducted under license. ZNG is leading the way of corporate reform by pursuing commercial activities through officially sanctioned channels as demonstrated by their formal application and subsequent awarding of exploration licenses.
More specifically, ZNG has secured exploration concessions for five separate blocks. By strictly adhering to official procedures, ZNG is mitigating any risks by ensuring it obtains the government's support for its activities.
Previous Work in the Region
To date, the region in which ZNG is operating has been the subject of extensive government testing and evaluation. Geological testing as well as the drilling of test wells have recently been accelerated. ZNG has taken the opportunity to review research details, which confirm a number of prospective structures.
Furthermore, parametric drilling has also been carried out along with the drilling of stratographic test wells.
Current Activities
Exploration
By winning concessions on these properties, ZNG has also gained access to all geologic data contained in government archives. ZNG has reviewed this data and finalized 2D seismic survey. At this point, one block has been the focus of exploration, including gravimetric and seismic surveys.
ECL, a leading international oil and gas consultant, and ZNG teams have collectively conducted complex analysis in order to identify oil source rocks in deposits. The analysis indicates oil and gas potential in the Devonian, Carbonaceous and Triassic deposits.
Following detailed data collection, survey and seismic testing on all seven blocks, ZNG will proceed with the exploration and development of one block at a time. This strategy has two main benefits:
(a) It will speed up development by focusing ZNG’s efforts and resources;
(b) Accelerated development reduces ZNG’s need for CAPEX since it will generate revenues earlier. These revenues will to some degree offset future costs and provide cash necessary for further developments and growth.
Seismic survey on the remaining six fields is expected to begin in the second half of 2006.
Development
ZNG is planning to host a tender to select an independent drilling organization and expects to begin exploratory drilling in 2006. Following development, the company anticipates the extraction of Urals blend crude.
Transportation
ZNG’s five blocks are located adjacent to the main Transneft pipeline network that serves a direct route to refineries and ports throughout Russia. ZNG has already prepared plans for the installation of collector pipelines to deliver crude to the main pipeline. In the short to medium term after beginning production, ZNG will deliver crude via the rail system until production volumes justify the construction of a pipeline.
Transportation cost advantages are evident if crude is delivered by pipeline:
|
.jpg)
