Energy juniors Range Resources, Red Emperor Resources and Strait Oil and Gas UK have reached an agreement with Georgian Industrial Group for the joint development of a coal-bed methane (CBM) project in the Republic of Georgia.
A development company is to be set up, in which GIG will hold a 50-percent interest, which will begin feasibility and technical studies that will be followed by a three-to-four well pilot project around the Tkibuli-Shaori Coal Field. It is expected that six CBM wells per annum, each producing up to 500,000 cubic feet of gas per day, could be drilled on the coal field – which contains contingent resources of approximately 400 billion cubic feet of gas.
GIG has agreed a 'take-or-pay' arrangement for all the gas produced by the development company.
Range Resources Executive Director Peter Landau commented in a statement Monday:
"This is a major opportunity for the company and the significance of the project should not be understated. The partnership with the Georgian Industrial Group, the largest industrial and holding company within Georgia, is a milestone towards establishing itself in a country that still remains almost entirely dependent on imports of foreign natural gas."
Energy analysts at London-based FoxDavies Capital commented that the deal with GIG is a major step forward for both Range Resources and Red Emperor since it "(i) alleviates one of the key issues regarding [their] portfolio; (ii) provides the prospect for near-term cash flow; and (iii) means that neither company [has] to continue to pay for the acreage as the partner will take it forward."
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