EuroGas has acquired three unconventional gas concessions by EuroGas Ukraine Ltd., in which EuroGas holds a 30% stake with options to increase its shareholding to 100%.
The acquisition of three additional unconventional gas concessions completes the acquisition program, announced by the Company in the fall 2008, for a total of five unconventional gas (Coal Bed Methane [CBM] and shale gas) concessions for EuroGas Ukraine Ltd., a Ukrainian company owned 50% by EuroGas GmbH and ZNVKIF New Technologies ("NT"), a Kiev, Ukraine based corporative investment fund.
The five unconventional gas concessions held by EuroGas Ukraine Ltd. under a Joint Activity Agreement with Nadra Luganshchiny Ltd., a wholly-owned subsidiary of NT, cover an area of 512 square kilometers. The largest concession (Marijewvskogo Poligon) encompasses 251 square kilometers and may alone contain -- according to a 1998 report prepared by Montan-Consulting GmbH (a subsidiary formerly owned by Kloeckner AG of Germany) for the World Bank -- at least 15.1 billion cubic meters (0.53 TCF) of methane gas. A comparable report by AFC (Alternate Fuel Centre), a subsidiary of the Ukrainian Ministry of Coal in Kiev, estimates the methane gas reserves at Marijewvskogo Poligon to be approximately 24 billion cubic meters (0.85 TCF). In addition to the CBM reserves in coal seams and sandstone layers, all concessions areas may also contain lower formations containing shale gas.
Preparations for drilling the concessions are underway and discussions are currently being held with a Calgary based Canadian drilling company to start a drilling program in 2010 with state-of-the-art horizontal drilling equipment.
In September 2009, EuroGas' affiliated company EuroGas GmbH signed a Memorandum of Understanding to explore for unconventional gas, such as shale and CBM gas, in the Lublin Basin in Western Ukraine. EuroGas was the first foreign company to successfully drill a coal-bed methane well in the Ukrainian part of the Lublin Basin in the late 1990s before former management of EuroGas opted to withdraw from Western Ukraine, a move which current management has now reversed because of the hydrocarbon potential of Western Ukraine in general, and of the Lublin Basin in particular.
The Polish part of the Lublin Basin has become the focus of a major land rush over the last 6 months, with some of the largest oil companies in the world, such as ExxonMobil, Chevron, ConocoPhilipps, Marathon Oil, as well as Poland's National Oil Company PGNiG (EuroGas Polska's partner in Biesczszady) having secured licenses (concessions) in Eastern Poland along the Ukrainian border. The interest in the area has been spurred by the potential of discovering shale gas bearing formations similar to the huge successful shale gas discoveries made in the United States and Canada over the past few years. The new Polish licenses of ExxonMobil, Chevron, Marathon Oil and PGNiG are adjacent and immediately offsetting EuroGas' 1998 Western Ukrainian drilling site.
"EuroGas' Eastern European geological team, under the guidance of Prof. Dr. Yuriy Koltun, a Member of the American Association of Petroleum Geologists and a world-renowned geochemist who pioneered the potential for discovering organic shale gas potential in Western Ukraine as early as 2005, has been working already for the past 18 months to secure shale gas and other unconventional gas areas in Western Ukraine for EuroGas," said Wolfgang Rauball, CEO, EuroGas.
Mr. Rauball went on to comment, "When we drilled in the Ukrainian portion of the Lublin Basin back in the late 1990s, we saw the huge hydrocarbon potential that existed but that had been neglected by the Soviets. After a long and careful assessment, we are now convinced that this area merits considerable attention and we will be moving quickly to expand our prospect portfolio by assisting Ukraine to develop its own energy resources."
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