INA and MOL Strengthen Partnership

Today, with a handshake of Mirko Zelic, INA E&P Director and Zoltan Aldott, MOL Group E&P Director, the two strategic partners launched a joint exploration project in the Podravska Slatina (Cro) - Zalata (Hu) area designed to secure new volumes of natural gas.

The exploration area, which spreads on some 50 km2 and is located on both the Croatian and Hungarian territory, have not been previously extensively explored due to its location and technical difficulties coming from it, but preliminary results based on 2D mapping look promising, said Zelic.

"The research area is split exactly between Croatia and Hungary, which would otherwise make exploration impractical for just one company," he added.

'This joint project is the best example of how strategic partners cooperate," said Aldott. "We pool up our resources and know-how and the results are inevitable to happen. If we are successful, it will provide for both Hungary and Croatia additional quantities of the needed natural gas."

In order to secure the most optimum conditions, the strategic partners have set up a joint venture for the exploration of the prospect. Both partners have equal rights and responsibilities and finance the project on a 50:50% basis (regardless on which side of the border the activity takes place). In-kind contribution is also provided symmetrically, whereby INA acts as operator on the Croatian, while MOL on the Hungarian side. All decisions with regard to the management to the exploration process are to be made unanimously and proceeds are also equally distributed between the parties.

The ground work will start with the drilling of one exploratory well (Zalata-1) on the Hungarian side as a minimum work program still in 2006, the costs of which is expected to amount to EUR 5 mln, and a next optional well preferably on the Croatian side in 2007. The target depth of this exploratory well is 3400 m and the working program also contains the testing of the potentially gas bearing zones and completion of the well(s) for production if the test proves the commerciality of the gas accumulation.

As the structure comprises several sub-maxima, an additional exploration well is needed to disclose it – if justified by results of the Zalata-1. The second well will presumably be drilled in Croatia. The drilling will be carried out jointly with INA in 2007. If any of the exploration wells is successful, an appraisal well shall be drilled.

In case of commercial gas discovery the partners will jointly investigate the optimum gas field development in order to accelerate the investment program and connect this region to the high pressure gas pipeline system.

Co-operation in exploration for oil and gas between the two countries dates back to the year of 1957. From that time petroleum industry professionals of the companies met frequently to change their ideas on exploration potential of the Hungarian-Croatian border region, principally in the Drava basin. The discovery of the adjacent Barcs-West-Stari-Gradac fields gave new momentum to such discussions, because the effective exploitation of these joint fields required tight co-operation from the partners, which led to the development of new joint exploratory ideas.

INA's and MOL's corporate level strategic partnership in 2003 opened further possibilities for joint business initiatives; it does not just mean a unilateral shareholding, but much more the constant attempt to find possibilities of implementing joint projects, in order to exploit the entire synergetic potential of the two companies' co-operation.

Other projects realized in co-operation

Co-operation between the companies relates to all the areas of upstream business. INA and MOL have developed a regional exploration model in the Drava basin in order to initiate new exploration prospects in the cross border area. This brings about very intensive geotechnical work in the interdisciplinary and multinational groups. Latest result of this co-operation is the joint 3D seismic survey in Vizvar-Ferdinandovac area, which measurement should lead to new exploration programs as well.

A mutually interesting area within the upstream business is field development. The partners recently signed an agreement on joint development of Vizvar-North gas field in Hungary connecting the field to the Croatian gas transportation and processing system. A similar Croatian gas field development project is also in investigation phase.

MOL and INA have a very long experience in joint field operation and production. Since 1986 Barcs-Nyugat-Stari-Gradac gas-condensate fields have been operated by a mutually approved joint operation plan in order to reach maximum technical and financial benefits.