Vermilion, Ukrgazvydobuvannia enter 50/50 partnership in Ukrainian oil&gas PSA
The partnership of Canadian Vermilion Energy Inc. and Ukrgazvydobuvannia in a joint project on development of three oil and gas fields in Ukraine under production sharing agreements (PSA) is now 50/50, according to its second quarter year report.
"Entering Ukraine aligns with our strategy to capitalize on opportunities in under-exploited basins by using modern technologies to improve success rates and recovery," reads the document.
Vermilion said that subsequent to the end of the second quarter of 2019, it entered into a 50/50 partnership with Ukrgazvydobuvannia and were awarded two exploration licenses in Ukraine, subject to a final production sharing agreement.
"The licenses cover approximately 585,000 gross acres situated in one of Europe's most prolific natural gas regions (Dniprovsko-Donetsky Basin). The new licenses are in close proximity to several multiTCF gas fields with most of the basin (and awarded license areas) still uncovered by 3D seismic. The terms of the licenses include a modest capital commitment, back-loaded over a five-year time frame," reads the report posted on the company's website.
As earlier reported, Canada's Vermilion Energy jointly with a Ukrainian company (Ukrgazvydobuvannia) has won the right to develop three oil and gas fields in Ukraine.
On July 1, an interdepartmental commission for organizing the conclusion and implementation of the product sharing agreements (PSA) prepared for the government proposals on the winners in nine continental hydrocarbon sectors put up for auctions. Among them are Ukrgazvydobuvannia in alliance with Vermilion for Balakliyske and Ivanivske fields, Ukrgazvydobuvannia for Berestianske and Buzivske, private company Ukrnaftoburinnia for Rusanivske, U.S. Aspect Energy for Varvynske, DTEK for Zinkivske, Geo Alliance for Sofiyivske and Zakhidnadraservis for Uhnivske fields.
The head of the office of the National Investment Council, Yulia Kovaliv, said that now within two months companies must agree on the contracts themselves and sign agreements with the government in order to start exploration as soon as possible and to start work as soon as possible. She also said that the volume of investments of the winning companies is $430 million in the pessimistic scenario.
According to Vermilion report, its quarterly production volumes by approximately 1,300 boe/d and FFO by approximately $11 million, we recorded corporate production of approximately 103,000 boe/d, little changed from the previous quarter.