CAPITAL: TBILISI
MONETARY UNIT: LARI
REFINING CAPACITY: 106,436 B/CD
OIL PRODUCTION: 2,000 B/D
OIL RESERVES: 35 MILLION BBL
GAS RESERVES: 300 BCF
Energy problems of several kinds challenged Georgia's emergence from the former Soviet bloc.
Chronic power shortages plagued the country, which in 2000 generated enough electric power to fill only about half of its estimated demand of 40-45 million kw-hr/day. Hydroelectric accounted for 80% of Georgian power generation. About 100 billion kw of potential hydro energy was untapped.
Georgia had minor oil and gas production and reserves but was taking steps to increase all categories. The country lies at a pipeline crossroads for the westward transportation of oil and gas from the resource-rich Caspian Sea region. And it was improving its refineries.
Georgian officials said a lack of funds for repairs and fuel for power stations caused the outages. President Eduard Shevardnadze promised that service would improve.
Georgia became independent with the 1991 collapse of the Soviet Union and suffered economic woes aggravated by civil unrest and conflicts with separatist rebels in two regions.
There were calls for the republic to connect its electrical grid to Russia's, but such a move would be politically awkward for the westward-looking Shevardnadze, who had tried to steer Georgia away from depending on its giant neighbor. Upstream developments
Georgia's state Saknavtobi (Georgian Oil) licensed blocks to several western joint ventures and was pursuing limited exploration.
Saknavtobi and the German company GWDF International were to sign an agreement establishing an oil prospecting partnership in late 2000. The project
also involved developing fields in western Georgia at Chaladidi, Supsa, and Shromisubani. The German company was to invest $3 million/year in exploration.
Georgia was to own 70% of any oil produced, while the German company would get 30%. Work was to start by yearend 2000.
Frontera Resources Corp., Houston, garnered a $50 million loan from European Bank for Reconstruction and Development (EBRD). It was the second phase of a $60 million package initiated in June for development of Kursange and Karabagli oil fields in Azerbaijan and Block 12 in eastern Georgia.
Frontera began operating in Georgia in the mid-1990s and moved into Azerbaijan in 1999, following the Kura basin play from eastern Georgia into offshore Azerbaijan. In the process, it helped assemble the largest onshore acreage position in the Caucasus region, more than 1.4 million acres.
Block 12 in eastern Georgia includes 1.3 million acres with seven known fields and numerous exploration prospects. Included is Taribani field, the first of Frontera's development projects, which contains gross unrisked reserves estimated at 1 billion bbl of oil equivalent.
Frontera had 100% of the foreign company operating interest in a production sharing agreement in partnership with Saknavtobi.
CanArgo Energy Corp., London, was attempting to rehabilitate and further develop Ninotsminda oil field 40 km east of Tbilisi.
Ninotsminda produces 41° gravity crude from Middle Eocene fractured volcanics at 2,600-3,000 m. It is 10 km west of Samgori, the Georgian field with highest cumulative production at 180 million bbl.
The field averaged 1,416 b/d in the first 9 months of 2000, of which CanArgo's share was 709 b/d. It made 5 MMcfd of gas, including 3.3 MMcfd to CanArgo. Some gas was flared.
The N97 exploratory well, aimed at gas postulated in Cretaceous at 4,000 m, unexpectedly discovered gas and oil in Sarmatian (Upper Miocene) and Upper Eocene at 1,960-2,100 m and had mechanical problems. TD was 2,249 m. The N98H well stabilized at 220 b/d and 750 Mcfd of gas on an 8 mm choke with 765 psi flowing tubing pressure from a 350 m horizontal leg in Middle Eocene.
Interruptions of power from the Georgian grid delayed field operations. CanArgo signed an agreement with AES Gardabani, a unit of AES Corp., Arlington, Va. AES Gardabani owned two units of the privatized Gardabani thermal power plant, and another AES Georgian unit owned the Tbilisi power grid. AES Gardabani was to participate and partly fund CanArgo's deep Cretaceous gas program at Ninotsminda. Processing activity
Georgia's hub location for crude oil transport helped it attract considerable foreign investor interest in its refining sector.
The country's two refineries are a 106,000 b/d plant at Batumi on the Black Sea coast and the 4,000 b/d Georgian American Oil Refinery at Sartichala east of Tbilisi.
The Sartichala refinery was idle from May 2000 after Georgia's Parliament banned imports of its feedstock, pyrolysed tar. Shevardnadze demanded a quick restart for the plant, noting that Georgia could expect oil production to rise shortly. Processing local crude abroad was unacceptable, he said.
CanArgo increased its interest in the Sartichala plant to 51% in November 2000. CanArgo acquired 12.9% interest in the refinery in 1998 by financing a doubling of capacity to 4,000 b/d. The refinery produces fuel oil, diesel, and low-octane gasoline. With acquisition of the further interest, it planned to add a reformer to add high octane gasoline to the product slate.
The Batumi plant runs mainly Russian and Azeri crudes. In 2000 it was running substantially below capacity due to a lack of oil supplies, but the situation was to change with the reconstruction and conversion of the 232-km Khashuri-Batumi oil products pipeline, expected on line in 2001.
The Chevron-financed $70 million project would permit the transport of 100,000 b/d of Kazakh oil to Batumi and free up rail routes that had been used to ship Chevron's Kazakh oil from Tengiz field. Some oil was likely to be supplied by rail to the refinery from other Kazakh sources and from Azerbaijan.
Mitsui & Co. Ltd., Tokyo, was responsible for modernizing the Batumi refinery at a cost of $250 million. Mitsui undertook the work without Georgian government guarantees of its investment. Marubeni Corp. and JGC Corp., both based in Tokyo, dropped out of the project because of a failure to obtain such guarantees. The revamped, more-efficient plant at Batumi was to process 50,000 b/d of crude, double preproject rates.
Mitsui had an interest in the Agip SPA-operated Kyurdashi block in Azerbaijan. If oil were found there in commercial quantities, Mitsui was likely to process some of its share in Batumi.
Georgia might get a new $400 million refinery in Supsa. Plans included an initial capacity of 60,000 b/d, ramping up in phases to 240,000 b/d. Azerbaijan's state oil company, SOCAR, could become an interest-holder.
A refinery at Supsa would receive oil shipments through the existing Baku-Supsa pipeline. The pipeline was expected to transport 120,000 b/d of oil in 2000 from Azerbaijan's AIOC (Azerbaijan International Operating Co.) development, and future volumes transported by this route could increase.
Itochu Corp., which would like to refine its equity-crude production from Azerbaijan in a refinery at Supsa, said it intended to be a participant in this project.
Source: http://www.pennwellpetroleumgroup.com/articles/ipe_print_toc.cfm?volume_num=2001
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