Victoria’s strategy is to grow into a mid cap E&P company with the development of its existing high class fields and prospects and via the acquisition of opportunistic undervalued assets, particularly in Africa and the FSU.
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Victoria is looking at monetising our gas reserves in the near term from ‘gas to power’ in addition to the industrial gas demand. |
The simplified chart below is a summary of the latest project schedule:
The Board of Victoria remains confident that we are working within the project schedule and are on course for 1st gas sales in Q4 2011
SNH will be requested to pay for their share of development costs as these costs are incurred.
Our construction plan includes shoring of all trenches deeper than 1.2 meters and the use of temporary drainage and pumps to keep the pipeline route clear of water. Jointing will be conducted under cover to ensure that pipeline ends are kept dry and clean.
Pipeline installation is scheduled to commence before the end of June and involves three construction teams and a horizontal drilling team to complete fourteen horizontal sections. The project schedule envisages completion of 100 meters of pipeline per day although this rate can be accelerated if required. Construction of the pipeline is not considered to be on the critical path.
Over the course of the last 50 years, HDPE usage has grown consistently to replace steel as the primary material for newly installed mains and distribution systems.
In Europe; HDPE is the overwhelming material of choice with a share of greater than 90% for newly installed gas pipes in the distribution network.
The Company expects gas sales of 8 million standard cubic feet per day (‘mmscf/d’) in the first year of operations rising to 44 mmscf/d (7,300 barrels of oil a day equivalent) by the end of 2014. A chart of the Company’s potential gas sales and its end user markets is highlighted below:
Under the standard operating pressure of 5.5 barg, the pipeline has a capacity of 60 mmscf/d, which is of sufficient size for the Douala industrial market over the medium term. This capacity can be increased with a higher operating pressure.
The total gas distribution network is approximately 32km in length comprising pipe diameters between 400mm and 63mm and this will be used to supply gas for industrial customers only serving the markets for substitution of liquid fuels for heat, and gas for on-site and near site gas fired power generation. Should VOG enter into a gas sales agreement to feed gas to a large power station, this will be serviced by a separate pipeline.
Condensate separated from the gas at the process plant will be stabilised and stored for transport to the Sonara refinery at Limbe in Cameroon located approximately 60km away from the process plant. Condensate production is forecast at the rate of 20 barrels per million cubic feet of gas. Therefore in the first year of operations, condensate production will be in the range of 160 barrels per day rising to 880 barrels per day by year end 2014.
VOG’s next drilling campaign at Logbaba is anticipated to commence at the end of 2013/ beginning of 2014.
Customers will be billed at the end of the month for the gas received and metered during that month. Payment terms will be 15 days from the date of invoice. Should customers not pay, VOG has the ability to turn off their gas supply immediately.
VOG anticipates having executed in excess of 20 Gas Sales Agreements (‘GSAs’) by the time of first gas. Customers that have signed already are not being announced while negotiations with other customers of a commercially sensitive nature continue.
VOG has entered into GSAs on a ‘pay as you go basis.’ The terms of the contract stipulates that customers are not bound to take our gas and equally VOG is not obliged to deliver any gas. Therefore, there are no financial penalties if VOG fails to deliver gas to customers. We have not required that customers ‘take’ our gas or face financial penalties as the contract terms of the GSAs are significantly in their favour.
LNG projects require very large volumes of gas to be economically viable. VOG’s current proved and probable reserves are 201 Bcf of gas at Logbaba so LNG is not economically viable. That said, should VOG discover larger quantities of reserves on the remaining area of the licence beyond the needs of our industrial consumers, it is possible that VOG, in co-operation with other gas operators in the area, could enter into joint discussions about onshore or offshore LNG liquefaction and distribution.
Further to the drilling and testing of wells La-105 & La-106 carried out in 2010, the Company announced a significant increase in reserves and resources in October 2010. This update was completed by Blackwatch Petroleum Services Limited, ("Blackwatch"), which act as consultants to the Company and the gross Logbaba reserves are highlighted below. VOG is operator and has a 95% working interest in the Logbaba Field.
Logbaba Reserves, 100% Basis (Bcf)
|
Category |
July-2008 |
Oct-2010 |
|
Logbaba Field |
|
|
|
Upper Logbaba Proved Reserves (1P) |
10 |
49 |
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Proved + Probable Reserves (2P) |
104 |
212 |
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Proved + Probable + Possible (3P) |
202 |
350 |
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Entire Logbaba Block |
|
|
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Prospective Resources |
n/a |
>1000 |
Note: VOG 95% working interest
In the 2009 Annual Report and Accounts, the Directors made a provision of $35.5 million against the carrying value of the Kemerkol asset subsequent to our licence being revoked by the Economic Court of the Atyrau Oblast of Kazakhstan. We continue to fight our corner within the constraints of the Kazakhstan legal system and still remain hopeful of a positive outcome but Kemerkol's long-term economic importance within Victoria's overall portfolio of assets has been minimised.
VOG has equipment valued at approximately $0.8m retained on site at Kemerkol
No
In 2006, DeGolyer and MacNaughton, (‘D&M’) carried out an independent reserves report which appraised prospective resources at over 1.1 billion barrels of oil equivalent. Following drilling in 2007 and the 103 discovery, VOG has pursued a cost-effective work programme over the past three years to appraise the 103 area and firm–up the leads and prospects mapped by D&M, based originally on conventional seismic. VOG’s work programme since this time has included two passive seismic and two gas tomography (geochemical) surveys over the 103 discovery and the other leads and prospects respectively. More than 60 km of winter roads were constructed within the licence area to provide access for the survey equipment and personnel to the areas of interest. In February 2011, VOG presented the results of our 2010 work programme and the forward plans for this year and 2012 to the Russian Ministry of Natural Resources and the plans were approved.
VOG’s current work programme envisages a 2D drilling campaign at the beginning of 2012.
VOG’s current work programme envisages commencing the drilling of 2 wells as agreed with the Russian Ministry of natural Resources by December 2013. Drilling locations will be decided based on the results of the seismic reprocessing and re-interpretation currently underway as well as the results of the 2D seismic planned for later this year.
VOG expects to be able to drill each appraisal well for under $10m
VOG’s future strategy at West Med is to assess and plan the commercialisation of the large prospective resources and to exploit the well 103 discovery to generate cashflow. To achieve this objective, integrated appraisal and development studies are being conducted / coordinated by Blackwatch Petroleum Services Limited, ("Blackwatch"), which act as consultants to the Company.
VOG is fulfilling its work programme as agreed with the Russian Ministry of Natural Resources in February 2011. It is our hope that, further to the next seismic and drilling campaign to be carried out over the next 18 months, we will have significantly enhanced the value of the asset.
While we would not discount the possibility of a farm-in partner before this time if a serious and credible offer materialized, it is our assessment that more value can be attained after completion of the next drilling campaign. That said, the Board of Directors would of course appraise any serious farm-in offers before this time.
VOG reserves and resources at West Med are highlighted in the chart below:
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Category |
mmboe |
|
West Med Reserves |
|
|
C1 and C2 (1) |
14.4 |
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C1, C2 & C3 |
170 |
|
Resources |
|
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Prospective Resources |
1,123 |
(1) Victoria’s West Med Reserves, as approved by the Russian Ministry of Natural Resources, are classified as C1 and C2 reserves according to Russian convention and are comparable to the Society of Petroleum Engineer’s Proved and Probable Western classification