The United States' Hunt Oil Company, a high-profile oil and gas production company, has inked an agreement with Ukraine's Chornomornaftogaz that foresees the companies combining their efforts to explore and produce oil and gas in the Black Sea region.
Texas-based Hunt Oil Company, a high profile oil and gas production company, has inked an agreement with Ukraine’s Chornomornaftogaz that foresees the companies combining their efforts to explore and produce oil and gas in the Black Sea region.
Larry Bottomley, vice president of Hunt Overseas Oil Company, and Chornomornaftogaz president Ihor Franchuk signed a Memorandum of Understanding on Nov. 4 at the United States Embassy’s Commercial Office in Kyiv. U.S. Ambassador to Ukraine John Herbst attended the signing ceremony.
Hunt, the largest privately-owned U.S. oil and gas company, currently has interests in the U.S., Canada, Yemen and Peru. Chornomornaftogaz is a subsidiary of the state oil and gas company Naftogaz Ukrainy, and is responsible for oil and gas exploration and production in the Black Sea region.
The agreement authorizes Hunt to join in on the development of a 12,000 square meter parcel of deep-water shelf territory in the Black Sea. The territory accounts for about one-tenth of Ukraine’s deep-water drilling territory in the region.
Both companies are still negotiating the project’s details, but Bottomley said Hunt may invest “tens of millions to billions of dollars” in the project, depending upon how much oil is discovered.
Franchuk, who is also a parliament deputy, said production could begin after two to three years of exploration studies, which are designed to determine how much oil and gas exists in the region.
Operating ten sea-based drilling platforms in the region, Chornomornaftogaz produced about 700,000 tons of oil-gas condensate last year, equivalent to only a tiny fraction of the 20 million tons of crude that Ukraine’s refineries processed last year. Chornomornaftogaz hopes Hunt will help find much more crude in the region, and help it boost production.
Serhy Kuyun, acting director of Ukrainian Petroleum and Energy Consultants, cautiously welcomed Hunt’s arrival.
“It is fashionable these days to announce partnerships,” he said. “If Hunt holds true to its promises and actually invests millions to billions of dollars, this could pan out as the single largest investment in Ukraine’s oil industry as of yet.”
Neither Chornomornaftogaz nor Naftogaz Ukrainy has the funds or the expertise needed to adequately develop oil and gas production in the region, Kuyun added.
If Hunt does find more oil in the region, it could provide a big boost for Chornomornaftogaz. Kuyun said the 8,500 tons of crude the company produces from oil-gas condensate per month is not enough to produce the amount of fuel sold in one day by one single gasoline filling station in Kyiv.
Kuyun said few companies have seriously considered searching for large amounts of oil or gas in the Black Sea region, as large established reserves in Russia and the Caspian region have attracted most of the attention. The arrival of Hunt is a sign that investors could slowly begin to line up.
“It’s not clear how much, but there is oil there,” Kuyun said. “Concrete exploration is needed … as it will take years of exploration to establish how much is there. It is like rolling the dice. It’s a serious job that requires large investment.”
