Two little-known Western-registered companies recently closed deals securing the rights to explore and produce hydrocarbons in Ukraine
Two little-known Westernregistered companies recently closed deals securing the rights to explore and produce hydrocarbons in Ukraine, following in the path of many other Western oil companies that have been trying to break into the country’s energy market over the past few years.
New York City-registered hydrocarbon company Star Energy last week announced it had bought the rights to projects from EGPI Firecreek, another US-registered company. Both companies announced the conclusion of the transaction in press releases on Aug. 13.
On Aug. 16, Ukraine’s state oil and gas company, Naftogaz Ukrainy, announced it had inked an agreement with UK-registered CBM Oil to jointly explore and produce hydrocarbons on the Black Sea off the coast of Odessa. The deal envisions CBM and a state hydrocarbon company in charge of projects in the Black Sea region, Chornomornaftogaz, sharing production rights.
While details remain to be worked out, officials said Chornomornaftogaz could inherit a stake in CBM Oil as part of their partnership. Citing sources at Naftogaz, business daily Ekonomichiskie Izvestia said CBM was also eyeing production rights in the Caspian region, but little information was available about the company.
Although Star has already been working in Russia, its acquisition of Firescreek’s projects marks the company’s first foray into hydrocarbon extraction and development in Ukraine.
According to Star’s press release, the deal included seven oil and gas fields throughout Ukraine with estimated reserves of more than 100 million barrels of oil and 150 billion cubic feet of gas.
Firecreek itself began development of its business in Ukraine after 2000. The three projects, known as the Region, Dewson Zao, and Bukovyna fields according to Firecreek’s press release, are located in the Kharkiv and Chernivtsi regions of Ukraine. According to Star, two of the fields are already producing hydrocarbons, and the company plans to substantially increase production at these sites.
Meanwhile, CBM has pledged to invest $25-30 million into joint Black Sea exploration projects with Chornomornaftogaz. Chornomornaftogaz and CBM had inked earlier partnership agreements back in 2006.
Ekonomichiskie Izvestia and Ukrainian News information agency reported that CBM has held talks in recent months with Fuel and Energy Minister Yuriy Boyko on their anticipated involvement in Black Sea exploration and production. Few details on the company and its role were revealed.
Star Energy Corporation describes itself as a hydrocarbon exploration, production and refining company with 100 percent of its assets located in Europe, primarily in Russia’s Samara region. The company claims to be pursuing a strategy of seeking investment and acquisition opportunities in Russia and Eastern Europe “with the goal of providing Western investors with access to a portfolio of natural resource licenses and operating companies.”
“The exclusive focus of Star over the next several years will be on developing our base in Russia and the [CIS]. Through acquisitions and development, we plan to significantly expand our exploration, production and refining operations,” Star Energy CEO and President Patrick J. Kealy said in a press release May 10, which announced the initial signing of a memorandum of understanding with Anglo-Ukra Energy. That agreement envisioned the acquisition of rights to concessions of the Region, Sakhalinska, and Bukovyna oil and gas fields.
As part of the deal, Star issued 2.1 million shares of the company’s common stock with registration rights and paid $100,000 to Firecreek. PJM Management will receive 150,000 shares and $10,000 and Double Coin Ltd. will receive 2.5 million Star shares. Star now owns 100 percent stakes in the Region and Bukovyna projects, as well as a 51 percent stake in the Dewon Zao project.
The company plans to conduct its operations through its newly registered subsidiary, Anglo-Ukra Energy (AUE). It also plans to promote itself and expand operations in the country through AUE, with headquarters in Kyiv and offices in Ivano-Frankivsk and Poltava.
“I am a great believer in the future of Ukraine,” Kealy said in the May 10 press release. “It has significant gas and oil reserves, but has only recently found it necessary to develop these assets.”
Although Ukraine has significant gas and oil deposits, little has been done until recently to exploit these resources. Ukraine still receives most of its oil and gas imports from Russia, although development of its own domestic resources would help the country gain energy independence. The country imports the lion’s share of the gas and oil it consumes.
While development and production of the country’s gas and oil resources looks promising, foreign companies have recently been struggling to capitalize on their hydrocarbon agreements in the country because of protectionist laws introduced this year that have been forcing companies to sell their oil to state gas monopolies at far below market prices.
