October 29, 2015
By Zviad Adzinbaia
Georgia Today, like many of our Readers, was interested in the groundbreaking announcement by a US independent oil and gas exploration and production company Frontera Resources over discovery of an estimated 3.8 trillion cubic meters of gas in the Georgian region of Kakheti early this month.
To give a qualified analysis around the topic, Georgia Today exclusively interviewed Dr. Ariel Cohen, Senior Fellow at the Atlantic Council and Director of the Center for Energy, Natural Resources and Geopolitics at the Institute for the Analysis of Global Security.
Q: What is your opinion about the validity of the Frontera discovery?
A: The main issue is the confirmation of the reserves. I know the people in Frontera personally, including the CEO and the President, and they are reliable people with a lot of experience; these people have been involved in the business for the long time. At the same time, as they say, they are in the independent process of confirmation of these reserves. If this is proven, the questions we need to ask are: First, how much of these reserves is extractable? Because if it is a combination of both conventional and unconventional reservoirs, not all of the 3.8 cubic meters will be extractable, but even if it is 50 percent of 3.8 trillion, it would be the size of Azerbaijan’s Shahdeniz 2 field; if it is a little bit less, still it is huge and very significant. The other question is what will be the costs of production, because we are today facing a low price and a low cost environment. Compared to what we had 5 years ago, gas prices are currently nearly three times cheaper. Therefore, the Georgian gas should be economically competitive with the gas from Azerbaijan, Russia or Qatar. If this gas is economical, then it is a real game-changer; it will transform Georgia from an importer to an exporter, and this would fundamentally change the economics of the country. Moreover, Georgia, which is currently a mid-income country, would become a high mid-income country in terms of GDP per capita comparable with Azerbaijan and Kazakhstan.
Q: What steps need to be made by Frontera and approximately how long will the process of confirmation take?
A: Clearly, the Georgian government and the Georgian people have an interest in having Georgia as a gas producing country because it will at least cover the internal need for gas. Even though Georgia is blessed with massive hydro resources in terms of wind and solar energy – which is more expensive than gas – nobody disputes the economic benefits of being a gas exporter. Thus, as the independent Frontera Company is dealing with the confirmation, they themselves will go and confirm it with an independent reputable firm. Once it is confirmed, the second step is developing the field and building a pipeline. There would be two ways of exporting this gas. The first is using the existing pipeline and putting it in the TANAP (Trans Anatolia Pipeline) and second, exporting the gas in a liquefied form (liquefied natural gas – LNG) probably to Romania across the Black Sea. Another possibility would be to use the Odessa port and supply Ukraine with gas. At the same time, Turkey, Central Europe and the overall European market are other options, so the opportunities are numerous. It could be very lucrative for both Georgia and Frontera. As for the period needed, it will probably take a year to confirm and three, five or seven years for development, which greatly depends on politics and the Georgian government to create this revenue stream quickly. Clearly, Georgia has an opportunity to benefit from that.
Q: The Georgian government has been heard to say that the country needs to diversify its gas resources through Russian supplier Gazprom, the negotiations with whom were followed by public outcry. Do you see any correlation between the two events, the Gazprom deal and the finding of Frontera?
A: First, I think that as Georgia has a conflict with Russia over Abkhazia and South Ossetia (Tskhinvali region) and relations are difficult, I do not understand why Georgia needs to diversify its gas sector away from friendly Azerbaijan. Azerbaijan was a real friend, it supplied gas to Georgia at a low price and now Georgia has the potential to develop its own resources and it may have an additional source of gas. Meanwhile, Russia, looking for additional markets for export to Europe, is down by approximately 20 percent and it may slip further as Russia, including Gazprom, is under sanctions from the west. Thus, as they say in Russian,’ you cannot occupy the Georgian territory and become again a major gas exporter.’ However, the question of why Georgia is pursuing such directions should be asked to the decision makers.
To remind Georgia Today readers, a US independent oil and gas exploration and production company early this month revealed that extensive geologic and geophysical studies within and between the Mtsare Khevi Gas Complex and the Taribani Field Complex areas could be part of a common geologic complex. As a result, ongoing exploration studies have confirmed an extensive integrated gas resource potential that is much larger than previously identified.
On October 8, Frontera Resources Corporation, an independent oil and gas exploration and production company, released the groundbreaking announcement of a significant upgrade to gas resources associated with its ongoing exploration and production efforts in Georgia.
The Company says that it had continued to advance its natural gas focus within its eastern Georgia holdings by combining the technical focus of its Mtsare Khevi Gas Complex and Taribani Field Complex into one integrated 2,000 square kilometer geologic unit named the South Kakheti Gas Complex.
It is surprising that, in addition to gas resources previously identified for subsets of this combined area, Frontera’s ongoing work recently concluded a new estimation of as much as 135 trillion cubic feet (3.8 trillion cubic meters) of gas in place of reservoir targets found between 300 metres and 5,000 metres in depth.
Zviad Adzinbaia is an Analyst at newspaper Georgia Today covering regional politics, security, Russia-Georgia affairs and issues of Georgia’s Euro-Atlantic integration. He is also a fellow of a number of high-caliber programs at the Georgian Foundation for Strategic and International Studies (GFSIS).