Interview with Dmitry Borisov, Gazprom Neft Project Manager in Cuba and Equatorial Guinea
— Dmitry, what common features have the Equatorial Guinea and Cuba projects?
— They are both offshore projects and the projects have advantageous timing: exploration drilling in Cuba starts when the EG Projects are completing the G&G data interpretation. Our partner in the Cuban Project is Malaysia’s Petronas, one of the global leaders in off-shore development. This company has accumulated huge professional experience in marine projects because the major oil production in Malaysia is done offshore. In addition, Petronas has carried out operations in around 40 countries, whereas Gazprom Neft is only now taking up offshore projects beyond Russia’s borders.
— How did Gazprom Neft become involved in the Cuban project?
—Petronas signed a Product-Sharing Contract (PSC) with the Government of Cuba in 2007. The agreement facilitates the exploration of four offshore blocks in Cuba’s exclusive economic zone around the Gulf of Mexico. In 2009, Gazprom Neft started its cooperation with Petronas in Iraq. At the same time the Malaysian company made us an offer to participate in the exploration of Cuban mineral resources. After having signed an Assignment Agreement for the share and a Joint Operating Agreement we joined the Cuban Project in summer 2011, acquiring a 30% stake. Due to strategic cooperation between our companies, we do not have to pay extra fees to sign on the project; we just have to compensate the partners for past costs incurred in proportion to the size of our stake. As of mid-2011, we had spent approximately 12 million dollars on this asset, including compensation for expenses and funding current operations.
According to our geologists, the Malaysian company possesses one of the most promising blocks in the Cuban offshore area. There is reason to suppose that, in terms of geology, the Cuban area is similar to the Black Sea offshore area where we have an experience which will be useful in the joint project with Petronas.
Within the area, there are 14 prospects and the total reserves are estimated to be around
If the drilling results confirm the oil deposit in Catoche-1, then we will start 3D seismic work to outline the structure and check its dimensions and resources. So, the results from the first well will tell us whether we should drill a second (appraisal) well in the same structure or move to another one.
— When do you expect to start production?
— Based on the industry’s operational standards for offshore work, production generally starts
The Cuban Shelf in the Gulf of Mexico has not yet been properly explored. To date, only two wells have been drilled — nowhere near enough to make any decisions. But if hydrocarbons are there, then we’ll be one of the first companies to access them.
— And how things are progressing in Equatorial Guinea?
— In June 2010, we signed the PSC with the Ministry of Mining, Industry and Energy of Equatorial Guinea and the national oil company GEPetrol. Before that, we had a choice of 16 deep water blocks from which our geologists selected the two blocks they thought most promising: Block U in the Rio-Muni Basin and Block T in the Niger Delta. A separate agreement has been signed for each block. We act as the operator on both of the projects and our stake is 80%, with the rest owned by GEPetrol.
According to initial estimates, the amount of natural resources in the blocks could be as much as 110 million tons of oil. Early in 2011, in accordance with the PSC, marine 3D seismic work was carried out over 300 square kilometers in Block T. As for Block U, the past G&G information which has been provided is enough to make a decision and so there was no need for any additional 3D seismic. We expect to have finished data interpretation by summer 2012 when we decide whether or not to drill an exploration well.
— What’s the difference between the operations in Africa and in Cuba?
— In Equatorial Guinea we have more responsibility because we are the operators and we make all the decisions. Nevertheless, it is easier to resolve any operational issues there because of intensive oil production in the region and more professional contractors.
— What amount of funding can be expected if the exploration is a success?
— We estimate that, until the middle of 2012, our total investment into the project will amount to just above 10 million dollars. When we start drilling, we expect to spend tens of millions of dollars and in case of full-field development in both blocks — hundreds of millions of dollars. Gazprom Neft bears 100% of the costs at the exploration stage. As soon as oil production starts, GEPetrol will be able to increase its share to 45% and will have to compensate for any past costs incurred, after which the operations will be funded on pro rata basis. The agreement signed specifies that we can leave the project after any of the exploration sub-stages if we think the operations are not prospective.
— On the subject of Africa, has there been any change in the outlook of the Libyan Project?
—In September Gazprom Neft signed an Option Agreement for the Elephant Project with the Italian ENI. As soon as the partners notify us of the end of the current force majeure, we will have a year in which to exercise the option and acquire a 33% stake for 163 million dollars in the consortium from ENI, whic