Ukrnafta tries to dig itself out of debt, stagnation
For Ukraine, energy independence doesn’t just mean weaning itself off imported Russian gas.
For Ukrnafta, Ukraine’s state-owned oil and gas extractor, financial independence means breaking free from shareholders who have brought the company to the verge of bankruptcy or a possible fire-sale price to a private owner.
A new management team wants to overhaul the company, but such a step will require the approval of the company’s gov-
In 2015, the subsidiaries of Burisma Group increased the volume of natural gas production. What are your plans for 2016, due to which factors does Burisma expand its business?
We expand our business due to equipment investments, people and technology. At the moment, we have assembled the best experts and the most innovative equipment, which allows us to drill slanted wells 2,900 meters deep in three weeks.
This year Burisma plans to drill 16 wells over 4,000 meters, and 5-7 wells under 4,000 meters. At the moment, seismic surveys are being conducted at four units at the same time. We put into operation a well with a depth of 5,620 meters, which provides a profit of 280,000 cubic meters of gas and 25,000 cubic meters of condensate per day. And we have not uncovered the most powerful horizons yet. According to the results of the well exploration, it was taken a decision to drill another well within the Vodyanovsk field. In May, we plan to drill a well with a planned depth of 5,800 meters, and to accomplish it in five or six months. In 21 days, there was drilled a well 2,870 meters deep with an inclination angle of 45 percent within the Proletarian field. All this allows us to reach the planned production volume of 1.8 billion cubic meters of gas, but this year we plan to increase the volume of gas production up to 2 billion cubic meters of gas.
What projects did Burisma implement in 2015?
We built an additional gas piplene between Kharkiv and Shebelinka, which cost us Hr 18 million, and conveyed it to “Transgaz” system for free. This made it possible not only to facilitate the work of Kharkov ring, but to operate the Ukrainian gas transport system more efficiently. With this ring all the gas companies (including state-owned ones) operating in Kharkiv Oblast can increase the output without violating the regulations. This is a net investment in the government project for the more efficient gas production. Today there are no similar investments, where private companies would invest in the state system of gas transmission.
Burisma also launched a gas pipeline over 30 kilometers long in Kharkiv Oblast which connects gas transport providers’ nets to our company fields. This will increase production and ensure transmission of 4 million cubic meters of gas per day. Last year Burisma announced about its activities in Kazakhstan and Italy. What projects may contribute to the company's portfolio in 2016?
Even though, the Holding’s activities differ in these two countries (in Italy, the holding company develops geothermal field), we convey our competences to international markets. First of all, our service and our drilling technologies. Burisma owns the largest rig fleet in Ukraine, including heavy drilling rigs, that enable to reach the depth of up to 10,000 meters.
In Kazakhstan, we signed an agreement with the National Oil and Gas Company "Kazmunaygas" and its subsidiaries. For example, we signed a contract with "KMG Drilling & Services" to perform a drilling of a directional appraisal well at the Urikhtau field.
In Italy, it’s a new aspect, specializing in the electricity production from renewable and environmentally friendly geothermal sources in Europe. An international group Gesto Investimento e Gestão (G.I.G.) became our partner in the Italian project, and now we cooperate on three projects.
Companies in Mexico and the United Arab Emirates would also like to see us, as their investors and partners. Currently we estimate the prospects of a series of projects; we will be able to tell you more about it later. Is it worthwhile to invest in Ukraine at the moment?
But, in spite of macroeconomic and political risks, we continue to invest in Ukraine. Our principled position is to form an energy independent state and develop the Ukrainian gas production market. The future of Ukraine depends on having an energy independent state, which would be able to provide completely its market with domestic extracted gas.
Despite market expansion, the Ukrainian market remains strategic for us. Burisma is the most recognizable Ukrainian gas company in the world. We promote the “made in Ukraine” brand in the world as a part of the qualification potential of Ukrainian universities and the technological possibilities of the Ukrainian companies. The company became a “guide” of energy independent implementation in terms of Ukrainian national policy.
Despite the difficult situation in the country and "unfriendly" fiscal policy in 2014-2015, we continue working on our projects on the natural gas exploration and production. In 2014, production amounted to 692 million cubic meters, in December 2015, we managed to increase the production volume to 1.2 billion cubic meters in annual equivalent.
Last year our companies paid about Hr 3 billion in taxes. According to this number, the group is among the three largest industrial taxpayers of the country, which demonstrates the social orientation of the company and compliance with international practices.
Does Burisma plan to cooperate with a state-owned company “Ukrgasdobycha”? In which format?
We actively upgrade our rig fleets. This year we purchased a new drilling rig SK — 3000 with the load capacity of 750 tons. This is the most powerful rig, not only in Ukraine but also in the Commonwealth of Independent States. We also bought a new U.S. fleet for hydrofracturing, which consists of 15 pumps with a total capacity of 35,000 horsepower. We can say, that this national project will give an opportunity to participate in tenders for services of various companies, including the largest state-owned gas producer "Ukrgasdobycha."
We have already signed a cooperation agreement with leading American company Propetro, which performed more than 10,000 successful hydrofracturings and is ready to cooperate if we win the tender.
We also purchased seismic equipment, which lets us cover large areas and provides high quality seismic information. In this field we cooperate with Dawson Company.
Ukrainian gas employees stand near a gas installation in Boyarka near Kyiv on April 22, 2015. Ukrnafta has suffered from years of mismanagement, leaving it with outdated and decaying infrastructure. (Kostyantyn Chernichkin)