UKRAINE TRY TO ATTRACT OIL AND GAS INVESTORS – BUT LACK INFRASTRUCTURE TO DO SO

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A National Oil and Gas Asset and Exploration & Production Database for Ukraine is a Critical Infrastructure element to attract Investors

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Introduction

In order to Ukraine to attract Investors and companies to assist them in the efforts of exploring and producing oil and gas, several steps need to be taken.

One of the most important steps is to make the Energy Sector more transparent to the global players within the oil and gas industry.

There are certainly other steps in this process, such as regulations, laws and fiscal regime that needs to be focused at. However, given that there are large enough opportunities, there will be an international interest, and will give Ukraine more and better cards to play with to close deals in the future.

Ukraine needs to look into how they form partnerships in the future. Not only look at the immediate income of a project, but to look at the long-term opportunity to harvest profits, in several areas.

Ukraine has a large and prominent academic base to take from, and its intellectual base provide Ukraine with a large potential to create a domestic governmental agency to form its future Strategy for oil and gas.

Ukraine also host several industry segments that will benefit from more coordinated oil and gas efforts guided by a national strategy that is sound and transparent to the investors. Rig and pipeline construction and the iron industry cries for more activities apart from its export potential.

In this article the author will touch mostly into the creation of a National Data Center (NDC)/ National E&P Data Bank (NDB), to host and promote Ukraine potential. However, several other activities are touched as well, and should not be seen as less important, although not discussed in details here. These topics should be addressed as equally important.

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Background

Ukraine suffers from lack of transparency within the Energy sector today. If Ukraine is to attract serious international and national investors to participate in developing Ukraine’s diversified resources within oil and gas, there is a need to modernize and make the energy sector more transparent on its way.

Encouraging trust and open up the landscape so the investors and government together can resolve the challenges ahead for Ukraine, is the only viable way forward.

Ukraine does not have the economic powers to take upon itself all the challenges ahead within oil and gas industry. Not only is the conventional oil and gas prospecting an effort to take into account. Lately, the focus on Coal Bed Methane and Shale Gas has made new opportunities and challenges to Ukraine.

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One major effort that needs to be focused on, by the Ukraine authorities are the establishment of a National Data Center for oil and gas resources.

This effort has proven to give a nation more attention, and more credibility as it promotes in a more transparent way the potential in a nation’s resources.

Therefore we propose that the government of Ukraine put more focus and attention to make a Joint Venture with one or more service companies with experience with building National Data Centers. It would also  be advised to create cooperation with countries gone down the path of creating such Centers and to learn from their experiences.

This would open for several multi-lateral agreements between countries and service companies, but not limited to such. Oil and Gas Companies should be welcomed to assist building up such facilities. This can be down through brownies agreements to get a acreage and licenses to operate on Ukraine territories.

This model has been followed by several countries, but especially Norway, as their efforts of oil and gas exploration took off as late as in the 1960’s and not only before in the 80’s a proper national database began to take form. However, Norwegian authorities linked several brownie deals with concessions in order to build up their own expertise to expedite the efforts in together with the industry to understand the oil and gas potential on Norwegian Continental Shelf. Today, this has led to a large National Data Center, which provides the authorities a hub for the industry from all over the world to participate in a national strategy for exploring and producing Norwegian potential.

The Ministry of Fuel and Energy comprises of the Department of oil-and-gas industry; Department of energy industry; Department of strategic policy and prospective development of FEC; NJC “Naftogaz of Ukraine”; Department of FEC economic and financial regulation; State Department of coal industry; Main Office of Chornobyl AES (Nuclear Power Station) and social working relations; Main Office of international cooperation.

The Ministry of Fuel and Energy develops short-, medium- and long-term forecasts for economic and social development of fuel and energy complex; works out conception and special programs on perspective development of fuel and energy complex; participates in elaboration of State Program drafts of economic and social development of Ukraine, State Budget of Ukraine, the Cabinet of Ministers of Ukraine Activity Program; exercises control over purposeful, economic and effective use of allocated budgetary funds for fuel and energy complex enterprises; develops offers on improvement of the mechanism of pricing in fuel and energy complex; takes measures on improvement of foreign trade activity of enterprises, institutions and organizations of fuel and energy complex, protection of Ukrainian commodity producers on a foreign market and home market development; within the framework of its authority participates in preparation of Ukrainian contracts; prepares prepositions on conclusion, denouncement of such contracts, concludes international agreements of branch character; conducts, in the limits of its authority, measures on adaptation of Ukrainian legislation to EU legislation on fuel and energy complex issues, represents and protects, within the terms of its authority, Ukrainian interests resolving problems on peaceful atomic energy  use in the International Agency of atomic energy, in other international organizations; participates in forming and implementation of antimonopoly policy as a whole and according to corresponding directions (demonopolization of economy, competition development, antimonopoly regulation, improvement of antimonopoly legislation).

To empower the Ministry of Fuel and Energy with more perspective and optimizing its potential for strategic planning there is a need for a National Data Center for Oil and Gas activities (NDC).

So what do we talk about when we mention a National Data Center (NDC)?

A Web-enabled National Data Center (NDC) will open up the Ukrainian oil, gas, and mining industries to the world market and enable Ukraine to compete globally for investors.

The Ukraine Ministry of Energy needs to attract international investors to further develop its diversified oil, gas, and mining reserves. The Ukraine authorities need to recognize the value of a centralized master data repository with Web-based visualization to secure national assets and encourage investment from prospective buyers worldwide.

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This significant goal should be entailed by streamlining and modernizing the way data is collected, stored, and accessed.

Before posting investment opportunities on the Internet using a Web portal, it would be necessary to standardize, remaster, and upload (scan) existing information into a single, comprehensive E&P database. Ukraine Authorities objectives have to be to ensure data quality and integrity and mitigate the risk of losing valuable seismic data, because old storage tapes starts to deteriorate. An overriding rationale for this project must be to enable more informed decision making by stakeholders in Ukraine’s natural resources market—from governing bodies to operators and investors.

State-of-the-art information management technology will make it easier to reach prospective investors anywhere in the world. As a result, Ukraine will be better able to negotiate investments and form partnerships to more fully develop its diversified natural resource reserves.

Access to data will be controlled and the pricing of data can be administrated through this system in an orderly fashion that enable interested parties to purchase portions of data they deem interesting for them.

Challenges for Ukraine oil and gas activities

Being able to centralize, manage, and protect Ukraine’s natural resources data and to increase global knowledge of local oil, gas, and mining industries

Ukraine is in a need to promote investment opportunities within their territories.

Ukraine needs to form a strategy that has realistic goals versus what is mapped out to be their potential resource base at any given time. This will require input from existing operators in Ukraine territories to enable update of statistics for exploration and production in the country.

There is a massive work to incorporate data from all E&P domains into an NDC for quick and easy access to categorized types of information. The lease types have to be defined as exploration, mining, and quarry, with production rights available for a variety of resources.

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Prevent deterioration of legacy seismic and log data previously stored in various formats, and not easily accessible to potential investors.

A Web-based portal has to be created as the main global gateway to viewing Ukraine’s natural resource data stored in the NDC. This allows ease of use, personalization, and aggregation of content sources critical to decision making. The Web data view component of this solution must be designed to give operators and potential investor’s quick access to oil, gas, and mining details (including cultural, navigation, well records, oil and gas production, and seismic facts). To facilitate the process, there will be a need for setting up secure online data rooms to develop an online data-brokering model for promoting investment opportunities.

What is a National Data Center (NDC)?

A National Data Center (NDC) is an electronic Government solution that enables broader petroleum data access to entitled, multiple stake holders. National Data Centers attract investment while optimizing workflows and increase collaboration between regulatory bodies, other government entities, universities, the public, and global and local companies. The solution would operate within the Ministry of Petroleum agencies and is referred to as a national data repository (NDR) or petroleum data bank.

Government and regulatory agency goals

Accelerate time to first oil and gas to optimize tax and royalty revenue from investors. Promote transparency and facilitate access to information to increase investment. Develop local human assets by effectively transferring knowledge. Discriminate between useful and irrelevant data to reduce risk and uncertainty in the decision making process.

A Web interface provides easy access to data anywhere, anytime and a Self-service transactional interface give the opportunity to enable auto-handling of regulatory reporting

The ability to integrate an NDC into corporate and government workflows.

Government portal for oil and gas activities

The portal will enable the authorities to easily and dynamically report to users about;

  • Regulations

  • Upcoming Plans

  • Availability of acreage

  • Overview data collected

  • In conjunction with state driven data labs (such as core labs, seismic, logs etc)

  • Detailed Coal Bed Methane Fields Map

  • Detailed Shale Gas Fields Map

  • Detailed Conventional Oil and Gas Fields Map

  • Promotion of acreage up for bid, both onshore and offshore

  • Promotion of state funded studies, and other non-exclusive studies and data

  • Farmout and Divestiture

  • License/Bidding Rounds

  • Acquisition bids

Basin-specific oil and gas field maps are to be included and show the locations, boundaries, names, and either the barrel-of-oil equivalent (BOE), the liquid hydrocarbon (crude oil plus lease condensate), or the natural gas reserve size for each field
Provide searching, accessing and dynamic mapping of BLM activities including Oil, Gas, and Geothermal Leasing, Coal and Other Solid Mineral Leasing, Right-of-way (ROW) Corridors, Stipulations (no surface occupancy etc.), Mining Claims (unpatented), Land Use Permit, Land & Mineral Title, and many more.

Provide an overview of each of the gas industry in Ukraine. Details of the market structure, regulatory environment, infrastructure and provides historical and forecasted statistics relating to relating to the supply/demand balance for each of the key sub-segments. It also could provide information relating to the natural gas assets (gas fields, LNG terminals, pipelines and underground gas storage terminals) in Ukraine. The NDC would provide an overview of  the fiscal regime relevant to the natural gas assets in Ukraine and compares the investment environment in Ukraine with other countries in the region. An overview of the profiles of the major companies operating in the natural gas sector in Ukraine together with the latest news and deals are also included in the NDC.

Oil and Gas Statistics

Ukraine will be able to produce dynamic, updated statistics on vital information about the country’s potential and activities at any given time. Some examples of activities Ukraine could report on are;

  • Show producing, non-producing oil and gas fields/leases.

  • Total number of leases in effect

  • Total number of Acres leased

  • Number of producible leases

  • Number of drilling permits

  • Production volumes by regions and total

Fact pages combined with Fact Maps will give a huge variety of users the opportunity to dig into the database from various angles and perspectives.

Systems

Geographic Information Systems (GIS) are powerful  tools  to enter, maintain, store, distribute, and analyze geospatial data. GIS and associated spatial analyses deal with the quantitative location of features and their associated attributes. GIS have been implemented across a broad range of research, science, business, and government applications. GIS are particularly effective for managing natural resources. As the development of oil and gas resources expands in the Intermountain West, so does the need for spatial data and spatial awareness of development impacts. GIS can be utilized to document and examine the potential and observed effects of oil and gas development on all impacted resources including: water, wildlife, cultural/historic, habitat, air quality, socioeconomic, vegetation etc. Furthermore, GIS provides a tool for oil and gas operators to effectively and efficiently manage development for the protection of resources and optimal production.

Combining GIS systems with proper Data Management Systems and Databases, will enable Ukraine to establish an overview to use for forming future strategies of oil and gas exploration and production.

It also will give Ukraine a massive opportunity to create a dynamic system, which will evolve over time and never become obsolete to both government and potential interested parties working or plans to work there.

Utilization of Google Earth has become more and more attractive amongst the more mature NDC’s around the world.

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How to implement a national Data Center in Ukraine?

Create deals with service companies and opil and gas companies under a revenue sharing agreement to undertake a project to implement an online data repository and management system.

There is a need to create Incentive/penalty agreements with existing operators to ensure data collection from existing producing and former exploration efforts in the country.

The project will result in a centralized E&P data repository which can be conveniently accessed by various energy companies via web. Due to centralized web access, the lead time will be reduced. This rapid availability of E&P data will result in more exploration activity in Ukraine

Revenue models for the National Data Center/Data Bank will have to be worked out through more than one ways; Subscription fee, data fees, and access Fees to database in general. The subscription fee has to be connected to the concessions given in the country. That will enable everybody to know about each other’s activities and data availability. F.inst. any company to endeavor into  activities within oil and gas in Ukraine is obliged to pay a subscription fee and to agree on giving data from its activities to the databank after a certain time.  Non-compliance will be penalized to varying degree. This will give the authorities some control opportunities as well as income opportunities.

This will also enable an opportunity for the state owned oil and gas company to market any production efforts and their needs for capital to fulfill any production development projects.

Conclusions

  • A National Data Center will provide the Ukraine authorities several benefits, amongst these are;
  • Global interests to gain a strong understanding of the country’s energy market.
  • Facilitate market analysis and forecasting of future industry trends.
  • Give interested investors and companies an optimal way to evaluate the attractiveness of the Ukraine gas investment in the light of government policies and the fiscal environment.
  • Facilitate decision making on the basis of strong historic and forecast production, reserves and capacity data.
  • Understand the Ukraine’s policies and fiscal terms, and their impact on contractor’s profits from upstream  oil and gas assets.
  • Assess major natural gas assets and their performance.
  • Analyze the latest news and financial deals in the gas sector of Ukraine.
  • Enable investors to develop strategies based on the latest operational, financial, and regulatory events.
  • Companies will be able to do deals with an understanding of how players are financed, and the mergers and partnerships that have shaped the market.
  • Identify and analyze the strengths and weaknesses of prospectively and production assets in Ukraine.

The author

Stig-Arne Kristoffersen has a background as en civil engineer and geoscientist. He has worked for several major international and national oil and gas companies since mid 1980’s. He also enjoyed the participation in several start-up companies, either as founder or as a consultant.

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