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The Gas Evaluation Report That Started the War in the former Ukraine SSR

EVALUATION OF NATURAL GAS RESERVES AND RESOURCES IN UKRAINE 31st Dec 2012
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At the request of Kulczyk Oil Ventures (‘Kulczyk Oil’, or ‘Company’), RPS Energy Consultants Ltd (RPS Energy) has prepared an evaluation of the natural gas and natural gas liquids reserves and the net present values of those reserves for the Vergunskoye, Olgovskoye, Makeevskoye and Krutogorovskoye license interests in Ukraine, as of 31st December, 2012.
Kulczyk Oil intends to use this evaluation for its corporate purposes which will include
its regulatory compliance filing with TSX and the annual reporting requirement in connection with the loan raised on behalf of the Partnership through the European Development Bankin 2011.
The Company has agreed in the Letter of Engagement between RPS Energy Consultants Ltd
and Kulczyk Oil that it will only use the report or any excerpts from it after Company has shown RPS Energy the context in which such report or excerpts wi ll be published and received RPS Energy’s permission to do so. This evaluation has again been prepared using the standards covering the evaluation of Reserves set out in the Canadian National Instrument NI 51-101
and the Canadian Oil and Gas Evaluation Handbook (COGEH) and represents RPS Energy’s opinion of Kulczyk Oil’s 70% Working Interest of the Partnership’s Reserves and Resources position as at 31stDecember 2012
.
The properties are operated under a concessionary (royalty/tax) fiscal system. The gross Reserves are the working interest share of total Reserves and the net Reserves are the working interest share of total reserves after payment of taxes levied on production. The future net revenues and net present values presented in this report were calculated using forecast prices and costs prepared by RPS Energy. All revenues were presented in this report in United States dollars.
See the full report that started a war in the former Ukraine here: download it before it is taken offline
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Kulczyk Investments SA is an international investment company, founded by Polish entrepreneur Jan Kulczyk, focusing on opportunities in global emerging markets. The company’s four strategic sectors are mineral resources, energy, infrastructure and real estate. Kulczyk Holding SA is responsible for the operations of the group in Poland.

International Advisory Board:

  • James L. Jones, retired US Marine Corps General, former US National Security Advisor. Former NATO Supreme Allied Commander
  • Horst Köhler, former President of Germany (2004-2009), former Chairman of International Monetary Fund and General Director of the European Bank for Reconstruction and Development
  • Aleksander Kwaśniewski, former President of Poland (1995-2005), respected diplomat and active participant of international public life

Sectors and investments

Mineral resources

Kulczyk Investments has been a long-term investor in mineral resources exploration and production, with a specific focus on oil, natural gas, iron ore and coal. The group of companies carries out 51 projects in 22 countries on 4 continents on the total concession area of 220 thousand square kilometres. The company’s portfolio includes: Neconde Energy Limited, Serinus Energy (previously Kulczyk Oil Ventures), Ophir Energy, San Leon Energy, Loon Energy Corporation, Strata Limited and Centar Plc. On January 1, 2012, Ukrainian KUB-Gas LLC, partially owned by Serinus Energy, tied-in the Olgovskoye-12 oil well in Ukraine for commercial production. Total KUB-Gas production from its Ukraine properties since the start of 2012 has averaged more than 200 barrels per day.[1]

Energy

KI has created Poland’s first energy group to operate internationally. A vertically integrated group of companies operating under a common brand Polenergia in the field of energy generation from conventional and unconventional sources, as well as energy trading and distribution. Polenergia is one of the key assets in the Kulczyk Investments portfolio as an operational centre, a know-how base and a platform to carry out innovative energy projects in Poland and within the region. The Polenergia group comprises Elektrociepłownia Nowa Sarzyna, Elektrownia Północ, Polenrgia Dystrybucja, Polenergia Biogaz, Polenergia Kogeneracja, Polish Energy Partners and KI Energy Trading.

Infrastructure

Kulczyk Investments carries out strategic road infrastructure projects in Poland through its subsidiaries Autostrada Wielkopolska, Autostrada Wielkopolska II. On 1 December 2012, six months earlier than scheduled, the A2 motorway section linking the Polish border to Germany was opened. It was the largest concession based investment project in Poland carried out in public-private partnership, as well as the largest environmental project. The amount invested to construct both sections of the motorway exceeded PLN 9 billion. Since 2005, Kulczyk Investments is the majority shareholder in PEKAES, a logistics operator listed on the Warsaw Stock Exchange. In 2009, the company acquired a 90% stake in Chemikals, a company that manages a modern rail terminal located at the border with the Kaliningrad Oblast.

Brewing

The Kulczyk group has been present in the brewing sector for nearly 15 years. Investment in Lech Browary Wielkopolski and the effective cooperation with SABMiller resulted in the creation of Kompania Piwowarska, one of the most advanced brewing companies in the world and the largest of its sort in Poland, with a current domestic market share of 42.9%. In 2009, Kulczyk Investments became one of SABMiller‘s larger shareholders entering a new, global phase of cooperation with the world’s second largest beer producer.

Real estate

Kulczyk Investments owns some of Warsaw’s key property portfolios in the city’s prime locations. In 2010, Kulczyk Investments established a joint venture with Silverstein Properties Inc, one of the most respected American real estate companies that, amongst others, is currently redeveloping the World Trade Centre. Kulczyk Silverstein Properties intends to develop and acquire prime real estate assets throughout Central and Eastern Europe. Kulczyk Silverstein Properties is currently in the development process of Chmielna Tower, which will be one of Warsaw’s most innovative office towers.

Respect Index

As an international investment house, Kulczyk Investments is compelled to creating optimal conditions for social and economic development, wherever the company invests. Based on many years of experience investing in international markets and together with Forbes Magazine, the Warsaw Stock Exchange and Deloitte, Kulczyk Investments initiated a ground-breaking project to create Poland’s first stock exchange index of socially responsible companies – the Respect Index.

“Kulczyk Oil Ventures offers a balanced portfolio of production, development, appraisal and high impact exploration projects, with a strategy to expand the company by way of organic growth as well as through corporate acquisitions,” explains Jock M. Graham, Executive Vice President of KOV since February of 2006 and a consultant to the company prior to his appointment as Executive VP.

A highly trained geologist with almost 30 years of experience, Mr. Graham worked at Chevron Canada in development, operations and exploration geology throughout the Western Canadian Basin; in Dubai as a founding member of Arabex Petroleum Limited; and at Coplex Resources Ltd. with projects in Senegal, Oman, The Philippines, Yemen and Colombia. Serving as Vice President and Country Manager for Coplex Colombia in Bogota, Mr. Graham was responsible for exploration and development efforts in and around the Llanos Basin, and served as Technical Director for Vostok Oil at Tomsk in Western Siberia, and as Operations Manager for that group’s significant En Naga North and El Naga West development project in Libya prior to joining KOV.

Mr. Graham’s extensive experience integrates perfectly with Kulczyk Oil Ventures and the company’s principal assets, which include five licenses with four producing gas fields in Ukraine, a large license onshore Brunei and a large onshore exploration block in Syria. Along with Mr. Graham, the management team at KOV has a vast wealth of experience in international exploration and production operations. Cohesive, motivated, dedicated and eager, the company’s team has been growing both in Canada and abroad as exploration and production activities have increased. “KOV shareholders can have confidence that the management of the company is aligned with their interests and will grow the value of the company, and their shareholding as a direct result,” says Mr. Graham.

The remainder of the company – containing the Brunei and Syria assets – was listed on the Warsaw Stock Exchange as Kulczyk Oil Ventures in 2010 and raised approximately $93 million at that time, part of the proceeds being used to finance the US $45 million acquisition of an indirect 70 percent shareholding in KUB-Gas by KOV in June, 2010. The company now trades in Warsaw and continues to be a reporting issuer in Canada.

Seeking out countries which have longstanding reputations as prolific oil and gas producers, Kulczyk Oil Ventures has a presence in locations known for rapid growth and world-class exploration. In June of 2010, 70 percent of KUB-Gas LLC plus service assets was acquired for $45 million, with assets that have grown to now include four producing fields, one exploration license, a Canadian-made drilling rig and snubbing unit, two service rigs, and four gas producing facilities. In November of 2012, an all-time high of 25.8 MMcf/d (18 MMcf/d net to KOV) was attained, with plans to continue drilling and work throughout 2013.

“Ukraine has been producing oil and gas in significant quantities for many decades, and prior to the large discoveries in Siberia was one of the Soviet Union’s major producing areas,” says Mr. Graham. “Most recently, the Dnieper-Donetsk Basin – in which KOV operates through its interest in Kub-Gas – has become one of the largest producing areas in the country with upwards of 60 Tcf of gas discovered in this basin. We fully expect that number to keep growing as more and more western companies enter the oil and gas arena there. Currently, KOV owns an effective 70 percent interest in KUB-Gas LLC, the company holding 100 percent interests in five licenses in the Lugansk Oblast of eastern Ukraine, four of which are producing.”

In Syria, KOV was in the process of drilling its first exploration well when the company was forced to cease operations and ultimately declare Force Majeure as a result of the ongoing troubles in the country. At the time the company commended its operations in Syria, there was no indication of what was about to unfold, and the Syrian people were very receptive to KOV, with Western staff routinely in the country to assist and work with Syrian staff, both in Damascus and the field area. From an operating perspective, it was a very stable environment and as a result, there were a host of foreign companies in the country until the recent troubles began; currently, all foreign companies are in a state of Force Majeure until such time as it is deemed safe to re-enter the country and resume operations.

“This was a huge disappointment as we had drilled to approximately 2,000m en route to a 3,000m target depth on a very large structure with significant reserve potential,” says Mr. Graham. “Several of our primary objectives were yet to be reached so when we had to suspend operations, it was very frustrating. The well is currently suspended, but we fully intend to return to the site to complete operations when the situation improves. Our license is very close to several large gas / condensate fields and has a very compelling geologic story. KOV has a participating 50 percent interest in an approximately 10,000 square kilometre exploration block in Syria (Block 9).”

Prior to the recent unrest Syria, with a long-established oil and gas sector, was producing roughly 400,000 BOPD. Once it is deemed safe to re-enter Syria, KOV will return to the country and resume operations. “At that time,” confirms Mr. Graham, “we fully intend to return to Syria, to continue growing the business there and trust we will continue to enjoy excellent relations with the people with whom we interact.”

Despite social, geographic, political, and logistical challenges that may arise, Kulczyk Oil Ventures is committed to the many positive aspects that come with working on exploration projects that have high reward potential such as in Syria and Brunei, where KOV plans to commence drilling its first well in April, having been awarded all major contracts for the programme. With plans to drill a minimum of two exploration wells, the company is optimistic about its two well-defined targets that carry significant resource potential and which, if successful, could open up a large play for the company in Brunei. While KOV’s earlier drilling efforts in Brunei were unsuccessful, the company believes the new targets are technically very solid.

“It’s part of our strategy of putting the company in a position to go for a ‘home run’ as part of the upside exposure, while mitigating exploration risk with a growing production and revenue base in Ukraine, as well as continuously looking for new areas of growth,” comments Mr. Graham. “Of course, only time will tell if we are successful in these upcoming exploration wells, but we do have our fingers crossed. With exploration success, you can transform your company overnight; it’s that simple.”

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references
http://www.businessinfocusmagazine.com/2013/03/kulczyk-oil-ventures/
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