Saturday, March 22, 2008

Arctic Oil & Gas - A Manager of the Resources

Arctic Oil & Gas Corp. has confirmed "confirmed potentially vast "Arctic Commons" oil and gas deposits from geoscientific evidence. Prevalent deposits of what is known as the "Azolla Interval" have corresponded to Arctic finds in northern Alaska, East Barents Sea, and the South Karal/Yamal basins" as stated in

Recent estimates have found the "Arctic Commons" could contain the equivalent of more than 400 billion barrels of oil and gas as well as massive amounts of another potential energy source: crystallised methane and methane hydrates. This obvious massive opportunity to control probably the world's largest non-government controlled hydrocarbons resource has sparked a race amongst governments and control has begun to be given to a few of the world's major "Independent Oil Companies."

In parallel, some petroleum exploration companies are developing their share of the extensive "Arctic Commons" claims of what they anticipate to be one of the greatest oil and gas discoveries in history. Those companies expect their legal claims to a portion of the prospect to be developed in partnership with both major integrated oil companies and large independent exploration companies.

From the companies web-site we can gleam more information about these "Arctic Commons". The website states:

"An Exclusive Rights Claim to the Hydrocarbon Resources of the Arctic Oceans Commons was formally lodged by the Company and its partners with the United Nations and the five Arctic countries on May 9th 2006.

The Company intends to operate as the ”lead manager“ tasked to create a multinational joint venture consortium of major oil companies, whose technology and managerial expertise will be vital to recovering the oil and gas from the harsh, deep waters of the Arctic in an environmentally safe manner."

Now this raises several questions from the five countries that border the Arctic. Canada, the U.S., Denmark, Norway and Russia - how will these countries deal with the claim and position of Arctic Oil & Gas? Is Arctic Oil & Gas actually making a gamble (they are based in Las Vegas, Nevada) that they will be brought out by potentially larger suitor (such as an ExxonMobil, OAO Gazprom, StatOilHydro, Petro-Canada) or is their logic justified in being a "lead manager" of the resources?

Should the north be developed based on a marketplace model, such as the one being proposed by this company? Or should it be developed and maintained, much like the Antarctic is currently - a land with no ownership and met for the betterment and knowledge of mankind and his/her understanding of the environment we call home?

Joint Ventures are common in the oil industry, royalties are as well, and so is working in disputed and far offshore areas. Nations and companies have worked together in some of the most remote locations - so why change the model?

Does Arctic Oil & Gas offer a new idea to an old problem of how do individual nations share resources and the potential wealth that follows. Remember though, that even with wealth, there comes problems and sometimes distribution of the wealth is not equal. Take a look at Nigeria or the early oliegarchies when the former Soviet Union broke up - a few became wealthy, the majority did not.

Some things to watch and this will be an interesting story to see how it plays out.

Saturday, November 10, 2007

Philippines: Nido Petroleum & CGGVeritas Seismic Surveys

Nido Petroleum Ltd is an Australian oil and gas explorer and producer that currently has production, development and exploration assets in the Palawan Basin, Philippines.

Nido Petroleum’s was not always known as Nido, but rather it had a start as a trust called Sydney Oil Company Drilling and Exploration Trust (SOCDET). This trust had a focus on the Philippines, and began to invest in the north-west Palawan Basin in February 1995. Over time, Nido ‘inherited’ interests in Service Contract 14 (SC14) that included the Nido and Matinloc oil production assets and the Galoc oil field. SOCDET then incorporated as Nido Petroleum Ltd in July 1999.

Since entering the Philippines, Nido is now the holder of the second largest oil and gas exploration acreage holder in the region.

There are 4 sedimentary basins found in the region that include:

  • Mindoro-Cuyo
  • East Palawan

  • Northwest Palawan

  • Southwest Palawan

The largest gas and condensate field was discovered in 1991 in the Northwest Palawan Basin and is named Malampaya. Currently the field's lifespan is estimated at 20 years and has gas reserves (estimated) of 3,770 billion cubic feet (BCF) and 85 million barrels (MMB) of condensate.

A Short History of the Region

Petroleum exploration in the Philippines dates back to 1896 with the drilling of Toledo-1 in Cebu Island by Smith & Bell.

Between the 1950's and 1970's widespread exploration activities were carried out throughout the region. During this period, all exploration was governed by Republic Act No. 387 known as the "Petroleum Act of 1949" which introduced the era of the concession system.

In 1973, the current Service Contract System replaced the Petroleum Act of 1949. This came via the enactment of Presidential Decree No. 87, which is known as the "Oil Exploration and Development Act of 1972".

This decree brought with it an attractive contractual term, a very liberal fiscal regime that were particularly favorable to offshore exploration, hence allowing activities to move to offshore areas like the Northwest Palawan Shelf where the first field, Nido, was discovered.

Since then, several small fields, which were located offshore Northwest Palawan, were subsequently discovered and produced.

In 1989, relatively large fields were discovered in the deep waters off Palawan when Occidental tested gas in its Camago Structure.

Alcorn Philippines, in 1990, discovered the West Linapacan Field and commenced production two years later until 1996.

In 1990, Shell discovered Malampaya gas field which became the largest gas discovery in the country. The field was produced in 2002, providing clean fuel to Luzon grid.

Onshore in northern Luzon, the Philippine National Oil Company developed the San Antonio Gas Field in 1994 and continues to supply gas fuel to the local electric cooperative in the province of Isabela.

Some of the incentives used to make exploration viable and attractive in this region include:

  • Service fee of up to 40% of net production
  • Cost reimbursement of up to 70% gross production with carry-forward of unrecovered costs
  • FPIA grants of up to 7.5% of the gross proceeds for service contract with minimum Filipino company participation of 15%
  • Exemption from all taxes except income tax
  • Income tax obligation paid out of government's share
  • Exemption from all taxes and duties for importation of materials and equipment for petroleum operations
  • Easy repatriation of investments and profits
  • Free market determination of crude oil prices, i.e., prices realized in a transaction between independent persons dealing at arms-length.
  • Special income tax of 8% of gross Philippine income for subcontractors
  • Special income tax of 15% of Philippine income for foreign employees of service contractors and subcontractors

Back to Nido

Nido in its Press release at (on September 28, 2007) stated that the seismic survey will be the largest ever undertaken by company -- covering a total area of more than 5,000 kilometres (3,107 miles) of 2-D and 846 square kilometres (327 sq miles) of 3-D seismic data in three permit areas: SC58, SC54 and SC63.

The seismic survey's are being conducted by CGGVeritas. Currently,

  • CGGVeritas MV 'Pacific Titan' (pictured above) was operating in the SC54 block. This survey was designed to provide more information about the Late Miocene 'Pagasa' Turbidite play. Currently data is being processed.

  • Following the completion of SC54, the same vessel started acquiring data adjacent to SC54 and is currently 15% complete.

The Pacific Titan is very well designed and suited for 2D and small 3D seismic data acquisition projects.

Territorial Disputes & UNCLOS

Competing territorial claims over the South China Sea and its resources are numerous.

The 1982 United Nations Law of the Sea allows for a country's Exclusive Economic Zone (EEZ) to extend 200 nm (370.6 km) beyond territorial waters, all the nations surrounding the sea have begun and have been laing claim to great portions of it.

The People's Republic of China (PRC) has stated its claim to almost the entire body.

Areas with potential problems include:

  • Indonesia and the PRC over waters NE of the Natuna Islands.
  • The Philippines and the PRC over the Malampaya and Camago gas fields.
  • The Philippines and the PRC over Scarborough Shoal.
  • Vietnam and the PRC over waters west of the Spratly Islands (See a previous blog). Some or all of the islands themselves are also disputed between Vietnam, the PRC, the ROC, Brunei, Malaysia, and the Philippines.
  • The Paracel Islands are disputed between the PRC/ROC and Vietnam.
  • Malaysia, Cambodia, Thailand and Vietnam over areas in the Gulf of Thailand.
  • Singapore and Malaysia along the Straits of Johore and the Straits of Singapore.
  • The PRC and Vietnam have both been vigorous in prosecuting their claims.
  • The Spratly Islands have been the location of many disputes and armed forces.

Due to such a tense understanding between the nations involved, Joint Development Authorities have been setup in areas of overlapping claims to jointly develop the area and dividing the profits equally without settling the issue of sovereignty over the area. This is true, particularly in the Gulf of Thailand.

Exploration Continues......

As it can be seen, exploration, disputes, and companies and nations are working together, no matter their size to become energy independent.

Junior Oil and Gas companies, such as Nido, focus on one region and develop relationships in the area - leading to new discoveries and a better understanding of the areas that have currently been explored and exploited over the years. As the technology increases and improves yearly, it allows Junior companies to bring life back to old fields or to find new ones, no matter where they are.

Friday, November 9, 2007

Inida: Government Tightens Rules for Exploration

A recent article came across Rigzone about the "Indian Government Tightens Rules for Oil & Gas Exploration"

This is interesting, as recently in Alberta, they recently had a royalty review. Russia has been taking more control of their resources, along with Venezuela, etc.

Essentially the major changes are occuring to the PSA (Production Sharing Agreements).

The main changes are:

  • "Until such time as the availability of natural gas from all petroleum production activities in India meets the total national demand as determined by the government, each company comprising the contractor, shall sell in the domestic market in India all of the company's entitlement to natural gas from the contract area."

Cutting to the chase, the natural gas now has to be sold domestically, rather than exported, as it currently is being done.

Further the Indian government states in the release:

  • "If India attains self-sufficiency, during any year, the government shall advise the companies accordingly by a written notice. In such an event, domestic sale obligations shall be suspended for such period as may be specified by the government, and the company shall have the right to lift and export its participating interest share of natural gas during the said period, subject to any extant policy guidelines of the government, applicable from time to time."

So once, India, has enough natural gas production to become self-sufficient, any excess can be exported, subject to any policies at the time of the government in power at the time.

So is exploration going to slow down because of this?

I do not feel so, as any natural gas producers now have a natural (bad pun!) market for the gas - India.

It also encourages exploration companies to build up and explore for natural gas, as the more they find, the easier they can satisfy a domestic market and then any excess can be exported.

Friday, November 2, 2007

Mozambique: Exploration is under way!

Mozambique is often not a country that one associates with oil and gas exploration.

This country in southeastern Africa is bordered by the Indian Ocean to the east, Tanzania to the north, Malawi and Zambia to the northwest, Zimbabwe to the west and Swaziland and South Africa to the southwest.

Quoting from the INP, we can get a good history of oil and gas exploration here:

"Exploration for hydrocarbons in Mozambique goes back to 1904 when the early explorers discovered thick sedimentary basins onshore Mozambique. Poor technology and lack of funds halted those early exploration attempts.

From 1948 onwards international oil companies moved into Mozambique and carried out extensive exploration, mainly onshore with limited activity offshore. As a result the Pande Gas Field was discovered in 1961 by Gulf Oil followed by the gas discoveries of Búzi (1962) and Temane (1967). Exploration activity declined in the early 1970’s due to political unrest.

New activity was established in the early 1980’s with the enactment of law 3/81 and creation of ENH. In the following years extensive work was carried out to map and appraise the Pande Field. A breakthrough was made in 1993 when it became clear that the Pande Field could be mapped using direct hydrocarbon indicators (DHI) from seismic data and it turned out that there was a giant bright spot at the top of the reservoir. The method was later also used to map the Temane field with good result.

From 1970 to 1980 there have only been drilled 6 wildcat wells in Mozambique – 3 of them offshore. An extensive drilling campaign conducted by Sasol in 2003 which included exploration and production wells in the Pande/Temane Block allowed the expansion of gas reserves and the discovery of Inhassoro Gas Field, making total of 5.504 trillion cubic feet (TCF)."

In total, there have been 97 wells drilled in Mozambique. Breaking the numbers down further we see the following:

  • 61 wildcats

  • 24 appraisals

  • 12 production

They were located in the following regions of Mozambique:

  • 15 wells were located offshore

  • 16 wells over the Pande Gas Field

  • 18 wells in the Temane Gas Field

  • 6 wells in the Inhassoro Gas Field

  • 4 wells located offshore Zambezi Delta

  • 1 well in the Rovuma Basin

At the Africa Upstream Conference in Cape Town (Nov 2nd), INP announced (INP press release) the dates for the 3rd Mozambique Licensing Round which will include both onshore and offshore blocks (3rd License Round Map).

Currently, companies such as Petronas, StatoilHydro, Anadarko and ENI are working offshore Mozambique.

Why are companies looking to come to Africa to explore?

In 2001, Mozambique enacted, similar to Columbia, a regime that encourages exploration.

The details are as follows:

There are three kinds of concession contracts, and they are:

  1. Reconnaissance Contract: Maximum two years exclusivity.

  2. Exploration and Production Contract: Exploration period maximum 8 years. Production period maximum 30 years.

  3. Pipeline contract: Period depends on the project.

A tax and royalty regime that is competitive with other nations.

The Corporate Income Tax rate is 32% of net profit, with no ring fencing. Development costs are depreciated over four years.

The Law sets the royalty at 2 % to 15 %; normally rates are 3-7 % for crude oil, 2-4% for natural gas depending on water depth.

Onshore: 8% for crude oil and 5 % for natural gas.

And the legislated Code of Fiscal Benefits provides various investment incentives for the petroleum sector, such as exemption from import fees and VAT (petroleum).

As we can see the majors have entered and there is plenty of potential in Mozambique for companies willing to enter the country. Mozambique is stable and is not heard of often in the news - which is good.

Will Mozambique become the next Angola or Nigeria?

Time will tell.

Saturday, October 27, 2007

Columbia: PetroSouth, Barco, Standard Oil, Texaco, Socony-Vacuum

This report came across the Canadian Newswire about a company acquiring exploration assets in the country of Columbia.

The news-release states:

"PetroSouth Energy Corp. (the "Company")(OTCBB:PSEG), an energy exploration and production company focused on high-impact energy prospects in Colombia, South America, is pleased to announce the acquisition of a 6% working interest in the 64,000-acre Carbonera Exploration and Exploitation Contract, and participation in three future exploration wells."

and further states:

"The 6% working interest was acquired for US $420,000 and other considerations from Omega Energy's exploration block located in Catatumbo Basin region of northeastern Colombia. The operator of the Carbonera Contract is Well Logging Ltda. Fulfillment of the first Phase contract commitments (Phase 1 re-entry of Cerro Gordo-1) was met prior to the Company acquiring the 6% working interest. Pursuant to the terms of the Contract the Company will participate with drilling one exploration well in each of Phase 2 (12 months -April 28, 2008), Phase 3 (12 months - April 29, 2009) and Phase 4 (12 months -April 28, 2010). The Cerro Gordo-1 well was originally drilled and abandoned by Texaco in1989. The well was re-initiated (re-entered) by Well Logging Ltda. in thesouthern part of the block in June 2007. It was proven productive after aone-week test. The Cerro Gordo-1 well flow tested a combination of gas andcondensate at Gas: 4.0 MMCF/Day and Condensate: 60 BBL/Day."

The region encompasses the Catatumbo River basin and it begins northern Columbia, in the department Norte de Santander. It flows northeast across the Venezuelan border, and crosses the rich oil-bearing regions in the Maracaibo Lowland, and empties into Lake Maracaibo after following a course of about 338 kilometres. It is navigable in its lower course and receives more inflow from the Zulia River 6 kilometres west of Encontrados, Venezuela in the Maracaibo Lowland.

The Catatumbo Basin is a subbasin, forming the southwest flank of Venezuela's prolific Maracaibo Basin. It is bounded to the west by the Santander Massif (hence the department name of Norte de Santander) and the Sierra de Perija and in the south and southeast by the Merida Andes. The eastern boundary is defined by the Venezuelan border with Colombia. In Venezuela, this basin has already produced several billion barrels of oil, and individual producing fields there range in size up to more than 800 million barrels of oil recovered to date.

Oil exploration in this area began in the thirties, with initial exploration activity taking place in Tibú field. By 1941, the field was in production as part of the Barco Concession (see footnote below), operated by Colpet. In 1977, Ecopetrol assumed the operation of the field, and after the concession reverted in 1982, all the rights to income after royalties went to Ecopetrol.

As we can tell, there are prolific fields in Columbia. The news-release provides a good summary of the region and neighbouring fields:

"Immediately adjacent to the Carbonera Block lie fields such as Tibu,found in 1940 and with 260 million barrels produced to date, Petrolea,discovered in 1934 with 38 million barrels produced to date, and Rio Zulia,dating from 1962 and with 137 million barrels recovered to date."

There are many attractive reasons to do exploration in Columbia.

January, 2004, marked a change in the way Columbian Government decided to conduct business with regards to regulatory and fiscal policies intended to encourage oil industry investment in the country. Some main points, including security, are:

  • The hydrocarbon potential of the country is significant in terms of the overall economy and much of it remains untapped due to alack of investment in the last 20 years.
  • Fiscal terms were revised as of January 2003, making Colombia an attractive country in which to invest in the oil and gas industry. These fiscal incentives increased the share of revenue which an investor could obtain from 27% to up to 50%
  • Colombia has a stable economy, with low inflation and consistent economic growth and, due to the fact that it has never defaulted on a debt payment or breached a contract with foreign investors, is a favored location for direct foreign investment.
  • Colombian authorities provide essentially unlimited access to all technical information on oil and gas blocks.
  • The security situation in the country, which has long hampered exploration, has improved significantly and is expected tocontinue to improve.

With the work being done by PetroSouth, we are seeing how a junior is working in another country that we do not often associate oil and gas with. They are growing their business one step at a time, taking educated risks and looking for a well-planned return on investment - not an immediate one, but one down the road.

You can't track oil stocks based on their Quarterly Reports. In my mind (opinion), that is bad business and bad analysis. Look at long term. Consider the fact that finding the fields and the exploration involved can take many years. Then consider once the field is proved productive, setting up the production facilities, then the pipelines - we are looking at easily 10 year span to bring most fields in remote regions to fruition. The infrastructure takes time, and even pipeline companies and operators want to know there are consumers for the oil or gas, before investing in the country and making large commitments.

My advice, don't play oil stocks on the short term (i.e. quarterly), but on the long term prospects and continual growth of fields coming on line. This is how juniors operate and slowly they'll become the new majors.

A Footnote: A Little History from Time magazine about the Barco Concession

Quoting from a Time Magazine article about the Barco Concession, we see an interesting story of how oil exploration, Standard Oil, Gulf Oil and others played a part in building Columbia's oil history.

An very good read, enjoy the article below:

"Time Magazine, Monday, October 30, 1939

In A. D. 1907 General Virgilio Barco of the Republic of Colombia turned up in Manhattan. He had in his back pocket an oil lease to 1,200,000 acres of his native jungle—a gift to him from a grateful country. No fool, he went straight to No. 26 Broadway, office of the late John D. Rockefeller. Standard Oil's guards took one look at the general's Latin getup. He never got in, and until last week no oil ever came out of the Barco concession.

For 29 years the concession was juggled like a hot potato. Virgilio sold it to seasoned Promoter Carl Kendrick MacFadden's Carib Syndicate (25%) and Henry L. Doherty's Cities Service Co. (75%). Cities Service faced 250 miles of steaming, mountainous jungle between the Barco and the Caribbean, and gave up. In 1926 it finally sold the concession to the late Andrew W. Mellon's Gulf Oil Corp. Then the Colombian Government put its oar in, canceled the whole concession.

Out of Colombian courts and politics five years later came the Barco concession revamped: Gulf Oil received a 50-year contract calling for construction of a pipe line to tidewater and payment of a 3½% royalty to General Barco's successors, 6% to Colombia on all oil delivered there. Gulf sank twelve wells, and a lot of money. There was oil there, but the cost of getting it out was appalling. In 1936 not one barrel of Barco oil had yet reached the sea when testy, ribald, Norwegian-born Torkild ("Cap") Rieber, The Texas Corp. chairman, finally shelled out a cool $12,500,000 for Gulf's "white elephant." He took Socony-Vacuum Oil Co., Inc. into a 50-50 partnership and for $2,050,000 bought Carib's minority interest. That done, Cap Rieber settled down to one of the toughest engineering feats in the history of his industry: piping oil from the Barco to the sea.

Last week Barco oil oozed from the end of a 263-mile pipe line at the new-built Colombian port of Covenas. It was not black like much U. S. oil but bright green (it looked golden in the sun). Hove to in Covenas harbor, the Texaco tanker Nueza Granada and Socony-Vacuum tanker Altair began to fill their cargo tanks with the first Barco oil for transport to an unnamed foreign crude buyer.

To hardheaded, steel-willed Torkild Rieber (57), once a tanker captain himself, the tough job's end was a triumph. Construction began in February 1938. There were no roads, and the rainfall was terrific. With a fleet of six trimotored Fords, a Lockheed and two Stinsons, engineers flew in, piece by piece, tractors to cut jungle roads, suspension bridges to span the rivers, power plants, refrigeration plants, pumping stations, cement, concrete mixers, food, and 263 miles of twelve-inch steel pipe. In all, 11,000,000 lbs. of freight went into the jungle by air. One plane with its crew of two flew into the jungle and disappeared for good. Eight other men died on the job—transfixed by arrows of the Motilone Indians (a short, husky, irascible tribe who dress in rancid alligator grease to keep off mosquitoes and hang their dead from the ceiling to rot).

From the Petrolea pumping station at the Barco field the pipe line snaked up 5,400 feet over the Eastern Andes, then down through miles of rotting jungle to the sea, thrice crossed the Magdalena River or its branches. It cost Cap Rieber and Socony-Vacuum a cold $40,000,000 ($18,000,000 for the pipe line; $22,000,000 for development work). "Hell!" says Cap Rieber, "if they wanted to move the Chrysler Building to Colombia, we'd do it —if they'd pay us for it."
Today 25,000 barrels of Barco oil flow daily through the pipe line. Next year they expect to step that up to 50,000, with an eventual top of 70,000 barrels after all seven pumping stations are in. The oil yields 49% gasoline on straight run, double that under cracking processes (ordinary black oil yields no better than 24% gasoline on straight run). How much of it lies hidden in the upper Catatumbo basin nobody knows. The companies have until August 1941 to stake out their final claims. Then half of the Barco reverts to the Colombian Government.

To Texaco and Socony-Vacuum the Barco oil is welcome. Both sell overseas (there is a 21¢ tariff on oil imports to the U. S.) and neither has enough oil for its distribution system. In a warring world they will doubtless find buyers for their Colombian oil, but may bring it to the U. S. to be refined. Last week old Virgilio Barco was many years in his grave, but his son Jorge (pronounced Horkhay) Barco, in Cúcuta, had himself a few drinks as the royalties began to accumulate."

Friday, October 26, 2007

Nigeria: More Trouble in Central Africa for Oil Companies

Though I've written about the small companies and their exploration activities, events happen in many countries where exploration and productions happens. It does not matter the size of the company. It can happen in any country. The wrong place at the wrong time.

An example came from Eni today.

Quoting the Press Release on the Eni site.

Nigeria: attack to FPSO Mystras vessel

October 26, 2007 - 13.10 pm

The attack occurred today at dawn some 85 km off Nigerian coast. Attackers managed to climb aboard the FPSO Mystras and seized six workers, whose nationalities are Polish and Indian. Another Nigerian worker is reported to be slightly injured at one leg. Eni will provide further details as soon as available.

October 26, 2007 - 11.06 am

Eni informs that today 26 October, around 7 am Italian Time, some speedboats carrying unidentified gunmen assaulted and jumped aboard a supply vessel nearby the FPSO Mystras. Attackers also tried to climb upon the Mystras itself without success. No one has been reported to be injured so far. Eni will provide further details as soon as available.

(*) FPSO (Floating Production Storage and Offloading), is a vessel for production, storage and offloading of crude oil.

Over the past few months there have been several hostage takings in Nigeria. It is matter of fact of doing business in this country - everyone going there as an expat knows it and should expect it. As an expat who has lived abroad, you know that when you accept the position overseas or elsewhere, that it is not your backyard. You are in a different country with a set of different laws and different lifestyles and different governments.

Fortunately, the past incidents with kidnappings have been resolved peacefully; though the full details are never released, and this is good news for Eni and the current hostages.

Eni has been operating in Nigeria for quite sometime and has worked in many countries. No matter how much you plan for the unexpected, something can happen that no one can see coming.

We hope that they will be released soon.

Sunday, October 21, 2007

Vanco: Ukraine opens deepwater Black Sea

An interesting article about the Ukraine and their oil and gas industry, shows that another small company is leading the way in developing new areas for exploration.

The government of Ukraine has signed the "Prykerchenska Production Sharing Agreement" with Vanco Energy Co. This agreement gives Vanco the opportunity to explore the deepwater part of Ukraine's Black Sea and to develop the Prykerchenska block (I've attached a map).
This effort came to fruition this month (October 2007) after over a year and half of negotiations with the government and all parties involved. There were setbacks, but this is attributed to the Ukraine negotiating their first Production Sharing Agreement and the length of the agreement. The agreement has a 30 year term and will allow Vanco to start exploration and eventually build production facilities.
For the Ukraine, this is one method of solving Ukraine’s energy needs and it could help the country fulfill its goal of producing 25 percent more gas within the next 20 years.

The Kremlin in the past has unexpectedly doubled the price Ukraine pays for gas at the border in 2006 and then raised it again by a third this year. The Kremlin seems intent on making it's former member states pay more for their energy needs.
The Ukraine is actively pushing for exploration to sever the ties and is working with other Western Based companies to do this. Recently this year, on June 5, 2007, Ukraine’s state-owned oil and gas company Naftogaz Ukrainy and a subsidiary of the US-based Marathon Oil Corporation inked a cooperation agreement to explore for hydrocarbon deposits in the country’s Dnipro-Donets Basin, which supplies Ukraine with 80 percent of its hydrocarbons and is believed to contain natural gas deposits deep below those being exploited
Vanco is unique in that it has been dedicated to international deepwater exploration since 1996. This company has succesfully operated offshore drilling programs in Morocco and Côte d'Ivoire in the last three years. In addition to Ukraine, the Houston independent has deepwater exploration programs offshore Gabon, Equatorial Guinea, Ghana and Cote d'Ivoire.

This is an interesting story of an ambitious company and how local politics and want or a desire for independence can lead to opportunities for a nation and explorers.