EBRD awards loan to Frontera for projects in Azerbaijan and Georgia
Houston-based Frontera Resources said that it had been awarded a $ 50 mm loan by the European Bank for Reconstruction
and Development (EBRD) for two onshore oil development projects in Azerbaijan and Georgia. The credit will be
disbursed to Frontera Resources Caucasus, a 100 % subsidiary of Frontera, and used to fund operations at the
Kyursangi-Karabagly deposit in western Azerbaijan and Block 12 in eastern Georgia.
It was noted that the EBRD loan would be linked to Frontera's oil reserves in Georgia and Azerbaijan. It also stated that the bank had awarded the credit as a follow-up to the $ 10 mm convertible loan extended to the US company in June of this year. The EBRD may eventually convert that loan into an equity stake in Frontera.
Frontera has also borrowed money from a group of financiers led by Deutsche Bank. The company holds rights to almost 1.4 mm acres in the Kura basin, an onshore oil- and gas-bearing region in the southern Caucasus. Most of its properties are in eastern Georgia.
The US company gained a 30 % interest in the Kyursangi and Karabagli fields late last year. Its partners in the
project are the State Oil Company of Azerbaijan (SOCAR), with a 50 % stake; and Delta/Hess, a joint venture set up by
Amerada Hess of the United States and Delta Oil of Saudi Arabia, with 20 %.
Kyursangi and Karabagly have yielded about 102.9 mm barrels since their discovery more than 30 years ago, and Frontera is working to boost oil output at the concession. The two deposits are believed to hold about 139 mm barrels of oil in recoverable reserves. SOCAR experts say that a further 1 bn barrels or more could be extracted if the concession is rehabilitated properly.
Kyursangi, for example, may contain another 730 mm barrels in strata 5,500-6,000 meters below the surface. However, difficult conditions and high wellhead pressure (600-700 atm) have prevented SOCAR from developing the field with existing technology and equipment. Karabagly, meanwhile, is believed to contain almost 380mm barrels. SOCAR has not been able to proceed on its own at Karabagly either because of the difficult geological structure of productive strata at the field. Frontera and the other partners are expected to use non-horizontal drilling techniques to sink wells down to 3,500 meters.
Frontera began working at the Block 12 concession with Saknavtobi, Georgia's state oil company, in 1997 and began producing crude from the Taribana field earlier this year. Seven oil fields have been discovered at Block 12, and the concession is believed to hold 1 bn barrels of oil equivalent (BOE) in gross unrisked reserves. Lasmo Plc of Great Britain purchased an option to acquire up to 40 % of the property last year but has not yet exercised its rights.