Naftogaz announces tender for two submersible drilling rigs

State oil and gas monopoly Naftogaz Ukrainy has announced a tender to purchase two semi-submersible drilling rigs to explore and develop primarily the Palas gas field as well as the Prykerchenska, Skiffska, and Forosska fields.

The purchase, with an estimated cost of $1.4bn, will be financed by loans attracted from commercial banks.

Dragon Capital comments on the news: In December 2010 Naftogaz and Gazprom agreed to create a JV to develop the Palas gas field which lies on the border of Russia and Ukraine. Progress was initially weak but in January 2012 Gazprom and Naftogaz decided to intensify cooperation", says Dennis Sakva, Senior Analyst, Dragon Capital.

We thus believe that the announcement of the tender is related to the operation of the JV. The field covers an area of 162 sq. km. and has estimated gas reserves of 120bcm (out of which Ukraine’s share is 86bcm) and oil and gas condensate reserves of 70Mt ((513MMbbl) out of which Ukraine’s share is 45Mt (328MMbbl)). The depth of the Black Sea ranges from 450m to 850m and thus is unreachable for the two jack-up drilling rigs that Naftogaz recently procured. The news comes as a surprise as the company is already heavy leveraged but such aggressive offshore development plans bode well for the company’s long term strategy and Ukraine’s energy independence

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