Eastern Europe s largest natural gas producer «UkrGasVydobuvannya» Transformation and growth. Opportunities for cooperation

Transcription

1 Eastern Europe s largest natural gas producer «UkrGasVydobuvannya» Transformation and growth. Opportunities for cooperation October 2017 Wrocław

2 Dependence Europe can significantly decrease its dependence on Russian natural gas Europe s Dependence on Russian Gas Source of gas by country in 2016, bcm 100% Germany 55% 81 UK 30% 77 Italy 35% 65 Dependence on Russian natural gas could be substantially reduced by: Alternative supply channels: - LNG supplies - Alternative (non-gazprom) pipelines 668 days without import of gas from Russia Development of newly discovered fields: 0% - Traditional gas (e.g., offshore field in Mediterranean and Black sea) - Unconventional gas (e.g. tight gas, shale gas) Hungary Czech republic France 28% Poland 63% 64% 9 40% Pipeline via Gazprom Pipeline via non-gazprom Own production Imports of LNG Source: BP statistical Review of Energy 2017, Financial times, UkrTransGaz 2

3 Ukraine was a pioneer of the oil and gas industry in Europe Ukraine in the European gas market 1948 The most powerful in Europe gas pipeline Dashava - Kyiv (509 km) 1912 One of the first European gas pipelines Boryslav- Drohobych (12 km) The start of gas supply from Ukraine to Russia (Dashava-Moscow pipeline) and Belarus (Dashava- Minsk pipeline) 1950 Exploration of the unique Shebelinka gas field - the largest in Europe at that time bcm annually (24% of USSR gas production) The maximum of natural gas production in Ukraine 2017 Ukraine still plays important role in European gas market: Gas production began to grow after a prolonged decline by transit volume of Russian gas to EU by capacity of underground gas storages in proven natural gas reserves Exploration of Dashavske gas field, the largest in Europe at that time, and the start of Ukrainian gas industry 1945 The world's first export of natural gas from Ukraine (Dashavske and Oparske fields) to Poland prolonged decline of natural gas production in Ukraine 4 7 by gas production volume by gas consumption Source: Naftogaz of Ukraine Model's outputs - CTM 22jan15-Main slides_with Enrique comments.pptx 3

4 Ukraine today: a major player in European gas market with huge potential One of the major producing countries in Europe... with huge reserves Production, bcm Reserves, bcm Norway 109 Norway 1,922 Netherlands 56 Ukraine UK 37 Netherlands 800 Ukraine 20 UK 240 Romania Germany 11 8 Ukrainian Reserves to Production Ratio indicates area for opportunities Poland Romania Italy 7 Hungary 80 Poland 5 Italy 45 Denmark 4 Germany 43 Notes:1. According to Ukrainian national classification Model's outputs - CTM 22jan15-Main slides_with Enrique comments.pptx 4

5 UGV is the largest oil & gas company in Ukraine and biggest tax payer in the country Production of 14.6 bcm - 75% of total Ukrainian gas production ~500 thsd t of oil and condensate (20% of the market) 276 bcm of 2P reserves production fields ~5% of state budget receipts of Ukraine 1.7 bn USD 2 in taxes (plan 2017)- #1 tax payer in Ukraine Vertically integrated company Full operational cycle from exploration to distribution Notes: 1. Calculated based on Ryder Scott as of and production 2015, based on 73 major fields Notes: 2. The equivalent in US dollars, according to the official rate of the National Bank of Ukraine (for the period January-September 2017) Source: UGV 5

6 UGV has strong presence across all segments of the value chain Exploration Drilling Production Refining Distribution 72% of exploration in Ukraine 140 fields under operations Own Geological Institute and Geophysics business unit Source: UGV ~100 wells To be drilled in 2017 Largest technology base in country Own drilling fleet of ~65 drill rigs 14.6 bcm natural gas production in 2016 ~500 thsd t of oil and condensate Three gas production business units 32 booster compressor stations 178 complex gas treatment units 600 thsd t per year installed capacity Production of diesel, gasoline, LPG, bitumen, fuel oil etc Switch to production of Euro 5 fuel quality Natural gas distributed via parent NAK Naftogaz (~40% of the market) LPG (11% market share), gasoline (6% market share) and diesel (2% market share) wholesale through open auctions Local gasoline station network 6

7 UGV is the incumbent gas producer in Ukraine and has the largest reserve base in Eastern European market UGV accounts for 75% of domestic natural gas production Gas market balance, bcm UGV has the largest reserve base among Eastern European players Gas reserves (2P), MMboe , % Consumption Domestic production Import need 214 UGV Other producers 1. Latest available Source: UGV 7

8 UGV has operations across all Ukraine s oil & gas regions with significant reserves Lvivgasvydobuvannya (LGV) Russian Federation Shebelinkagasvydob uvannya (SGV) Poltavagasvydobu vannya (PGV) Gas, condensate and oil deposits Azov Sea UGV applied for offshore licenses Black sea SOURCE: UGV 8

9 Strategy 20/20 will allow Ukraine to cover 100% of consumption by domestic gas in 2020 Government aims to cut imports by 2020 to ensure energy security of Ukraine Gas market balance, bcm 1 Gas market balance, bcm (41%) ~0 (0%) Consumption Domestic production Import Consumption Domestic production Import UGV Other producers Notes: UGV/McKinsey estimates. Does not include gas for underground gas storage facilities, Gazprom balancing volume and take-up / filling of gas pipelines. 2. Under the condition of fulfilling of production plans by UGV and private players. 3. Calculated based in Ryder Scott as of 01/01/2015 on 73 major fields and production Source: UGV, Naftogaz 9

10 UGV is implementing a strategy to increase production ~40% to 20bcm in 2020; required CAPEX ~4bn USD Production Bcm Greenfield Brownfield drilling Stimulation 20.1 Pressure optimization Capex by 2020, USD bn Effect 16-20, Bcm Well availability Comments Baseline Requires outsourcing Organic CAPEX needed for Baseline maintenance of existing infrastructure Well availability Pressure optimization Stimulation 0.2 Brownfield drilling More than 1,000 WOs by 2020 (incl. 200 WOs to be outsourced) 60 mini compressors to be installed 8 new booster stations to be built and 7 - modernized 300 fracks (wells) to be done by 2020 (significant level of outsourcing required) Up to 270 wells to be drilled by 20 (up to 30% of wells are completed with frack) 25% drilled by external contractors Greenfields Total exploration, 138 appraisal and 200 production wells are drilled First production well in 2017 Notes: brownfield drilling first year adjustment factors of 0,25, 0,25, 0,3, 0,3 and 0,5 for respectively 1. Baseline level is within +/-5% of Ryder Scott numbers 2 UGV financial plan Source: UGV, team calculations 10

11 UGV has started operations scale increase to fulfill production program 1. Drilling volume, ths meters 2. # of hydro fracked wells хх coil-tubing unit operations in # of WO (including 167 outsourced WOs) # of wells Outsourced WOs 1. Number may decrease after implementations of preventive measures (inhibitors, tubing metallurgy etc. Source: UGV Outsourced drilling UGV own fleet 201 Total ,342 Achievements of strategic goals require wide variety of outsourced services, e.g.: Stimulation Nitrogen units for gas-lift exploitation Coiled tubing units Re-perforation and perforation of bypassed seam on underbalance Completion on depression using PPCT Stimulation, incl. multistage frack Drilling Outsourcing of services of muds, drilling bits, etc Side tracking and cluster drilling Geology Creating field development 3D models Re-interpretation of logs, geophysical data, etc. using Petrel, Eclipse, Techlog 11

12 12 From 0 to 100 hydro fracking operations per year in 2 years

13 13 From 4 to 400 coil-tubing operations per year in 2 years

14 14 UGV is demonstrating a steady production increase in 2017 Average daily production, , 000 m3 42, ,000 41,500 41,000 40,500 40, ,7 mln м ,500 39,000 38,500 In 2017 UGV started steady production increase 38,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

15 15 Significant natural gas production increase in 2017 as a result of successful transformation effort +7% production increase in Jul Sep 17 vs Jul-Sep 16 +4% production increase in 9m 17 vs 9m mln m3 production to date in 2017 vs 2016 >12 bln м3 Produced in 2017 as of today

16 Strategic opportunities for cooperation with UGV Key dimensions of cooperation UGV plan to increase outsource drilling, total planed outsourced drilling volume 882 thsd meters till 2020 The future increase in gas production requires extensive involvement of experienced subcontractors Offshore Text Text UGV is proposing the development of 4 licensed areas in the Black Sea (Zmiine, Medusa, Krylovskaya, Sozansky) to the east of the Odesa region The gas resources in these areas are estimated from 80 bcm to 300 bcm Onshore Text Tight Textgas The potential reserves of UGV s tight gas reservoirs are estimated at 150 bcm 1. Number may decrease after implementations of preventive measures (inhibitors, tubing metallurgy etc. Model's Source: outputs UGV, - CTM U.S. 22jan15-Main Energy Information slides_with Enrique Administration, comments.pptx UkrRDE, SE «Nauka» 16

17 UGV s key tenders for services and equipment Drill rig outsourcing Drill rig purchase Tenders for 66 wells to attract 11 outsourced rigs were conducted in 2017 Further tenders for outsourced rigs (8 rigs for 19 wells) will be conducted in as the drilling program is ramping up Tender for 5 advanced drill rigs were conducted in tenders for 15 budget drill rigs were conducted in 2017 Compressor stations 4 more compressor stations to be purchased in 2017 Drilling services WO rig / services outsourcing To support outsourced drilling, UGV has conducted tenders of drilling services in more tenders to be conducted in 2017 (MWD/LWD and Completion) 3 tenders for workover rig services and fishing tools and services have been conducted 2017 and more tenders to be conducted in coil-tubing services tenders (for 120 wells) were conducted in , more tenders (for 200 wells) will be conducted in 2018 Hydrofracking Four tenders for the total of 140 HF operations have been conducted, additional tenders for 100 operations will be announced in Seismic works 2D and 3D seismic works tenders to be conducted throughout Over km2 of 3D seismic planned to be done in Model's outputs - CTM 22jan15-Main slides_with Enrique comments.pptx 17

18 18 Cooperation between UGV and Geofizyka Toruń S.A. (Poland) In winter 2017, the representatives of Geofizyka Toruń S.A. visited UGV s office in Kyiv to give a presentation on seismic services, as well as to discuss UGV s needs for 3D seismic surveys for the next 3-4 years. Geofizyka Toruń S.A. were invited to bid for the first priority 3D seismic surveys (4 lots with the total area of 1400 sq.km). The tender took place in spring Poland Ukraine We continue negotiations with Geofizyka Toruń S.A. regarding their participation in 3D/2D seismic surveys in the western petroleum region of Ukraine. Estimated 3D seismic coverage area, (second priority blocks, ) Western petroleum region of Ukraine

19 19 Cooperation between UGV and PGNIG S.A. (Poland) UGV had several meetings with PGNIG S.A. to discuss implementation of the pilot project on artificial lift of gas (using plunger lifts) on UGV s fields for its branch Lvivgazvydobuvannya. Parties have signed a non-disclosure agreement.

20 20 Cooperation with EXALO Drilling (PGNiG) UGV cooperates with EXALO for the Сementing Services for two wells in Poltava region

21 21 Cooperation with EXALO Drilling (PGNiG) UGV is at the active stage of signing the Contract with EXALO for contracting 4 rigs for 24 wells drilling within next 3 years

22 THANK YOU! 22