Vanco signs the first Ukrainian Production Sharing Agreement for hydrocarbons, offshore Black Sea

In early 2005, Vanco became interested in the petroleum potential of the Black Sea for many of the same reasons that attracted the company to deepwater Africa in the mid-1990s. The exploration immaturity makes the area one of the last exploration frontiers in the world. Additionally, vast hydrocarbon resources are possible in large structural prospects with associated gas plumes that are encased in world-class source rocks of Oligo-Miocene age.

Following the purchase of a 17,000 kilometer speculative seismic program, Vanco entered into a Joint Study Agreement with Naftogaz Ukrainiy (NAK), the state-owned oil company, covering prospective deepwater portions of the basin; Vanco provides deepwater exploration and operating capabilities while NAK provides local knowledge and data.

On 24 December 2005, the Ukraine Inter-Agency Committee on Production Sharing Agreements opened the tender process for the Prykerchenska area. Vanco and a financial partner submitted an application on the 24 March 2006 deadline, in competition with a Shell-Exxon group, Hunt Oil and TPAO, the Turkish state-owned oil company. On April 19, at a ceremony attended by Gene Van Dyke, the Inter-Agency Committee announced Vanco as the winner of the tender process, giving Vanco the right to negotiate the first offshore Black Sea Production Sharing Agreement for hydrocarbons with the Ukrainian government.

After 18 months of intense negotiations, the PSA was signed on 19 October 2007. (Click on photo to enlarge.)

The Prykerchenska ("near Kerch" - a Crimean Peninsula coastal city) contract area is located in the northern Black Sea where water depths range from 500 to over 2,000 meters. The new PSA covers 3.2 million acres (12,900 square kilometers) and exhibits a prominent Tertiary folded belt with numerous prospective structures that are on trend with the 2006 Subbotina oil and gas discovery. The southern part of the block contains a large structural prospect, known as the Tetyaev High, among other features.

During the first three-year period of the PSA, Vanco will acquire 3,000 square kilometers of 3D seismic data and drill two wells. Seismic operations are planned to begin in 2Q 2008.