Exceptional Discovery or Exceptional Scam?
26 June, 2014
Exceptional Discovery or Exceptional Scam?
Last week the beginning of the gas extraction works in the village of Iormughanlo of the Sagarejo region was marked with much fanfare. Extraction and distribution of gas from the deposit is carried out by the American Company Frontera. Along with company representatives, the first transmission of natural gas was attended by Mr. Richard Norland, the US Ambassador to Georgia.

The gas extraction works began in the second half of the 1970s and are still going on a small scale.
Average annual extraction of gas within the last five years was 16.5 million cubic meters. The total amount of extracted gas in the country is 2.8 billion cubic meters. The discovery of the gas deposit by Frontera didn't come as a surprise but the amount of it – 42 billion cubic meters - solemnly announced by the American company aroused great interest. Annually Georgia consumes 1.8-2 billion cubic meters of gas and the country almost by 100% depends on the imported natural gas.
On this background it isn’t strange that Steve Nickandros, CEO of Frontera, assessed this discovery as historical, considering the 42-billion cubic meters of gas as a precondition of energy independence of the country. The importance of the project was also underlined by Ambassador Richard Norland who noted that Georgia has the potential of becoming a state that extracts significant amount of gas. All this is wonderful but… nothing was known about this grandiose discovery to the Oil and Gas Corporation of Georgia.
Alexander Abaidze, Oil and Gas Corporation of Georgia: “The deposit in Iormughanlo was discovered during Soviet times. After that, in 2008, Frontera renewed the drilling and extraction works. As for the volume, the official documents submitted by Frontera to our Corporation, representing the state, said 23 million cubic meters. I hope you agree that there is much difference between 23 million and 42 billion. Besides, the discovery of such deposits is connected with wide-scale works; there should be geological proof, etc. No such special exploration works have been carried out and consequently no big deposits have been found. I can tell you even more, several months ago we held different meetings, including with Frontera where the 23-million deposit was discussed. Due to insufficiency of the presented data the state didn’t consider the beginning of extraction works well-grounded.”
Liana Jervalidze, expert in energy issues: ‘The gas exploration works in Georgia have been on since the second half of the 19th century. By the way, the Siemens brothers who later founded the famous Siemens Company were carrying out gas exploration works here. After WWII, in a mountainous village of the Akhmeta region gas was produced by Belgians. They carried wineskins filled with small amounts of natural gas on mule back and sold them to the plains.
Frontera has been carrying out exploration works for a long time but nothing has been found so far; that’s why the declaration about the 42-billion-deposit was somewhat unexpected. In case there is indeed such a reservoir, of course it’s very important for the development of the inner market because we depend on imported gas for 100%. At present, Georgia consumes maximum 2 billion cubic meters of gas. If we suppose that the economy develops and consumption will increase, it will presumably reach 3.5 billion.
It seems that the gas deposit discovered by Frontera will meet the internal needs for 12 years. This potential won’t turn Georgia into a full-fledged player on the world gas market but for the internal market it will be interesting. In case the exploration works are successful and the amount of deposit is as expected, this will be commercially very profitable and Georgia will become an exporter country.“
In Frontera they declare that the 42 billion is an anticipated index. According to the official webpage of the company, the daily rate of the extracted gas from the deposit amounts to 57 000 cubic meters and its geological potential is assessed at 28 billion cubic meters...
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