VGAS.L Share News (VGAS)

(Sharecast News) - Russia-focussed oil and gas exploration and production company Volga Gas announced a "potentially significant discovery" of a new oilfield in its ongoing exploration drilling programme on Tuesday.
The AIM-traded firm was currently undertaking a programme of drilling six slim hole exploration wells within its Karpenskiy licence area, in structures separate from its existing oil reserves in the Uzen field.

It had said in its interim report in September that a well in the North Uzen structure established the presence of oil in a Triassic-aged sandstone formation.

That would be subject to flow testing, after undertaking a fracture stimulation operation, which it considered necessary as the oil pay was inferred to be of low permeability.

The company said that more significantly, drilling on the Novo Kurilovskiy prospect reached a depth of around 1,200 metres.

While the initial target interval, the cretaceous Aptian formation at a depth of between 900 and 1,000 metres, had no shows of hydrocarbons, in the deeper Jurassic interval between 1,144 and 1,218 metres, a total of 60 metres of oil-bearing pay was identified, with cores taken during drilling.

Since the potential pay thickness was more than the calculated depth of the structural closure from seismic mapping, that indicated a potential stratigraphic element to the prospect, with implications of "significant upside" in terms of gross oil in place, the board explained.

"The commercial significance of this discovery will depend on the characteristics of the reservoir which are still unknown," it said in its statement.

Volga said the immediate plan was to complete drilling down to the Permian salt layer, open-hole logging and casing, which could take 10 to 14 days.

On completion of the drilling phase, a workover rig would be moved onto location to proceed with cased hole logging, perforations and testing.

That could take additional 10 to 20 days, depending on the number of intervals selected for testing.

"Prior to drilling, management had assessed unrisked potential recoverable oil in the Novo Kurilovskiy prospect at approximately eight million barrels of prospective resources," the directors said.

"The thickness of the pay logged to date and the possibility of a stratigraphic element to the prospect suggests that this could be a significantly larger size.

"However, commercial viability of the discovery depends on cased hole testing and it will require additional wells and new seismic will be necessary to give a level of confidence to calculate reserves in accordance with SPE standards."

At 1126 BST, shares in Volga Gas were up 15.62% at 27.75p.