Once Upon a Time in Bulgaria

Way back when, Bulgaria had a very strong history of oil and gas E&P. The country had a great oil and gas business, but new exploration and development has been light since the fall of communism in 1989.

"Some of the largest onshore oil and gas fields in the country are not too far away from our recently awarded Koynare concession," remarks Chad Potter, Vice President of Financial and Investor Relations at TransAtlantic Petroleum, who says the country used to produce a significant amount of oil and gas, but it's declined significantly over the last 20 years.

"There is a shale there that holds potential, but based on the current laws we wouldn't be able to target that," explains Mr. Potter, referring to the Bulgarian government's decision in January 2012 to, in effect, enact a ban on hydraulic fracturing used to extract unconventional gas.

"But that's fine. There's plenty of conventional potential - significant - that we've seen. In fact, we have a discovery well that we've been producing into CNG canisters," he says.

Potter reports that TransAtlantic will need to build a pipeline to the area to fully produce that gas.

"We have a second well that we had spud - we drilled down and set surface casing - but then when they instituted the initial 'fracc ban' that effectively banned all drilling, we put that well on hold.

"We are still working with the government regarding the particulars of our initial development plan on the Koynare concession. From our perspective we need to resume drilling the well that was put on hold and then potentially do some other appraisal drilling."

Bulgaria’s Energy Minister has stated that the gas deposits at Koynare field are estimated at around 10 bcm.

Mr. Potter comments, "It's about a 10-15 mile pipeline that could cost $10-20 million so we want to make sure we get over the commerciality hurdle to justify the expense of the pipeline."

Because Bulgaria imports almost 100% of the gas it consumes, the country has a great need for such indigenous gas.

"The actual in-country production is quite low, though recent offshore discoveries are helping. We think it's in Bulgaria’s best interest to allow for exploration both onshore and offshore. It certainly needs regulation and we want to make sure that we're operating within everyone's best interest as much as we can - we want to be good stewards for both the business and the environment."

There is a possibility, according to Potter, that TransAtlantic would contract its former oilfield services company Viking International, which it sold earlier this year, to perform services in Bulgaria.

"That's certainly a possibility," he admits. "We would bid it out and I know historically the wells we've drilled there have not been with Viking, but I'm sure they would love to expand; they're operating in Poland and are drilling our wells in the Thrace Basin in Turkey, so Bulgaria would be in-between and not too far away."

Given the fracc ban, and the company's hope to someday explore for shale gas in Bulgaria, one might wonder if TransAtlantic had any concerns over agreements with the Bulgarian government.

"They've worked with us," Potter retorts, adding. " There is almost certainly a contingent of people who would prefer that you weren't drilling whether the gas is produced from shale, tight sands or a conventional sandstone. Ultimately, I would love to have energy come from nowhere, but unfortunately that’s not possible. If you're drilling you take a portion of the surface to drill wells but you can use pad drilling and drill horizontally or deviated wells that definitely helps minimize the surface disturbance."

TransAtlantic has hope that it may eventually be able to go forward with exploring for hydrocarbons trapped in unconventional formations in Bulgaria.

"The Etropole shale is a big potential play with a lot of gas in place," he says. "We have some core data, but ultimately until you try to produce from it, you're not really going to know how much of the gas in place is economically recoverable."

As for when that will happen, Mr. Potter explains, "While we'd like governments to move faster, they are taking a measured approach and studying it, and I think once they have review the data they will realize that the process is ultimately safe. And while there are always risks to everything you're doing - they're measured - and as long as you know where the weaknesses are, that's where you target your safety measures.

"Ultimately we think, longer term, Europe will come around, but each country can obviously make its own sovereign decisions, and some will go against you and some for you," he adds.

Meanwhile, TransAtlantic continues its exploration of unconventional reservoirs in Turkey's Thrace Basin and the southeastern part of Turkey.

Chad Potter says, "In the Thrace Basin we are proceeding with a development program that is set to kick off in December. Up to now we've been doing science and now we've identified one area where we're going to come in and run two rigs, drilling back-to-back wells, essentially from now into 2015, and so hopefully that will set us up in a position to grow our gas production, as it's been in decline while we do the science work down there."

“And in the Southeastern part of Turkey, Anatolia, we’ve recently completed our first horizontal well that’s been flowing about 500 barrels of oil per day and we’ve just fracced the deeper Bedinan sandstone in a nearby well which we will be evaluating in the weeks ahead,” Potter added.