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Frontera addresses Kakha Kaladze with an open letter
09:05 16-02-2016
Frontera addresses Kakha Kaladze with an open letter We are writing today to respectfully correct the public record with regard to incorrect statements that you made in a nationally televised interview on February 5, 2016. This interview was related to the Atlantic Council’s recently published report entitled “Developing A Western Energy Strategy For The Black Sea Region And Beyond”. Your statements were made with regard to the report’s positive reference to Frontera’s announced estimates of significant natural gas resources associated with its ongoing exploration work in the Kakheti region of Georgia. As you are in a ministerial position of great public trust, numerous news agencies and social media
have subsequently replicated your recent misstatements in reaction to this report. Because of this, we want to be sure that that you and the Georgian people have the benefit of correct facts associated with our work in Georgia’s growing domestic natural gas sector:

* In your recent interview you are quoted to say, “…even Turkmenistan does not have as much volumes as were announced”. This is not correct. For example, the United States government’s Central Intelligence Agency’s World Factbook estimates Turkmenistan’s proved natural gas reserves at 626 trillion cubic feet (17.5 trillion cubic meters). By definition, gas in place would be much larger. The government of Turkmenistan reports an even larger estimate. Both assessments are far greater than our estimate of prospective natural gas resources of as much as 187 trillion cubic feet (5.31 trillion cubic meters) of gas in place related to our work in the Kakheti region.

* You also stated that “billions of investments are required to prove” the natural gas resource estimates made by Frontera. This is misleading and simply not correct. Land-based oil and gas exploration works are inherently efficient to develop, especially when they are situated in favorable geographies like that found in eastern Georgia. A great example of this is the highly efficient U.S. domestic onshore natural gas sector that has made the U.S. the world’s largest producer of natural gas in recent years. It would be very difficult to identify a similar onshore project anywhere in the world that requires billions of dollars to “prove” as you have suggested. Such a statement gives the wrong impression for the reality of our ongoing work in the Kakheti region.

* In the same interview, you indicated that Frontera’s contract is “a yearly renewable” contract with the government. This is simply not correct. As you should know, our Production Sharing Contract with the State of Georgia is a long-term contract that in no way requires annual renewal. Because of its long-term nature, this contract has been the basis for hundreds of millions of dollars of Frontera’s extensive foreign direct investment that has included acquisition and analysis of thousands of kilometers of 2D and 3D geophysical data, as well as tens of thousands of meters of new drilling data. This work has identified a significant natural gas resource for the country. Moreover, it has solidified our long-term commitment to the country’s oil and gas sector.

Whether intentional or not, your interview created confusion and doubt in the arena of public opinion and we hope that this message will serve to set the record straight. Georgia has a bright future related to the development of its natural gas sector and it seems counterproductive to denigrate this fact. Frontera is very proud to be a dedicated corporate citizen of Georgia and works hard to bring the Georgian people the opportunity to benefit from development of their country’s vast natural gas resources. Given Georgia’s NATO and European Union aspirations, it is our hope that the emergence of your country’s natural gas sector will result in enhanced national security by becoming a leader in utilizing its extensive gas resources for not only its domestic needs, but also for European energy security.
The Atlantic Council’s recently published report highlights a strategic role for Georgia to play in securing Europe’s energy future and states: “What Georgia needs today is supportive leadership, especially in the Energy Ministry, that enforces government policies to open the country for exploration and production, protect property rights, and facilitate domestic distribution and exports of locally produced gas. The country also needs transparency, good governance, and the rule of law – without these, foreign investment will remain severely constrained.” It is our great hope that this will indeed occur and serve to lift all people in Georgia to a brighter economic future….

Sincerely,
Steve C. Nicandros Zaza Mamulaishvili
Chairman of the Board of Directors Board of Directors Member
Chief Executive Officer President
Frontera Resources Corporation Frontera Resources Corporation
Houston, Texas U.S.A. Houston, Texas U.S.A.

See the letter original version

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