Oil minnow in Siberian drive

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The Independent Online
Bula, the independent oil explorer, is planning to raise up to pounds 70m to fund expansion in Russia, following encouraging testing of its first well in Siberia's huge Salymskoye oilfield.

Tomorrow, Bula will announce to the Stock Exchange that well testing yielded a flow of 942 barrels per day, putting it ahead of oil giants Amoco and Shell, which own development blocks to the north and south.

If all runs smoothly, the Dublin-based company intends to build production up to 240,000 barrels per day in the icy Russian wastes, by sinking up to 165 wells.

The latest fund-raising plans are understood to involve a share placing later this year, possibly of up pounds 20m, and arranging debt finance subsequently.

The money will finance four more wells plus a pipeline extension over the next year in Salymskoye, which has been estimated by experts to contain 585 million barrels of proven and probable reserves.

"This well demonstrates the vast reserves contained in this oilfield and we hope to build up first production before the year end," said Jim Stanley, Bula's chairman.

"The pipeline link and pump station facilities have already been put in place, which is a significant achievement for our company."

Bula shares currently stand at 2.5p, valuing the oil minnow at at just pounds 40m, against a net present value of the project of 28-35p per share at current oil prices.

The firm, however, has been hit by delays caused by the poor quality of Russian equipment in Siberia.

Last year, wrangles over legal title - a persistent problem for Western firms in Russia - also stopped it going ahead with the development of two other huge Siberian fields.

That row culminated with the ejection of two Russian directors from the board in August, but this time Bula's direct production-sharing deal with its local Russian partner has avoided such problems.

The Salym field, half the size of Wales, lies in the Khanty Mansiysk region of Western Siberia, 1,000 miles from Moscow.

Full testing of the first well, numbered 705, started at the end of September and achieved the flow rate over a four-day period. Subsequently, it is understood to have achieved even more encouraging results.