JKX Oil & Gas has commenced production and sales of liquefied petroleum gas (LPG) at its Novo-Nikolaevskoye group of fields in Poltava, Ukraine.

The LPG processing plant was designed and built in Canada and mobilised to Ukraine during the second quarter of this year. Storage and loading facilities were constructed in Ukraine with installation completed in June. Engineering modifications to the existing gas processing facilities were undertaken during the annual facility maintenance shut-down in May.

Following commissioning and testing, LPG production commenced on 4th July and the first commercial cargoes have now been dispatched. Production is planned to reach approximately 80 tonnes per day with daily off-take contracted to pre-qualified wholesale distribution companies.

The LPG market in Ukraine has grown by over 50% in the last five years and is currently in excess of 800,000 tonnes per year. Wholesale prices correlate closely with the Brent market and are currently in excess of $800/tonne.

Dr Paul Davies, JKX's chief eExecutive, commented: "We are delighted to add LPG production to our existing oil and gas producing portfolio in Ukraine. The facilities came in on schedule and on budget and we anticipate to achieve pay-back on the incremental investment in approximately six months. The added value of this product stream will enhance the economic performance of our Ukraine operation and effectively increase gas realisations (which are currently in excess of $10/Mcf) by approximately 10%.

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