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Important events in oil and gas sphere in Caspian region and Central Asian countries in 2012

Analysis Materials 29 December 2012 17:31 (UTC +04:00)

Azerbaijan, Baku, Dec.29 / Trend/

Azer Ahmedbeyli, Trend analytical centre expert

The importance and value of the Caspian hydrocarbons for the world economy becomes more and more evident every year for China and South Asia, as well as for the European continent. A lot of interesting events took place in the oil and gas industry of the countries of the Caspian region and Central Asia. Some of them are listed below:

January

- State Oil Company of Azerbaijan (SOCAR) has increased paid up capital in the Turkish joint venture Socar-Turcas from 200 million lira to 2.4 billion lira ($1.3 billion). According to the information, SOCAR-TURCAS was renamed into SOCAR Turkey Enerji after increase of SOCAR's share in the venture. The total value in investment portfolio of joint venture is $7 billion.

- Lukoil Overseas, the operator of international mining projects being carried out by the Russian LUKOIL national company, extracted its first gas as part of a production sharing agreement (PSA) to develop gas reserves in south-western Hissar (Kashkadarya, south of Uzbekistan. The company extracted gas in the largest gas field of the block - Jarkuduk yangi Kyzylcha. There are also plans to drill 40 extractive wells, construct a line of external power supply and engineering infrastructure facilities. The volume of investments will amount to more than $ 1.2 billion and the planned level of gas production, 5.8 billion cubic metres a year.

- The State Oil Company of Azerbaijan (SOCAR), the German Economic Development Agency of North Rhine-Westphalia NRW.İNWEST GmbH and a cluster of new nano-microtechnologies NanoMikro plus Werkstoffe.NRW signed a Memorandum of Understanding. The document anticipates creating a subdivision of scientific and production centres for nanotechnologies of SOCAR in the North Rhine-Westphalia, as well as offering financing, technical and legal studies of joint projects, defining areas for production of nanotechnology systems and studying the sales market.

- Gazprom and SOCAR have signed an additional agreement to double Azerbaijani gas purchases to 3 billion cubic meters in 2012. SOCAR and Gazprom signed a contract on Azerbaijani gas sales on Oct. 14, 2009

February

-SOCAR (State Oil Company of Azerbaijan Republic) succesfully placed in London debut Eurobond issue.

Eurobond aroused great interest among investors. The total volume of orders submitted by 290 investors totaled 4.6 billion U.S. dollars.

The total amount of issued eurobonds is U.S. $ 500 million. The yield of the Eurobond issue will hit 5.45 per cent per annum. The maturity date of the primary Eurobond issue is set for February 9, 2017. Eurobonds are issued on the basis of the "Regulation S" of the Securities Act the United States.

Eurobonds have been assigned ratings of BBB- by agency Fitch and BA1 by agency Moody's. Long-term corporate rating of SOCAR was defined by Fitch as a BBB-("stable" outlook), by S & P as a BB + ("stable" outlook) and by Moody's BA1 ("stable" outlook.)

According to the press release the issuers are the Royal Bank of Scotland (RBS), Citi Bank, and Deutsche Bank. Nomura International Plc. and Société Générale SA are the managers.

The investors' representative is the Deutsche Trustee Company Limited. The main agent for payments and transfers is Deutsche Bank AG (London Branch).

Eurobonds were placed between the investors of England (46%), Europe (38%), the United States' offshores (12%) and Asia (4%). As a result of placing 63% of the Eurobonds were purchased by equity participants, 16% - by banks, 11% - by insurance companies and pension funds, and 10% - by hedge funds.

- The State Oil Fund of the Republic of Azerbaijan (SOFAZ) has started investing in physical gold to increase the diversification and profitability of the investment portfolio. According to the 2012 Investment Policy of SOFAZ approved by the decree of the President of the Republic of Azerbaijan dated Dec.29, 2011, up to 5 percent of the Investment portfolio of SOFAZ can be invested in gold in 2012.

-Shah Deniz consortium does not consider ITGI (Interconnector Turkey-Greece-Italy) as the project to deliver Azerbaijani gas to the European markets. The decision was made in accordance with the previously announced criteria for the export of gas from Azerbaijani Shah Deniz field to the European countries. Shah Deniz consortium is currently considering three possible export routes, whereas in early selection they were four (together with ITGI). Nabucco, South East Europe Pipeline (SEEP) and TAP projects are considered potential routes at present.

Nabucco Gas Pipeline International has submitted the project's new concept to the consortium developing Azerbaijan's offshore Shah Deniz field. The new concept, which is called Nabucco West, the pipeline will be laid from the Turkish-Bulgarian border to the Austrian Baumgarten. Nabucco-West envisages the construction of 1,300 km of pipeline (Bulgaria: 412 km, Romania 469 km, Hungary 384 km, Austria 47 km).

April
Industrial stream with high pressure was received on the Galkynysh field in Mary region, which ranks second in the world for its natural gas reserves. "Recently, employees of the Turkmengeology Corporation's enterprise received industrial natural gas stream with high pressure from the fifth drill well (test distance of 4.6-4.7 km)," the report says.
According to specialists, this well is capable of producing 1 million cubic meters of natural gas per day.

According to the Uzbekneftegaz National Holding Company (NHC), an export contract for the supply of Uzbek gas to China was signed in October 2011. The contract was signed by Uztransgaz Company and PetroChina International Company Ltd., which is a subsidiary of the China National Petroleum Corporation (CNPC). The intergovernmental agreement is based on the principles relating to the construction and operation of the Uzbekistan-China gas pipeline and agreements on the sale of natural gas between Uzbekneftegaz and CNPC. "Part of the volume of Uzbek gas will be supplied to China from April 1," the holding board chairman Shokir Faizullaev said. He did not reveal the volume of gas to be exported to China this year. The Framework agreement envisaged the purchase of Uzbek gas to the volume of $10 billion cubic meters annually by China.

-The builders of the 'East-West' gas pipeline which runs from the largest gas fields in the east towards the Caspian Sea have laid the first 40 kilometres of the further regional gas transportation system. This gas line will be the largest in the country with a diameter of 1420 mm, running for a length of 766 kilometres. The East-West new gas pipeline with a capacity of 30 billion cubic meters of gas per year is required to create a loopback of the main fields of the country and to ensure operational manoeuvre by the flows of gas exports, as well as to improve the reliability of domestic gas supply.

- Preliminary engineering and design work started in the second stage of development of Shah Deniz offshore gas condensate field. This decision was officially announced at the meeting of BP CEO Robert Dudley with Azerbaijani President Ilham Aliyev. The Shah Deniz 2 project is set to produce 16 billion cubic metres of gas per year.

May

-Iran has discovered a large oil field in the Caspian Sea, Mehr news agency reported.

According to preliminary information, the new field has oil reserves of eight to ten billion barrels of oil. The field called "Sardar Jangal" is located 188 kilometers to the north of the coast of Gilan province and 250 kilometers north-west of the Neka port.

- The State Oil Company of Azerbaijan (SOCAR) and Vietnamese Petrovyetnam signed an agreement on basic commercial principles and provisions of a contract for the rehabilitation, exploration, extraction and production sharing of the onshore block in Azerbaijan. The block includes the oil fields of Muradkhanli, Jafarli and Zardab.

-British-Canadian Tethys Petroleum Ltd has signed a contract with the Uzbekneftegaz National Holding Company (NHC) to enhance oil recovery from the Chegara field in Kashkadarya region (south of Uzbekistan), the company's data, published during the International Exhibition of Oil & Gas Uzbekistan 2012.

- An agreement was signed in late May 2012 to settle certain issues of the North-Caspian project between the Kazakh government and the contracting companies of the North-Caspian project (KMG Kashagan BV, Agip Caspian Sea BV, ExxonMobil Kazakhstan Inc., Shell Kazakhstan Development BV and Total EIT Kazakhstan - 16.81%, ConocoPhillips North Caspian Ltd.. - 8.4%, and Inpex North Caspian Ltd. - 7.56%). According to the agreements, the parties approved an amendment to the plan and the budget of Kashagan field development. It allows achieving commercial production in the period from December 2012 to June 2013. The parties agreed to finance the share of KazMunayGas's investments in the project for 2012-2013 at the consortium's expense, to sign long-term purchase-sale contract on Kashagan gas phase 1 between "KazTransGas" and contracting companies, which ensures supplying up to 83 percent of the gas volume to the domestic market up to 2041 and not to reimburse a certain part of the costs incurred by the contractor to ensure further mutually beneficial cooperation between the parties in implementing the North-Caspian project within the agreement on settlement. Moreover, Kazakhstan and the contracting companies have reached a number of agreements aimed at achieving maximum clarity on such issues as taxation and cost recovery.

- Turkmenistan signed the purchase-sale contracts on natural gas within the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project. State Gas Systems of Pakistan and Indian GAIL ltd. are buyers. The Afghan side is represented by the ministry. It is planned to transport raw material though Afghanistan.A memorandum of understanding was signed with Kabul. The ADB representatives also prepared this agreement.
- Turkmen President Gurbanguly Berdimuhamedov delivered speech at the meeting of the CIS Heads of CIS Governments in Ashgabat. He voiced the initiative for the CIS countries to raise the issue of cooperation in the field of energy supplies at the UN General Assembly. "Turkmenistan proposes to start a dialogue to transport energy resources, to ensure security of energy supplies, to develop clear principles of our countries' activity on the world energy markets," Berdimuhamedov said.
June
- In Beijing "Turkmengas" state concern and the China National Petroleum Corporation signed the framework agreement on cooperation in delivering an additional volume of natural gas from Turkmenistan to China. According to this document, the annual volume of Turkmen gas supplies to China will be increased to 65 billion cubic meters.
- Kazakhstan National Petroleum Company KazMunaiGas (KMG), together with the Korean Consortium Caspian oil project commissioned a submersible drilling rig. Submersible drilling rig was called Caspian Explorer. This installation is the first offshore drilling rig, built in Kazakhstan. It is designed to work in shallow water (2,5-5,5 m) with a maximum drilling depth of 6000 meters.
- An audit of the reserves and resources of KazMunaiGas was conducted by independent international auditing company Gaffney, Cline & Associates which carried out an evaluation of prospective resources of the company in Kazakhstan's sector of the Caspian Sea, deputy chairman of the board of KazMunaiGas on geology and promising projects, Kurmangazy Iskaziyev said. "The resource potential of the Kazakh sector of the Caspian Sea, excluding reserves of Kashagan is, according to SPE international standards, 2.288 billion tons," Iskaziyev said, speaking at the second International Oil and Gas Conference 'Caspian shelf development', held in Astana, with the support of KAZENERGY. He recalled that the main goal of KazMunaiGas is capacity building. To achieve this goal, the company is guided by the following principles: aggressive exploration and expansion of the geography of business, effective implementation of projects and the high quality of operational processes. "At present, Kazakhstan, being one of the major oil-producing countries of the Caspian region, is rapidly emerging as one of the largest manufacturers and exporters of oil in the world. Recoverable proven reserves of Kazakhstan are five billion tons of oil and three trillion cubic meters of gas. Its prospective and probable reserves are 17 billion tons, of which the bulk is concentrated in the Caspian basin, including the waters of the North Caspian," Iskaziyev said.
- Turkey and Azerbaijan have signed several documents in Istanbul with participation of President Ilham Aliyev and Prime Minister Recep Tayyip Erdogan. President Ilham Aliyev and Prime Minister Recep Tayyip Erdogan signed the Intergovernmental Agreement on Trans-Anatolian Natural Gas Pipeline Project (TANAP). The Agreement was also signed by Azerbaijani minister of industry and energy Natig Aliyev and Turkish minister of energy and natural resources Taner Yildiz. A preliminary agreement between BOTAS and SOCAR on organizational issues with regard to TANAP was signed by Azerbaijani minister of industry and energy Natig Aliyev, Turkish minister of energy and natural resources Taner Yildiz, SOCAR president Rovnag Abdullayev and BOTAS deputy director general Mehmet Konuk. The Host Country Agreement between the Turkish Government and Trans-Anatolian Natural Gas Pipeline Project Company was signed by Turkish minister of energy and natural resources Taner Yildiz and SOCAR president Rovnag Abdullayev on behalf of TANAP.
- The consortium of Azerbijani Shah Deniz gas field development chose Nabucco West as the single pipeline option for the potential export of Shah Deniz Stage 2 gas to Central Europe. According to the decision, development of the South East Europe Pipeline (SEEP) project will cease. The decision was made on the basis of the publicly communicated selection criteria announced in 2011.
- Chevron distributed statement said that Settlement Agreement signed on December 14, 2011 between the participating companies of Karachaganak project and the Republic of Kazakhstan was carried out and completed. As a result a 10 percent stake in the project was transferred Kazakhstan. As a result of the agreement stake in the Karachaganak consortium are distributed as follows: BG Group (29.25 percent), ENI (29.25 percent), Chevron (18 percent), Lukoil (13.5 percent ) and the Republic of Kazakhstan (10 percent).
July
- French Total on behalf of the partnership SOCAR - Total - GDF Suez issued 'Notice of Discovery and Commerciality' for Absheron field discovery in the Azerbaijani deep waters of the Caspian Sea. The well results indicate gas resources of 150 to 300 billions of cubic meters (bcm) on the Northern compartment of the structure, the statement says.
- Norwegian Statoil signed a Joint Study Agreement (JSA) with the State Oil Company of Azerbaijan (SOCAR) on a geological and geophysical work evaluation of a shallow water area north-west of the Apsheron Peninsula.
The source said that the work will cover Simal Absheron Deniz, Shimal-gerbi Absheron kechid and the coastal strip of Guba (the northern region of Azerbaijan).
Joint work envisages processing and interpretation of two and three-dimensional seismic data in the territory.
"After data processing, their interpretation will be held during a year," source said. "In total, the work will take about two years."
Statoil told Trend today that the company under contract will re-evaluate the existing geological and geophysical data by using modern technology. No work was conducted on this area.
- The signing of a contract between LLP Teniz Burgylau and a consortium consisting of the LLP Keppel Kazakhstan and LLC ERSAI Caspian Contractor for the turnkey construction of the first self-lifting floating drilling unit in Kazakhstan was held in Astana. The project is one of Kazakhstan's breakthrough innovative projects.
The project documentation developed by Keppel FELS Ltd. is agreed with the authorised bodies of Kazakhstan and classification companies, namely the American Bureau of Shipping (ABS) and Russian Maritime Register of Shipping (RMRS).
The self-lifting floating drilling unit is designed for work in corrosion-active environments and in the presence of hydrogen sulphide. The project envisages compliance with zero discharge requirements, that is a complete ban on waste discharge into the marine environment as a result of industrial activity. All waste will be collected and transported in sealed containers to shore for processing and disposal.
Construction of the self-lifting floating drilling unit will be conducted at the shipyards of the Mangistau region, involving about 1000 people and will be completed in the first quarter of 2015.

- KazMunaiGas Exploration Production Kazakh national company (KMG EP) has closed a transaction on the sale of a 49 per cent share in KS EP Investments BV to a subsidiary of MOL Hungarian Oil and Gas Plc., a statement of KazMunaiGas said.
KS EP Investments BV owns a 100 per cent share in North Karpovsky LLP, which has the right of subsoil use according to the contract on oil, gas and condensate exploration in the North Karpovsky block in the West Kazakh region.
According to the information, as a result of this deal, a joint venture will be created between KMG EP and MOL for further exploration work on the block.
The North Karpovsky block is located 40 km north-west of the city of Uralsk, in the vicinity of the Fedorovsky block and other existing fields on the outer side of the Caspian depression. The total square kilometre area of the contract zone is 1670 square kilometres.
August
- The partners of Azerbaijani Shah Deniz gas field development and Trans Adriatic Pipeline (TAP) reached an agreement to secure funding for the project, TAP reported on Thursday.
According to the agreement these funds will contribute towards continued work in several important areas during the period running up to the final routing decision, expected in 2013.
The agreement also includes an option for the Shah Deniz shareholders to take up to 50 percent equity in TAP.

-Lukoil Overseas (an operator of international upstream projects of Lukoil) discovered a new field of gas and condensate on the Southwest Gissar block in Kashkadarya region in southern Uzbekistan. According to Lukoil Overseas, during exploratory drilling in difficult conditions on steep terrain of Shurdare structure at a depth exceeding 3,000 meters gas-bearing carbonate rocks of the Upper Jurassic age were revealed by the borehole. During testing of the well commercial daily output - up to 650,000 cubic meters of gas and 70 tons of gas condensate were obtained. "According to the results of the well test and interpretation of drilling, geological model of Shurdare deposit will be clarified, assessment of its resource base, a decision on the further exploration of prospective land made, and the role of the new field in the industrial development scheme of the Southwest Gissar defined ," the company's statement said.
September
-U.S. corporation Hess agreed to sell its part (2.72 %) in the Azeri-Chirag-Guneshli oil project (ACG) in Azerbaijani sector of Caspian Sea and its 2.36 percent interest in the associated BTC pipeline to the Indian ONGC corporation. The transaction will cost $1 billion and is expected to close in the first quarter of 2013
-The State Oil Company of Azerbaijan (SOCAR) started gas supplies from "Umid" field to the country's gas transportation system, SOCAR President Rovnag Abdullayev said. He said daily flow rate of the well, from which supplies are made, is 1.2 million cubic meters of gas and 150 tons of condensate. SOCAR specialists believe that according to the results of drilling of the first exploratory well, volume of reserves exceeds 200 billion cubic meters of gas and 40 million tons of condensate.
-Turkmenistan held an international road show on the TAPI project (Turkmenistan-Afghanistan-Pakistan-India) with the participation of the Asian Development Bank (ADB). In the framework of business contacts with the members of expert group, consisting of managers and specialists of economic and oil and gas agencies of Turkmenistan, Afghanistan, Pakistan and India, as well as representatives of ADB, the leaders of American Chevron, Exxon Mobil, British BG Group, BP, German RWE, Malaysian Petronas and others were acquainted with general terms of TAPI project's realization and expressed their intention to participate in the project.
October
-The Kazakh Oil and Gas Ministry confirmed the date of expected commencement of commercial production on the "Kashagan" field in the period from January to June 2013.
"We expect the commercial production will start at Kashagan in the period from January to June 2013. The Kazakh Oil and Gas Ministry expects the relevant documents on the second phase of the Kashagan project from the consortium. The preparatory work is underway," Kazakh Oil and Gas Minister Sauat Mynbayev said Kazakhstan set plans to extract 13 million tons of oil and 9 billion cubic meters of gas on the Kashagan field in 2013, Deputy Oil and Gas Minister Berik Tolumbayev said. At the same time, the issue of extending the contract with the shareholders of the North Caspian Operating Company BV (NCOC) consortium, developing the field, has not been discussed yet. The contract between the Republic of Kazakhstan and NCOC consortium expires in 2040. KazEnergy Association Chairman Timur Kulibayev said that $ 45 billion were invested in the Kashagan project.
-Gordon Birrell was appointed to the position of BP President for Azerbaijan, BP Azerbaijan's press release said. Gordon is currently Head of Safety and Operational Risk for BP's Production Division, responsible for driving improvements in BP's operating quality across the company's global Production Division.
- By acquiring ITERA Georgia the State Oil Company of Azerbaijan (SOCAR) became the only gas distributor in Georgia (with exception of Tbilisi), SOCAR President Rovnag Abdullayev said. He said a contract on acquiring these assets has been considered for a long time. All the risks were assessed and finally a decision was taken to acquire ITERA.
November
-SOCAR partners on the project of developing the Azerbaijani gas condensate field Shah Deniz voiced their preliminary intentions to acquire a stake in the Trans-Anatolian gas pipeline (TANAP) project. SOCAR head Rovnag Abdullayev said the preliminary data is not official yet, but according to it, the partners intend to distribute a 29 per cent share in TANAP as follows: Statoil and BP - 12 per cent, Total - five per cent. At present, Turkish BOTAS owns a 20 per cent share in TANAP, while SOCAR owns an 80 per cent stake. SOCAR intends to retain 51 per cent of its share in TANAP. Turkey will own 20 per cent of the equity.
-The State Oil Company of Azerbaijan (SOCAR) and the Turkish state companies Botas and TPAO signed an agreement on shareholders of the Trans-Anatolian gas pipeline project. In accordance with the signed agreement, the company TANAP Co was established in Turkey.
As SOCAR head Rovnag Abdullayev said, it is planned to complete preparation of the main project on TANAP by 2013.

-The Lukoil Uzbekistan Operating Company (operator of the Lukoil national company in Uzbekistan) approved a working draft of equipping the gas condensate fields of South-Western Hissar in the Kashkadarya region (south of Uzbekistan) with necessary facilities, the operator said. According to the project, the fields 'reserves are estimated at 82.3 billion cubic meters and the maximum volume of production in the period of constant selection will exceed 4.2 billion cubic meters of gas per year', the report said. At this stage it is planned to launch complex gas processing facility in Dzharkuduk field and commission large deposits Adamtash and Gumbulak. It is also planned to drill more than 40 wells, to construct a line of external power supply, a system of collection and preparation of gas and engineering infrastructure facilities to ensure putting the fields into operation on time. A total volume of investments will reach more than $1.2 billion.
-The Azerbaijani parliament ratified an agreement on the construction of a separate gas pipeline to transport gas to Turkey through its territory, as well as an agreement on the Trans-Anatolian gas pipeline system (TANAP) between the governments of Azerbaijan and Turkey.
-ExxonMobil is interested in the unconventional hydrocarbon resources of Kazakhstan, representative of Ministry of Industry and New Technologies of Kazakhstan said. "ExxonMobil has expressed interest in unconventional hydrocarbon resources in the frame of a memorandum signed between KazMunaiGas, KazMunaiGas Exploration Production and ExxonMobil Kazakhstan North Caspian Onshore Exploration Limited," the source said. In particular, the company expressed interest in the possibility of studying the potential of shale gas development in Kazakhstan. The reserves of shale gas in the country have not been fully investigated, the ministry representative said. In addition, work on the determination of promising areas for exploration and development of shale gas have not yet been launched.

-ConocoPhillips notified government authorities in Kazakhstan and its co-venturers of the company's intent to sell its 8.4 percent interest in the North Caspian Sea Production Sharing Agreement (Kashagan) to ONGC Videsh Limited, ConocoPhillips said. It is expected that the deal worth about five billion dollars will be closed in the first half of 2013 after harmonization with Kazakh government. "The sale of this quality asset is an important component of our ongoing strategic asset disposition program," the company's executive vice president Don Wallette said. As of Sept. 30, 2012, the carrying value of the net assets related to ConocoPhillips' interest in Kashagan was approximately $5.5 billion, ConocoPhillips reported.
December
-A Risk Service Agreement is being prepared for a project to develop deep-lying gas at the "Azeri-Chirag-Guneshli" (ACG) oil and gas fields in the Azerbaijani section of the Caspian Sea, SOCAR senior official told Trend. He said that at present, work is focused on the preparation of a new type of contract, as opposed to the ACG contract development project (PSA). Deep-lying gas at ACG is estimated at 300 billion cubic meters.
- BP company - operator of the "Azeri-Chirag-Guneshli" offshore fields' block has completed the construction of the jacket of the platform within the Chirag oil project (increase in oil production on the "Azeri-Chirag-Guneshli" offshore fields' block).This is the heaviest block in the Caspian Sea, which was loaded onto a barge STB-1 at the Baku Deep Water Jacket Plant named after Heydar Aliyev on Oct.20.The jacket will remain on the barge till the end of the year, which will allow to complete work on construction of underwater pipelines that are currently at the stage of mounting. It is planned to start work on installation of the jacket in early 2013. Also 90 percent of work on construction and installation of superstructures of the platform conducted by ATA (AMEC-Tekfen-Azfen) Consortium has been completed. They are planned to be sent to the sea in the second quarter of 2013.

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