Status of offshore oil and gas contracts in Turkmenistan in Dec. 2012

Turkmenistan, Ashgabat, Dec. 17 / Trend H. Hasanov /

Turkmenistan invites foreign companies to participate in the development of hydrocarbon resources in the Turkmen section of Caspian Sea. According to the estimations, there are 11 billion tons of oil and 5.5 trillion cubic meters of gas of projected resources, excluding the contracted blocks.

The Turkmen side considers it a priority to sign the production sharing agreements (PSA) in this area through direct negotiations to develop the Caspian Sea.

The Turkmen specialists said that more than 80 per cent of hydrocarbon reserves on the continental shelf are in sediments located at a depth of 3,000 metres, as well as poorly studied oil and gas zones.

New perspectives are associated primarily with two major oil and gas basins - Middle Caspian and South Caspian.

At this stage, Turkmenistan annually produces about 10 million tons of oil. The main producer is the State Concern Turkmenneft. Companies from Great Britain, Russia, Germany, Malaysia, Turkey, Canada and China operate on the basis of PSA contracts. Petronas, Dragon Oil, Buried Hill, RWE Dea AG, Itera and Zarubezhneft have been involved in the development of the Turkmen part of the Caspian Sea.

The total volume of investments aimed at implementing the joint projects with foreign companies in the oil and gas industry amounted to 1.342 billion during the first 10 months of 2012, the State Agency for Management and Use of Hydrocarbon Resources under the Turkmen President reported.

In its annual global survey in 2012, British Petroleum (BP) reported that oil production in Turkmenistan in 2011 amounted to 216,000 barrels per day. Turkmenistan's share in the world oil production last year was 0.3 per cent.

According to BP, the oil consumption in the country increased in 2011 by 3.9 per cent to 108,000 barrels a day. BP kept its estimates on proven oil reserves in 2011 in Turkmenistan without change at 0.1 billion tons (0.6 billion barrels) as in the previous year.

Block 1

The PSA contract was signed in 1996. The operator is the Petronas Charigali Malaysian State National Company.

The contract area includes Diyarbekir, Magtymguly, Ovez, Mashrykov and Garagol Deniz. Proved reserves are at least 1 trillion cubic meters of gas, more than 200 million tons of oil and 300 million tons of gas condensate. The area of the contract territory is 1,467 square kilometres.

Project Status

Oil industrial production and exports began in May 2006.

The oil transportation route passes through Azerbaijan.

In July 2011 Petronas said about readiness to commercially extract natural gas on the Turkmen shelf of the Caspian Sea. A gas processing plant and a gas terminal were commissioned offshore. The capacity of the first stage of the complex is 5 billion cubic meters of natural gas, the project - $ 10 billion.

Two unrealized projects: Caspian gas pipeline along the Caspian coast to Russia that will fix the position in the Gazprom"region, and the Trans-Caspian gas pipeline through the bottom of the Caspian Sea and promoted by the EU pretend for this volume.

The company drilled about 30 exploration, appraisal and production wells in the contract area. All of them showed significant inflows of hydrocarbons.

Block Cheleken

The PSA contract was signed in 1999. The operator is Dragon Oil.
The company's shares are listed on the London and Dublin stock exchanges (stock ticker symbol: DGO).

The controlling package of shares in the company is owned by ENOC state concern within the government of Dubai (UAE).

The total area of the contract territory is about 950 square kilometers. It includes the deposits of Jeitun, Jigalybek and Chelekenyangummez.

The proven and explored reserves of oil and condensate hit 658 million barrels. Gas reserves hit 1.5 trillion cubic feet.

Project Status

The company has been recently selling Turkmen oil via Azerbaijan and reached a one million point of oil production in 2005.

Dragon Oil within the PSA is one of the largest foreign investors in the Turkmen market. As of June 30, 2012, around $2.4 billion was invested in the local project.

The average daily oil production has increased from 7000 barrels (in 2000) during this period and reached 71,751 barrels of oil per day (as of late 2011).

The company intends to raise more than $1 billion in 2012-2015. According to the plans, on average, around 100,000 barrels per day will be produced.

Dragon Oil got profits worth $308.9 million for the first half of 2012 due to the project in Turkmenistan, compared to $309.4 million in the first half of 2011.

A new rig Caspian Driller will be transferred to Turkmenistan in late 2012. The preparatory actions for launching drilling operations are expected to be held in the first quarter of 2013.

Block 3

The PSA contract was signed in 2007. The operator is Canadian Burried Hill.
project status

Project status

A 3000-kilometre 2D seismic survey has been held. The operations are related to the analysis of seismic data and development of a drilling strategy. The company aims at long-term relations with Turkmenistan.

The information about this project is rather scanty.

Block 23

The PSA contract was signed in July 2009. The operator is the German RWE Dea AG. In accordance with the agreement, the license envisages exploration for six years.
The resource estimates are unknown. By revealing hydrocarbon reserves, a license for their commercial production for 25 years will be given. Total expenditure during the initial period of the study for four years is estimated at $60 to $80 million.

Project Status

RWE Dea completed a 3D seismic survey in August 2012. It was carried out in this area for the first time and covered approximately 400 square kilometres. At present, this data is being interpreted. It is planned to drill an exploration well by 2013. 'The Caspian region in the future will play an important role in ensuring Europe's energy supply and is of great importance for RWE Dea', the company said in its press release.

Block 21

The PSA contract was signed in 2009. The operator of the project is Russian ITERA.
In August 2011 the function of the operator passed to the Russian Zarubezhneft company (having a 51 per cent stake). It signed the agreement on joint activities in the area with Itera.

Project status

Geochemical surveys were completed in 2012 and offshore seismic operations have been conducted. The areas indicated for prospective oil and gas have been determined. Two were determined: Western Erdekli and Southern Erdekli.

The company says that the exploration confirmed a high promise of explored hydrocarbon structures and included them in the category of unique ones.

The total project cost for the development of Block 21 will hit $5-6 billion, of which $300 million will fall to investments in the exploration phase.

It is planned to complete the design of the well construction by late 2012. In case of suitable lease terms, Itera plans to use the shallow draft type of jack-up rig drilling barge Sunkar-257, or an installation on the pontoon base for drilling an exploratory well at a water depth of six to seven metres.

It will be necessary to drill a well to a depth of 7000 metres to open the target lower red colour horizons. It is planned to build three wells during exploration. This is the first experience in well drilling in Turkmenistan at such depths in such difficult conditions (reservoir pressure - up to 130.0 MPa).

Itera and Zarubezhneft previously reported that they do not exclude their participation in the development of the blocks 21 and 22 within the Zarit joint venture. Rosneft can act as a co-founder. There is no information on this in 2012.

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