Status of offshore oil and gas contracts in Turkmenistan in Dec. 2014

Ashgabat, Turkmenistan, Dec.30

By Huseyn Hasanov - Trend:

Some 32 licensed blocks with projected reserves of 11 billion metric tons of oil and 5.5 trillion cubic meters of gas, excluding the contracted blocks, were put for international tender in the Turkmen part of the Caspian Sea.

The Turkmen side considers it a priority to sign the production sharing agreements with foreign companies.

The Turkmen specialists said that more than 80 percent of reserves on the Turkmen part of the Caspian Sea are in sediments located at a depth of over 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.

The oil production hit 11.4 million metric tons in Turkmenistan in 2013 or by 4.1 percent more than in 2012, according to the BP Statistics Review of World Energy-2014. Turkmenistan accounted for 0.3 percent of the world oil production volume in 2013.

The oil consumption in this country stood at 6.3 million metric tons during the reporting period, which is by 2.8 percent more than in 2012.

Turkmenistan annually produces about 10 million tons of oil. The production is ensured by the Turkmenneft State Concern and companies from Great Britain, Malaysia and UAE operating on a PSA basis.

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.

Over $10 billion have been invested in the Turkmen sector of the Caspian Sea since the foreign companies began working.

The negotiations are underway with the companies of Europe, the US and the Persian Gulf.

Block 1

The PSA contract was signed in 1996. The operator is the Petronas Charigali (Malaysia).

The total area of the contract territory is about 1,467 square kilometers and it includes Diyarbekir, Magtymguly, Ovez, Mashrykov and Garagol Deniz fields as part of the Block 1 contract area.

The proven reserves are at least 1 trillion cubic meters of gas, more than 200 million metric tons of oil and 300 million metric tons of gas condensate.

Some seismic surveys were conducted during Petronas's activity. Several dozens of exploration, appraisal and exploitation wells were drilled.

The deposits with rich raw materials were prepared for industrial production in the Turkmen sector of the Caspian Sea.

Project Status

Industrial production and exports of oil began in May 2006. The oil transportation route passes through Azerbaijan.

The gas production has been possible since 2011. A gas processing plant and a ground gas terminal were commissioned in the vicinity of the Kyyanly settlement. The capacity of the first stage is five billion cubic meters of natural gas and 2.4 million metric tons of gas condensate per year. The capacity is expected to be doubled. Currently, there is a possibility to provide CAC-3 (Central Asia-Center) gas pipeline, passing through Russia, with natural fuel.

Two unrealized projects can count on the Caspian gas. These are the Caspian Gas Pipeline, meant to run along the Caspian coast to Russia through Kazakhstan, which could bring back the traditionally strong positions of Russia's Gazprom JSC in the region, and the Trans-Caspian Gas Pipeline, meant to run to Europe through Azerbaijan and Turkey.

These projects could also allow Turkmenistan to diversify energy routes.

Cheleken block

A production sharing agreement (PSA) was signed 1999.
Oil was transported through the port of Baku, Azerbaijan. A corresponding contract was signed for a period up to Dec. 31, 2014.

The project's operator was the Dragon Oil (UAE-Great Britain).

The shares are listed on the London and Dublin stock exchanges (stock ticker symbol: DGO). The main shareholder is the Emirates National Oil Company (ENOC).

The company carries out its main activity in the eastern sector of the South Caspian Basin, in the Cheleken contract territory.

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 in the contract territory in Turkmenistan stand at 677 million barrels.

Contingent oil and condensate reserves amount to 59 million barrels. Gas reserves are 1.5 trillion cubic feet. Prospective gas resources amount to 1.4 trillion cubic feet.

Project status

Dragon Oil has worked in Turkmenistan for 14 years, and throughout this period the company has invested about $4 billion in the development of the contract area Cheleken.

The company is also one of the largest investors in Turkmenistan. Dragon Oil is ready to invest $1.5 billion in this project till 2016.

The company said that in 2015, the average daily oil production in Turkmenistan on this project could reach 100,000 barrels of oil, compared to 80,000 barrels in Q3, 2014.

Since the start of the project, several dozens of new wells have been commissioned, a number of offshore platforms have been reconstructed and built, and tens of kilometers of pipelines have been laid.

Aside from that, the export opportunities have been expanded, additional oil storage facilities have been built, and it has become possible to load two tankers simultaneously.

Block 3

A production sharing agreement (PSA) was signed in 2007. The project's operator is the company Buried Hill.

Project Status

A 3000-kilometer 2D seismic survey has been held. The current 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 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). But in 2013 Zarubezhneft abandoned the project, not joining it officially. The efforts to agree upon the corresponding documents with Turkmenistan had no result.

Project status

According to results of processing of the 2D/3D seismic data, obtained after the explorations conducted in 2012-2013, the estimated recoverable reserves total 800 billion cubic meters of natural gas and 95.5 million metric tons of liquid hydrocarbons.

The company said the first exploratory well at Turkmenistan's offshore area is planned to be drilled in 2014, the depth of the sea at the site is seven meters. Drilling to a depth of seven kilometers is forecasted. Total capital investments in the company's project are valued at $6 billion.

Two structures are marked out at the block. They are the West Erdekli and South Erdekli. The company says the explorations convinced them of high availability of studied hydrocarbons structures and related them to a unique category.

Itera previously reported that it does not rule out participation in the development of the Blocks 21 and 22 within the Zarit joint venture. Rosneft can act as a co-founder. But there is no information on this.

In November 2014, the top management of Turkmenistan held a meeting with the head of Itera international group of companies Igor Makarov, who paid attention to the company's aspiration to expand its presence on the promising Turkmen market.

Block 23

PSA was signed in 2009.
Operator - RWE Dea AG company (Germany)
Under the agreement, the license envisages carrying out exploration work in a six-year period. Some 17 prospective structures were discovered. Earlier, RWE announced that the exploratory drilling at the first structure will be carried out from the coast in 2014-2015.

Resource estimates are unknown. Once the hydrocarbon reserve is discovered, a license will be issued for its commercial production for the period of 25 years. The total expenditures during the initial period of the exploration for the period of 4 years are estimated at $60-$80 million.

Project status

RWE Dea summarized the results of the 3D seismic survey in 2013 that was carried out in this zone for the first time and covered an area of approximately 400 square kilometers.

The license block is located in the south-eastern region of the Turkmen shelf of the Caspian Sea and covers an area of nearly 940 square kilometers.

Block 19 and 20 (stage of negotiations)

Italy's ENI company shows interest in these blocks with the reserve of over 500 million metric tons of oil and 630 billion cubic meters of natural gas.

Earlier, during the negotiations with the Turkmen side, the company's management expressed desire to assist in delivering Turkmen gas to world markets in long term. One of the promising directions is the European direction.

Counting on the resources of the Caspian Sea region, primarily, of Azerbaijan and Turkmenistan, the EU promotes the Southern Gas Corridor project. The project for the construction of the Trans Caspian gas pipeline can be a part of this project.

Under the PSA, ENI extended the contract on onshore Nebit Dag block in Turkmenistan for additional 10 years. ENI has invested over $1.5 billion in Turkmenistan since 2008. Its activity covers the contract area of over 1,000 square kilometers in Turkmenistan's Balkan province.

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