TURKMENISTAN - Producing JVs - Monument's JV

Monument Oil & Gas of the UK, capitalised at $900 million, is the luckiest among foreign companies operating in Turkmenistan as the oil reserves in its block are now said to be around 2 billion barrels. Monument says the oil recovery factor there is 25-35%. Its JV with Turkmenneft and Mobil consists of a 2,500 sq km block in the Nebit Dag region of western Turkmenistan.

The area includes Burun oilfield, which was partially developed when Monument got the block. The other structures in its block are the deeper portions of two old and developed oilfields, Nebit Dag and Kum Dag, and the gas/condensate field of Kyzl Kum and the considerable gas field of Kara Tepe.

Nebit Dag's deep structure came on stream in late 1997 and now is producing 14,000 b/d of sweet 30-36 deg. API oil. The field's output is to reach 20,000 b/d before end-1998. Total oil production of this and the other fields should exceed 50,000 b/d by 2000 and should reach about 150,000 b/d by 2006.

Monument came to Turkmenistan in mid-1995. After 18 months of negotiations with the government, it was awarded a licence for the Nebit Dag block in the first week of August 1996. Monument was committed to invest a total of $300 million, with up to $50 million in the initial stage.

The company was to begin boosting the fields' output from less than 1,000 b/d before end-1996. It was to keep 60% of the oil produced at new wells, a share falling gradually to 10%. The rest, along with oil produced at existing wells, was to belong to the government.

Monument began work on the fields immediately after it got the licence. But it wanted to have one of the cash-rich majors as a partner to help in the investment. It brought in Mobil and gave it a 40% stake, with the US major having acquired 25% in the Tengiz venture of Kazakhstan in 1996. The JV's PSA came into effect in February 1997. Monument remained the operator.

In January 1997, Ashgabat signed an MoU with Monument and Mobil for the exclusive right to negotiate a new oil PSA covering a 20,000 sq km tract extending all the way from the Caspian coast of Turkmenistan to the Iranian border. The PSA for this was signed in July 1998. The area's oil reserves are estimated at 2 billion barrels, which will enable western Turkmenistan to produce 500,000 b/d by 2006/7.

Right from the beginning of its negotiations with Ashgabat, Monument forged an alliance with Volga Sumo Transport and Trading (VSTT), a joint venture between Russian and British interests with its vessels operating under a Russian flag. VSTT gave Monument a guaranteed export outlet with up to 16 oil tankers of

4,000 tons each. This boosted the UK company's position when it negotiated the partnership with Mobil.

VSTT had established three viable export options: (1) a 30-day route for its tankers through the Volga and Don rivers to the Black Sea, though a series of locks, a route in which VSTT has virtual monopoly; (2) another route to the Black Sea for tankers to ship the crudes across the Caspian to Makhachkala and from there a rail route; and (3) a road and rail route to the Persian Gulf through Iran.

After it got the E&P licence, Monument arranged a crude oil swap deal with Turkmenneft. Thus it avoided the cost of building a pipeline and terminal facilities.

On March 23, 1998, Monument and Iran's NIOC signed another swap deal, whereby the UK company was to deliver its crude oil to northern Iran in return for an equivalent volume of Iranian crudes to be delivered by NIOC through its Persian Gulf terminals. The Turkmen crudes are now being processed by the Tehran refinery. A major crude oil pipeline is to be built by Iran to link western Turkmenistan to the Tehran refinery, through Neka (see Part 3).

The deal with Iran, the first of its kind involving a European company with a US partner, Mobil, irritated the American government. Washington forbids US firms from trading with or investing in Iran and, under the "d'Amato Law", is to punish non-US companies investing more than $20m per annum in Iran's oil and gas sectors.

Monument's CEO is Tim Eggar, a former energy minister under Britain's previous government which was of the Conservative Party. It was Eggar who signed the swap deal with NIOC (see Part 3).

Occidental Petroleum has onshore Block VI, 224 sq km, including a portion of the producing Burun oilfield. It has paid a bonus of $20m. This portion of the field is officially said to have 250m barrels of liquids and about 0.45 TCF of gas. But Oxy says the area's recoverable oil is not likely to exceed 110m barrels.

The US company's PSA is for 25 years, as in the case of the other E&P deals in Turkmenistan. Oxy is yet to begin oil production.

Oil Capital of the US, in partnership with TYT Bank and Lapis Holding of Turkey, has won a 1,900 sq km offshore block in the Caspian Sea which includes the undeveloped Shafag (formerly Gubkin), Barinov and Livanov oil and gas fields, estimated to have 358m barrels of liquids and 3.7 TCF of natural gas.

The consortium paid a bonus of $30m. The block lies in the prolific Apsheron Trend which, on the Azeri side of the Caspian Sea, contains the Azeri, Chirag and Guneshli oilfields (see survey of Azerbaijan in the current volume).

Oil Capital, involving controversial Lebanese businessman Roger Tamraz, is one of the companies that have promoted a major gas pipeline from Turkmenistan to pass through Turkey, which would then have two sections. One would go to Europe and another would run southwards through Syria, Lebanon and Israel.

There is a rival project to build a marine gas pipeline from a southern Turkish Mediterranean port to Israel and proposed to feed both Lebanon and Cyprus. This has been promoted jointly by TransCanada, Gazprom, Botas and an Israeli company - among several pipeline projects proposed to run from Turkmenistan (see Part 3).