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LUKoil Operations.

LUKoil in early September said in the first half of 2014, it had spent $301m in its Uzbek E&P operations, up 16.2% over the same period in 2013. It said it was working on realisation of three projects under EPSAs: the Kandym-Khauzak-Shady system involving groups of gas fields, development of the south-western Hissar field, and the exploration of the Aral Sea's Uzbek sector as part of a consortium (as mentioned above).

The total cost of the first two projects is $4.34bn, including Kandym-Khauzak-Shady at $3,146bn over the related EPSA period, and Hissar at $1,196bn.

In addition, LUKoil is conducting exploration at the Western Aral structure, jointly with UNG, CNPC and Korea National Oil Corp (KNPC) - Petronas of Malaysia having abandoned its stake in this and left the country in early 2014 (see omt16UzbProdOct20-14).

LUKoil says it plans to produce in Uzbekistan at least 18 BCM/year of natural gas by 2020, with the rise in output to begin from 2018. This compares with 4.3 BCM/y in 2013. LUKoil's cumulative gas production in this country up to mid-2014 stood at over 22 BCM.

LUKoil until now has been the largest foreign investor in Uzbekistan's petroleum sector. Since 2004, the company has invested over $3bn in the Uzbek economy. The total funds LUKoil plans to spend in implementation of the Uzbek projects will amount to between $5-7bn, depending on project costs in 2015-20.

The E&P blocks are operated by the LUKoil Uzbekistan Operating Co. This is a unit of LUKoil Overseas Holding Ltd., which represents the group's interests in oil and gas production out of Russia.

In August 2014, the Asian Development Bank (ADB) said it was considering to provide about $150m in additional funds to LUKoil for the Kandym project. These will be in credits and guarantees on commercial risks. LUKoil Uzbekistan in March 2012 signed an agreement with a consortium of banks for a loan of up to $500m for the Kandym Hauzak-Shady-Kungrad programme, being implemented under an EPSA. The deal was signed in Tashkent.

The financing consortium includes the ADB, the Islamic Development Bank (IDB), Credit Agricole CIB, BNP Paribas (Suisse) and the Korea Development Bank (KDB). In that ADB gave LUKoil $100m in loans and guarantees on risks for the commercial part of a $200m financing. That loan was for development of the Kandim group of fields and a production increase in the Hauzak-Shady system.

In the Kandym-Hauzak-Shady-Kungrad EPSA, LUKoil holds 90% and UNG has the remaining 10%, with the Russian major to provide all the financing and bring on stream the Kuvachi and Alat Kandym gas fields as well as the northern part of Dengizkul field of the Shady sector by Dec. 30, 2014.

In the meantime, the Tashkent government was to have approved construction of a related gas processing plant and plans to develop the Kandym group of gas fields.

The first phase of the GEA Kandym development plan with a planned capacity of 8 BCM/y should be presented to the government by Oct. 1, 2016. This group consists of six gas and condensate fields. The recoverable reserves of this group have been put at 330 BCM of gas, with a plateau production potential of 11 BCM/y. The EPSA for this was signed in 2004.

Three years later, a group of gas deposits at the Hauzak-Shady fields was put into operation. From the beginning of 2014, cumulative production at the Khauzak-Shady was 20 BCM of gas. The gas is totally exported to Russia from Uzbekistan's main networks via the OJSC Gazprom network of pipelines in Central Asia.

At present, LUKoil's operating priority in Uzbekistan is the implementation of the three projects - Kandym-Hauzak-Shady-Kungrad, the exploration and development of the South-Western Hissar group of fields, and exploration of the Uzbek sector of the Aral Sea as part of the consortium.

LUKoil in May 2014 reported a delay in work on the South-Western Hissar group in southern Uzbekistan, which it said will not be completed before 2016. This group's output will be 4.8 BCM/y. Earlier, the launch of the main facilities for this had been scheduled for 2015. LUKoil discovered South-Western Hissar's extensions in September 2012. The fields there contain condensate.

South-Western Hissar's extensions (in the Gissar block) are located in the Kashkadarya region. The 2012 exploration well there was drilled to a depth of three km. The well's test-flow was put at 650,000 CM/d of gas and about 70 tons/d of condensate. LUKoil in May said the new fields' resource base assessment and its development costs were to be annunced later in 2014.

LUKoil on Dec. 30, 2011 said it had begun producing the first batch of gas at the first South-West Hissar group of fields. The gas output target from that group was then estimated to be 1.1 BCM/y at the initial stage. The next phase was to involve construction of a gas treatment unit and commissioning of two large deposits - Adamtash and Gumbulak.

Apart from the drilling of more than 40 gas production wells, Phase-II was to also involve construction of external power lines, a gas collection and treatment system, a gas pipeline, a condensate pipeline, a rotation workers' camp, a field support base and the engineering infrastructure facilities. The planned output target then was put at 5.8 BCM/y.

On Nov. 8, 2007, LUKoil and UNG began supplying natural gas from the Khauzak field, in the Bukhara-Khiva region of south-western Uzbekistan, developed under the Kandym-Khauzak-Shady-Kungrad-Dengizkul programme. LUKoil then said these five fields were eventually to be among the main gas producers in Uzbekistan. Production was then coming from a gas treatment plant built to process the gas out of five wells in Khauzak. In turn, the gas went to a refining facility at the Mubarek gas plant and from there it was exported via Gazprom's Central Asia-Centre Pipeline, tied in from a spur line linking Mubarek to Dengizkul.

In return for UNG raising LUKoil's stake from 70 to 90%, the private Russian company took on responsibility for all investment. The share of production, to depend on profitability, was to fluctuate from 50% to 80%. The JV's share in profit production is 50%. The volume of approved original gas in place in the contract area in 2012 was said to total 329 BCM.

LUKoil has an LPG plant built at Kandym, where the 150 BCM field has been developed on a fast-track basis. In February 2010, LUKoil had launched a full-scale development of Kandym. Apart from drilling many operational wells, LUKoil began work on having a plant built at Kandym to strip the sulphur content of the gas and to dry the raw materials for export.

As part of a $5bn outlay, LUKoil was is to have a chemical complex with a natural gas processing capacity of up to 8 BCM/y, 6.5m t/y of purified gas, about 213,600 t/y stable condensate, 17,500 t/y of LPG and 191,100 t/y of sulphur by end-2011 (see the background in gmt16UzbProdOct15-12).
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Publication:APS Review Gas Market Trends
Geographic Code:9UZBE
Date:Oct 20, 2014
Words:1178
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