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Normally the PSAs in Turkmenistan are for 25-year production periods with possible five-year extensions. They are negotiated on a case-by-case basis. But the main terms are uniform in all PSAs, under the petroleum law.

In the Turkmen sector of the Caspian, there are two PSA operators: Petronas of Malaysia and Dragon Oil of Ireland. Dragon, producing oil in the Turkmen sector of the Caspian (see Part 2), is controlled by Dubai's state-owned Emirates National Oil Co. (ENOC).

On April 20, 2006, President Niyazov told his cabinet Turkmenistan's onshore oil and gas fields will be off-limits to foreign firms. He said foreign investors would be allowed to work fields in Turkmen section of the Caspian Sea, on condition the output was shared equally between the two sides. He said: "Take it as a law: land is not to be given away, at sea we can work as equal partners". He said some unnamed foreign firms had shown interest in the oil-rich Gasankuli area on the southern shore of the Caspian. "There are oil-rich lands there. Why should we give them to somebody? We will work there ourselves".

Niyazov's 2006 target is to produce 10m tons of crude oil and 80 BCM of gas. Turkmenistan is the second largest natural gas producer after Russia among the post-Soviet countries. Niyazov, who has ruled the energy-rich Central Asian nation with an iron fist for 20 years, holds absolute power and makes all decisions for the petroleum sector.

Petronas in mid-1996 was the first company to get a PSA. It moved into offshore Block 1, 1,467 sq km, with a 100% interest. This has proved to be rich in petroleum. In September 2002 Petronas made a big discovery with its East Livanov 2A well, where three tests had 14,176 b/d of oil and 19.05 MCF/d of gas in a Pliocene Variegated series. This was the fourth probe to be sunk in block 1 (Gubkin).

After subsequent finds, Petronas said the results supported the view of high prospectivity in the Turkmen sector of the Caspian. Potential reserves in the three earlier finds - East Livanov, Gubkin and Barinov - were put at about 2.6 bn barrels of oil equivalent.

Further exploration and appraisal drilling stopped after the fourth well was dug in 2003 because of technical problems. Work was restarted in April 2004. Then visiting Ashgabat, Petronas' CEO Mohammad Merican told President Niyazov the company would begin oil production in mid-2005 and gas production by end-2007. He said Petronas planned to drill another three wells.

In 2000 Petronas extended the exploration licence by another three years to Nov. 8, 2005. In 2002 it invested over $47m in Block 1, mainly in drilling. Marican said the company would also continue to interpret the seismic information it had received and will build a model of the beds at the block.

ExxonMobil, however, pulled out of Turkmenistan 2002 after disappointing results at the onshore Garashsyzlyk-2 block in the west of the country. Following test drilling begun in 2001, it said investment in the block's fields, Kotur Tepe/Barsa Gelmes, was not justified. It closed its offices in Ashgabat and Balkanabat.

The block's reserves have been estimated at about 1 bn barrels of oil equivalent. ExxonMobil's partners in this were Monument Oil & Gas of the UK (Lasmo, now is part by Agip), and TurmenNeft (see Vol. 55, No. 10).

Burren Energy, which bought out Monument Oil & Gas in the onshore Nebit Dag block, is developing its Burun field. It is embarked on extensive re-completion programme on more than 100 wells. It has 50 wells producing about 10,000 b/d of 33[degrees] API sweet crude oil. It exports its production in tankers that ply the Caspian, carrying the crude to Iran and Azerbaijan (see Part 2).

The company also holds four other developed oil and gas fields within the Nabit Dag PSA as well as a number of prospective discoveries.

Pado Oil, an Austrian firm, has a PSA with TurkmenNeft that covers the Khazar concession in the eastern Cheleken region. This PSA was signed in 2000.

So far, however, there has been little activity beyond studying data on the Southern Kamyshlydja prospect provided by TurkmenNeft.

Tracer Petroleum and the local CanNeft in late 2001 formed a JV, under a PSA, to develop the Adzhiyap gas field in south-western Turkmenistan, bordering Iran to the south and the Caspian Sea to the west. CanNeft has estimated the field's reserves at 3-6 TCF.

The block has 12 structures. One of these, drilled in the 1980s, logged a gas column of 60 metres. Testing then was prevented due to a collapsed casing.

The Zarit consortium of Russian companies and TurkmenNeft has been negotiating with President Niyazov for three offshore blocks - Nos. 29, 30 and 31. But the talks have been dragging on since late 2002. Russian firms involved are Itera, which has had a close relationship with Niyazov for years, state-controlled Rosneft and ZarubezhNeft. On Sept. 7, 2004, Itera's CEO Igor Makarov and Russia's National Reserve Bank (NRB) Chairman Yury Kudimov visited Niyazov and reiterated their commitment to the Zarit venture, with the NRB to finance the project.

Niyazov's press office said Makarov "briefed the President on progress towards an agreement to explore and produce oil [at Blocks 29, 30 and 31]. The high interest of all the Zarit co-owners in participating in the joint project was reiterated". It said Niyazov told the visitors "3D seismic exploration indicates that the offshore blocks contain huge energy resources, hence the strong interest shown by potential investors and developers. Their plans to tie their business with Turkmenistan are stimulated by the successes of a number of foreign companies, which are conducting fruitful oil and gas exploration and production in the Turkmen sector of the Caspian Sea".

Later Makarov and Kudimov told reporters their meeting with Niyazov "resolved most issues regarding preparations for the Zarit project". They said an agreement to develop the three blocks could be signed soon. This was to be the biggest Russian E&P involvement in Turkmenistan.

TurkmenNeft became a partner in Zarit in February 2004, getting 15%. Rosneft and Itera hold 31% each in this. ZarubezhNeft holds the remaining 23%.

In March 2004, the NRB received an exclusive mandate on settling Turkmenistan's debt to Azerbaijan, Georgia and Kazakhstan totalling $500m. The bank received the right to work with Turkmenistan debt claims before various Russian banks totalling $50m. NRB was to act as adviser as well as financier for Zarit.
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Publication:APS Review Gas Market Trends
Geographic Code:9TURM
Date:Sep 18, 2006
Previous Article:TURKMENISTAN - E&P Offers.
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