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Turkmenistan - Dragon Oil In Cheleken.

Originally Irish, Dragon Oil is the main foreign oil producer, with TN having a share in this JV. Its output from an offshore Cheleken block averages about 90,000 b/d, but its capacity is 100,000 b/d. The crude oil is of high quality as it is light with low sulphur content.

Dragon also produces almost 150 MCF/d of associated gas. It has said its block contains 3.5 TCF (100 BCM) of recoverable reserves of natural gas which are to be developed on a large scale. Dragon has since 2000 spent $5bn in the EPSA area and in a processing plant to lighten its crude.

Dragon operations are in offshore Blocks 2&4, where it produces from two oilfields: Lam and Zhdanov. Dragon's contracted area is 950 sq km at the eastern end of the Apsheron Ridge in the Caspian Sea. The company exports all of its oil output through Azerbaijan. The company sees positive oil production responses from water injection for pressure maintenance and artificial lift via jet pumps.

A water injection pilot plant in the Lam-75 area started up in June 2013. Dragon had expanded water injection before end-2014. It installed jet pumps in June 2013 in two wells on the Lam 13 platform which led to a production increase of up to 700 b/d per well. It has added a jet pump to a third well and installed them on other platforms in 2014.

Dragon in September 2013 gave a contract to quadruple its onshore crude oil storage capacity with completion of three large tanks made ready in late 2015. In 2014, it awarded a contract to add a 30-inch pipeline from Lam field to the central processing facility, and partial replacement of the two existing 12-inch pipelines made ready in the same period. It has a gas treatment plant built there.

Oil and associated gas production has surged, although a number of wells were choked to minimise sand extraction in the second quarter of 2012. De-sanders have been installed in the problem areas, and all the producing wells now are equipped with de-sanding devices. The company put 16 wells on stream in 2012 alone.

Block 4 is used as a gathering centre for fabrication of the production platforms in Zhdanov field. These platforms are suitable for drilling by a jack up with eight slots each initially. Structural up-grades have been made there.

In 2013, Dragon tendering contracts for construction and installation of the Lam F, G, and H platforms and associated pipelines. Geophysical and geotechnical investigations to evaluate locations for the platforms had been done by the company already. In 2012, Dragon had received a complete survey of 10 sites for the platforms and gathering stations. By then, it had awarded a contract for front-end engineering and design (FEED) work to increase crude oil storage capacity at the central processing facility.

This FEED work has included, among other aspects, application for land use and construction of bigger storage tanks. First tank construction begun in 2012 has been completed.

In 2012-13, Dragon reviewed a strategy for plugging, abandonment, and de-commissioning of old non-producing wells and platforms in the EPSA area. That was part of the activities it had under-taken under the EPSA. The cost of the project was to be covered from abandonment and de-commissioning funds.

Dragon has been supplying a major portion of its un-processed gas into its system's compressor station. This has allowed a considerable reduction of associated gas flaring. Construction of more of such facilities was to require another two to three years after a contract was awarded.

Plant capacity is expected to reach 220 MCF/d of gas, which should allow Dragon to strip 2,900 b/d of condensate and blend its share of condensate with its entitlement of crude oil. The split of the produced condensate is subject to the same terms under the JV with TN as crude oil.

Dragon Oil first moved into Turkmenistan in March 1996 as it bought the stake of IPC Turkmenistan Ltd, a wholly-owned unit of Int'l Petroleum Corp of Canada. By then, the venture had been led by Larmag Energy NV of the Netherlands. Dragon raised its interest in Block 2 to 100% in 1999, when it signed its EPSA which went into effect in 2000. Later, under pressure from late President Niyazov's dictatorship, TN acquired a stake in the blocks and Dragon was compelled to turn its EPSA into a JV.

Larmag had acquired the block in 1992 in JV with ChelekenMorNefteGaz (CMNG), now a unit of TN. Larmag in 1992 took another block. Its Bermuda-registered unit, Larmag Energy Assets, hired Santa Fe and Monument Oil & Gas as operators for the two blocks. But for Block 2 the operatorship later changed.

On July 1, 1995, IPC Turkmenistan became operator in Block 2 as it acquired 60% of Larmag's 50% stake. But Ashgabat rejected IPC's participation and the company withdrew from the JV in early October 1995 after receiving $13.2m in compensation from Larmag.

In March 1996, Dragon bought IPC's stake and became operator. Block 2, located 20-40 km off the Turkmen coast, includes the Cheleken oil structure. The fields' processing facilities are onshore near the Turkmenbashi oil refinery (see background in omt13TurkmProdSep27-10).

ENI (Ex-Burren Energy) In Nebit Dag Venture: Burren Energy of the UK, part of ENI, produces 25,000 b/d of crude oil from the Burun fields, up from 22,000 b/d in 2007 and 17.500 b/d in mid-2006. It is developing Burun, the biggest set of fields in the Nebit Dag area. Most crude oil produced is divided between TN and ENI.

In November 2009, ENI's then CEO Paolo Scaroni and the then Director of The State Agency for Management and Use of Hydrocarbon Resources, Yagshygeldy Kakayev, signed an MoU to promote and boost co-operation in development of Turkmen petroleum resources. The ceremony was attended by President Gurbanguly Berdimukhamedov and then Italian PM Sylvio Berlusconi.

The MoU followed a meeting between the Turkmen president and ENI's CEO held in Ashgabat on Oct. 26, 2009. Under the MoU, ENI in co-operation with the State Agency and the relevant Turkmen state bodies was to do studies aimed at enhancing the country's petroleum potential, by making available the Italian group's integrated experience and its knowledge in terms of sustainable development. Additionally, ENI was designing an intensive training plan for Turkmen petroleum experts. ENI had been present in Turkmenistan since 2008 when it acquired Burren Energy.

The Nebit Dag EPSA includes deep reservoirs beneath the Nebit Dag and Kum Dag fields, whose shallow formation had been virtually worked out. Nebit Dag went on stream in late 1997 and now is producing 30-36? API oil. Originally the output of this and other fields was to reach more than 50,000 b/d before end-2000. But the fields are producing far less than that. In 1995 it was agreed the fields' peak output after re-habilitation should reach 180,000 b/d by 2006. Independent experts then said such a target was too ambitious and may not be reached before 2017.

The EPSA gives the partners rights to a condensate field of Kyzl Kum and the Kara Tepe gas field. It has been said Nebit Dag and near-by satellites contain 2bn barrels, with a recovery factor of 25-35%. It was said Garashsyzlyk block's reserves could be as great, or greater than, those of Nebit Dag. Ashgabat in 1995 said the two blocks could raise output in western Turkmenistan to 500,000 b/d by 2006/07. Again such a target has proved to be too ambitious.

ENI, Italy's largest energy group, on Jan. 10, 2008 said its British holding company had taken control of 77.42% of shares in Burren Energy, a move which ruled out speculation about competing offers. ENI had announced an all-cash [pounds sterling]1.74bn deal to acquire Burren in November 2007, boosting its portfolio in the Congo and the Caspian basin.

Burren was an independent oil and gas E&P group with assets in the Caspian region, West Africa, the Middle East and India. ENI, one of the world's largest energy groups, has made acquisitions in West African countries like the Congo and Angola, the US and Russia as it seeks to boost output and gain a foot-hold in countries with strong potential E&P assets. It operates in over 70 countries in the oil and gas, electricity generation, petrochemicals, oilfield services and engineering industries.

Petronas In Block 1 Venture: Petronas of Malaysia operates the offshore Block 1, where the Diyarbekir oil and gas field is producing 15,000 b/d of crude oil and about 20 MCF/d of gas mostly associated and partly not associated with the oil output. Crude oil production is planned to rise considerably, from 10,000 b/d in mid-2005, with Petrobas hoping to become a major exporter of non-associated gas from Turkmenistan.

Petronas in mid-1996 was the first company to get an EPSA. It moved into Block 1, 1,467 sq km, with a 100% interest. This has proved to be rich in petroleum. In September 2002 Petronas made a 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 gas and oil discoveries - East Livanov, Gubkin and Barinov - were put at about 2.6bn barrels of oil equivalent in place.

Further exploration and appraisal drilling stopped after the fourth well was dug in 2003 because of technical problems as the field proved to be far more complex than the Malaysian company had anticipated. Work was resumed in April 2004.

Visiting Ashgabat, Petronas' then CEO Muhammad Merican told then 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 its exploration rights by another three years to Nov. 8, 2005. In 2002 it invested over $47m in Block 1, mainly in drilling. Petronas in 2004 said it was to continue to interpret the seismic information it had received and was to build a model of the beds at the block.

Petronas later got a further extension of its EPSA, with Ashgabat hoping the company would be able to discover large oil reserves in the block.

Petronas estimates that the Diyarbekir formations have about 5.3 TCF (150 BCM) of natural gas reserves. RPI Research has said the non-associated gas reservoir has the potential ultimately to produce 353 BCF (10 BCM) per annum for 20 years - with the first phase to have an output of 5.5 BCM/y.

Petronas wants to export the gas out of the country, with Ashgabat in late 2007 suggesting this could feed a 20-30 BCM/y gas pipeline to be built around the Caspian to the Russian market.

On Sept. 15, 2010, then Turkish Energy Minister Taner Yildiz said Ankara may seek to buy all the 5.5 BCM/y of planned Phate-1 natural gas output from Petronas. It was then said that the gas could be moved in compressed (CNG) form or converted to LNG and shipped via a pipeline. It would be destined for Turkey's domestic market or re-exported, Yildiz told reporters after holding talks with his Turkmen and Azeri counterparts.

Yildiz then said: "There is 5-to-5.5 BCM/year where Petronas is now working. We expressed to the Turkmen minister [the view] that we may like this gas. We do not see an obstacle to sending this gas to Turkey or via Turkey to other countries. We could make an offer for all of it".

Ankara and its EU partners in the then proposed Nabucco gas pipeline project at the time were seeking suppliers for the Turkish link, which was said to be able to reduce Europe's reliance on Russia for a quarter of its gas. The Nabucco project, which was planned to pump the gas to Europe, has since been cancelled, after having failed to guarantee any firm suppliers.

Partners in this project then cited Turkmenistan, along with Azerbaijan, Iraq, Egypt and Qatar as potential suppliers. Yet, apart from potential problems for gas supplies from Azerbaijan's Shah Deniz-II project, the Iraqi export issue was problematic. Baghdad and the Kurdistan Regional Government (KRG) in the north are yet to agree on the matter (see ood3IrqNabuccoSep27-10).

Even a smaller version of this project, Nabucco-West, did not materialise. That was because a rival project, the EU-bound Trans-Anatolian Pipeline venture (TANAP) has entered the implementation phase, depending on Shah Deniz-II and total support from Ankara. TANAP is planned to link up with a European gasline - called Trans-Adriatic Pipeline (TAP) which will be taking the gas to the EU markets from the Greek side of the border with Turkey.
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Publication:APS Review Oil Market Trends
Geographic Code:9TURM
Date:Sep 26, 2016
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