2014-02-27

Tethys eyes Kazakh gas for China

(Original Source: http://www.argusmedia.com/Mkting/Snip/Kazakh-Gas)

Central Asia-focused Tethys Petroleum aims to triple its gas production in Kazakhstan by the end of this year, with Chinese backing raising hopes of securing lucrative pipeline exports.

Chairman David Robson told Argus last week that he expects Tethys to drill 5-10 gas-focused wells in Kazakhstan this year and to work over wells that have been tested, but not yet tied in. Tethys sold a 50pc plus-one-share stake in its Kazakh arm to a subsidiary of Chinese private equity firm HanHong in November for $75mn, with potential performance-based bonuses.

"HanHong is confident that gas can be marketed into the Chinese market at a significantly higher price than we are currently getting in Kazakhstan," Robson said. HanHong has highlighted the fact that the second stage of the China-Kazakhstan gas pipeline, which will pass through Tethys acreage, should be operational in 2014-15. HanHong also said it expects Tethys to invest over $200mn in the Aktobe production province, home to Tethys' assets, with about half of this investment to come in 2014-15.

New contracts

Tethys produced 360,000 m³/d of gas in Kazakhstan in December. It signed new contracts with state-owned pipeline operator Kaztransgaz in January, covering sales from the Kyzyloi and Akkulka fields of up to 150mn m³/yr at a price of $90/'000m³, up from December's price of $65/'000m³.

Tethys' current oil output is 3,000-4,000 b/d and it made a $7mn loss in the first nine months of last year. Its Kazakh acreage holds 20mn bl of oil and 2.7mn m³ of gas, but it believes that there are potential resources of 1.3bn bl of oil equivalent (boe), including 1.2bn boe of crude. Tethys has been testing one of two exploration wells drilled in December and plans to embark on exploration drilling at a prospect near the Akkulka field this summer.

Robson says investors that are seeking new Kazakh resources are likely to be put off by bureaucratic difficulties in farming out stakes, which slows down the deal-making process, and by the state's pre-emptive right to block these kinds of deals.

"In many areas in central Asia, but also parts of Russia, there needs to be a much more aggressive campaign of exploration, leading to potential development of relatively modest-sized deposits," Robson told an IP Week forum in London on 18 February.

Robson said Tethys expects to start exploration drilling at its Bokhtar project in Tajikistan, where it partners Total and China's state-run CNPC, next year, following additional seismic work. The firm withdrew from Uzbekistan in January following the arrest of two employees.

This article was originally published in Argus FSU Energy on 27 February 2014.