Tethys Completes Kyzyloi Gas Pipeline

Tethys Petroleum has completed construction of the 35-mile (56 km) gas pipeline, and 8 miles (13 km) of additional tie-in pipeline, from the Kyzyloi Gas Field, and has pressure-tested the system flowing gas down the entire length.

The pipeline is located on TPL's west Aral properties and will connect the Kyzyloi Gas Field to one of Central Asia's major export trunklines. The Kyzyloi Field and surrounding accumulations contain sweet dry gas reservoired in good-quality sandstones at a depth of less than 2,000 feet (600 meters). The initial gas production rate is planned to be 22 million cubic feet per day (MMcf/d) (623 thousand cubic meters per day (Mcm/d)), but the pipeline infrastructure has been put in place with the intention of supporting a much larger capacity production rate of up to 72 MMcf/d (2,039 Mcm/d) with TPL intending to achieve this from exploration in the surrounding area.

With the Kyzyloi pipeline system now completed and tested, all that remains to commence gas sales is the tie-in of the pipeline to the major Bukhara-Urals trunkline, integration of the Kyzyloi compression and control systems with the trunk-line systems and final certification of the system by a senior governmental commission. The tie-in will be carried out by Intergas Central Asia (part of the Kazakh State gas company KazTransGas) who own and operate the trunkline. Now that the pipeline has been completed and TPL has met its obligations the State can now proceed with the tie-in to the main trunkline. Once this has been carried out then the high level Kazakh government commission will visit the operation to provide full certification of the system following which commercial gas deliveries will commence, these being expected in October 2007. TPL believes that this is one of the first significant pipeline systems constructed by a non-state company for the development of a dry gas field.

As a result of earlier drilling operations, re-completions on certain existing wells and the success of two exploration wells, TPL has already tested aggregate gas production in excess of 40 MMcf/d (1,133 Mcm/d). TPL has identified more than 27 additional drilling locations on its Akkulka and Kul-Bas Exploration Contract Areas, which have the potential to significantly increase production. TPL is currently finishing a 5-well exploration program and intends to drill a further 10 wells by June 2008. The Kyzyloi gas development is one of the first dry gas developments in Kazakhstan and is commercially underpinned by a long-term take-or-pay gas offtake agreement. Regional gas prices have increased significantly recently, and Tethys expects to benefit from these rising prices as additional gas is brought on production.

David Robson, Chairman, President and Chief Executive Officer of TPL, who was present at the pipeline testing, commented: "The completion of this pipeline is an important milestone for Tethys and allows us to now move forward and monetize our discovered gas reserves in the Kyzyloi Gas Field and the surrounding Akkulka Block. We look forward to further test results of our current exploration program, which we should have imminently, and also to the additional 10 shallow gas wells we plan to drill over the next 12 months. Success in these will ensure we are well on our way to achieving our capacity production. I would like to take this opportunity to thank the Tethys operations team and their contractors who have worked extremely hard in difficult conditions to complete the pipeline."


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