Tethys' subsidiary, Kulob Petroleum Limited, ("KPL") has signed a 1-year gas sales contract with OJSC Kulyabgaz to supply gas to the town of Kulob in Southern Tajikistan.
The price under the contract is fixed for the period of the contract at 300 Somoni (approximately US $86 per thousand cubic metres ("Mcm") (US $2.44 per thousand cubic feet ("Mcf")) and the initial contract is to supply up to 65,000 cubic metres (2.3 million cubic feet) of gas per day. Initial limited gas supply has now commenced and the gas is being delivered through a 12 kilometer (7.5 mile) pipeline from the Khoja Sartez Field on which KPL has commenced initial work on existing wells that it has rights to under the Bohktar Production Sharing Contract (the "PSC") signed in June 2008. Work on upgrading the gas delivery system is now being considered.
Tethys recently announced gas has been successfully tested from the Khoja Sartez 22 well ("KJZ22") at estimated rates (based on wellhead pressures) up to 80,000 cubic metres (2.8 million cubic feet) per day on a 12mm (30/64ths of an inch) choke with a flowing tubing head pressure of some 40 atmospheres (588 psig), with these rates being subject to verification when more accurate metering equipment arrives onsite. The Khoja Sartez gas condensate field is located on the north east flank of one of the several large salt domes in the Kulob area, and Tethys believes that there is further potential both for additional gas production from existing wells, and from deeper, as yet undrilled horizons within the structure, and around other parts of the Khoja Sartez salt dome.
In parallel with this work KPL, through the Operator under the PSC, Tethys Services Tajikistan Limited, is also working on the Komsomolsk gas field near Dushanbe, the capital city of Tajikistan. where it is currently working on three existing gas wells. Once sustained production is achieved it is planned to conclude a similar contract there where it is expected to realise a higher price than this contract due to higher demand and the fact in Dushanbe pricing will be related to a formula linked to the current import price. Tajikistan has little domestic gas production and is a net importer of gas with the gas being transported from Uzbekistan. It has been recently announced that Uzbekistan has increased the price of its gas to Tajikistan to US $240 per Mcm (US $6.80 per Mcf).
Dr. David Robson, CEO and President of Tethys, commented, "We are delighted to have concluded this initial gas contract and hence begin to monetize our work in Tajikistan. It is our company strategy to generate early cash flow in all our focus areas, whilst moving forward with an active exploration program for potentially large oil and gas prospects. This is an important first step to achieving this and we expect the demand in the Kulob area to be much larger than the quantity we have currently agreed. In the near future we hope to replicate this success in the Dushanbe area where the dynamics of the gas pricing should be even more favourable."
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