Tethys Petroleum has provided an operations update on its activities in Kazakhstan, Tajikistan and Uzbekistan. Tethys is the only independent oil and gas production and exploration company in all three of these Central Asian countries.
In Kazakhstan the first deep exploration well to be drilled by Tethys, the Akkulka deep well (AKD01), is drilling ahead currently at a depth of 2,250 meters (7,382 feet) with a planned total depth of between 3,400 meters (11,155 feet) and 4,500 meters (14,764 feet), dependent on results. It is also the first well drilled by Tethys with its new ZJ70 drilling rig ("Telesto"). An independent resource report carried out in 2007 by McDaniel and Associates estimates that the deep structures in the Tethys licenses in Kazakhstan potentially contain up to 690 Million Barrels of Oil Equivalent of un-risked mean prospective resources. The well is targeting Middle and lower Jurassic to Triassic syn-rift leads and prospects which are often located on inverted structures in a variety of orientations around the Akkulka high and especially in the central and eastern part of the block. It is expected that the well will reach total depth and logging will commence in early September 2009.
Also in Kazakhstan full gas production from Phase 1 on the Kyzyloi Field has resumed and production is currently 513 Mcm/d (18.12 Mmcf/d). Restrictions further up in the Bukhara-Urals Gas line had temporarily reduced output to approximate half full production capacity.
The Kyzyloi Field is now producing from eight wells, which includes the recently commissioned G12 and G16 wells, and is expected to stabilise at approximately 566,000 Mcm/d 20 Mmcf/d per day over the next week.
Phase 2 gas production, from the Central Akkulka Field, is tested, tied in and the compressors are fully installed and the system has been certified by a Kazakh State commission. Production is expected to commence upon the execution of a production contract with the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan, the terms of which have already been agreed. It is expected that this contract will be executed in September of this year. Phase 1 gas is contracted under a long-term take-or-pay contract but the Phase 2 gas can be sold on the open market. Gas prices have been volatile in the region following the fall of crude oil prices so it is difficult to forecast the price for the gas under the new contract, though it will certainly be much lower than industry related forecast prices in 2008. The project has low operating costs so would be expected to be profitable even at the lower prices.
In Tajikistan drilling is about to commence on the Komsomolsk 200 well ("KOM200"). This well is the first well drilled with the Company's ZJ30 drilling rig ("Tykhe"). This well is targeting reserves and contingent gas resources in the eastern part of Komsomolsk gas field under the northern part of the city of Dushanbe. Tethys believes that undeveloped gas lies in this eastern part of this field. This is first new well that Tethys has drilled in Tajikistan since signing the Bokhtar Production Sharing Contract ("Bokhtar PSC") in June 2008. The second well in the program, the Komsomolsk 201 well, is planned to be spudded later in the year.
In an independent reserve and resource report commissioned earlier in 2009 on the Komsomolsk Field, located near and under the city of Dushanbe, Prospective and Contingent Resources were assessed at a gross unrisked summed mid-case of some 74.95 billion cubic feet (Bcf) of natural gas and with Proven plus Probable Gross Reserves being assessed as 1.55 Bcf of natural gas plus a small amount of gas condensate. Any success on these wells would most likely move the Contingent Resources into the Reserves category. This field lies next to the capital city Dushanbe and has existing pipeline infrastructure in place. Currently Tajikistan imports almost all its gas at a price which Tethys believes to be US$240 per thousand cubic metres (US$6.80 per thousand cubic feet).
Additionally drilling is proceeding on the East Olimtoi (EOL09) exploration well located on a salt flank prospect to the south west of Kulob in Southern Tajikistan just north of the Panj River. The well is currently at a depth of 2,604 metres (8,543 feet) with an intermediate casing point to be reached soon. This well is targeting potential reservoirs in the Paleogene sequence, which are productive further north in both the Beshtentak oil field and the Khoja Sartez gas condensate field. The total planned depth of this well is between 3,800 and 4,500 metres (12,467 and 14,764 feet).
Also in Tajikistan the seismic program in the 34,751 km2 (8.6 million acres) Bokhtar PSC area is well under way with seismic data having been gathered in the area around Dushanbe, and with crews acquiring data in the Kulob area in the eastern part of the Bokhtar PSC area.
The current seismic acquisition program is targeting the most optimal areas uncovered by the independent reserve report that concludes that the gross unrisked Prospective Resources in the Bokhtar PSC area at a "mid case" total some 1,132 million barrels oil equivalent (MMboe).
Some of the key conclusions of the Resource Report were that there are a large number of leads in several horizons that have been identified in the PSC Contract Area and that a large number of these leads are relatively shallow and would be relatively inexpensive to drill.
The Resource Report states that one of the uncertainties with this play is the type of hydrocarbon that would be encountered and the resources reported are based on the assumption of a 60% chance of encountering oil and a 40% chance of encountering non-associated gas. The "mid case" is considered the best estimate based upon the outcome of a probabilities analysis. This term is a measure of central tendency of the uncertainty distribution.
Tethys believes that the Bokhtar PSC area has considerable potential for oil and gas condensate. The area includes almost the entire Tajik portion of the Afghan-Tajik basin, an extension of the prolific Amu Darya basin, which contains giant and supergiant gas and gas condensate fields in nearby Turkmenistan and Uzbekistan. A hydrocarbon system exists in the Contract Area but only limited exploration has taken place in the past. Several reservoir horizons are present and both sweet light oil and gas condensate has been produced. Salt tectonics dominate the southern part of the area where numerous salt domes provide the potential for substantial hydrocarbon traps.
It is the Company's strategy to develop appropriate shallower and already discovered deposits and to obtain high quality data, work up the most optimal prospects, and then farm out parts of the acreage to funding partners, whilst retaining a carried interest.
In Uzbekistan current gross incremental oil production from the North Urtabulak Production Enhancement Contract ("PEC") is 2,065 barrels of oil per day (bopd), 1,031 bopd net to Tethys interest after the government's take. This represents a significant increase in oil production since Tethys took over the project in April 2009. The net realised price for crude oil after processing, transportation, marketing and all export tariffs was approximately US$27 per barrel for June's production.
The North Urtabulak Oil Field is located in southern Uzbekistan in the northern portion of the Amu-Darya basin. Under the PEC the Contractor receives a share of incremental production from individual wells it works on. The North Urtabulak Field produces from a Jurassic age reef structure at a depth of about 2,500 meters (8,202 feet). Surface elevation is approximately 320 meters (1,050 feet).
Part of the North Urtabulak field is under a zone of active salt movement which has had limited production in the past due to drilling difficulties (mobile salt). The Contractor has successfully drilled two new development wells in this zone, which is believed to have considerable upside for additional oil production in the future. It is planned to drill a new vertical well in this area later in the year as indicated in the use of funds in the recent financing. It is believed that this will significantly increase oil production.
Other techniques are being investigated for implementation including increasing the efficiency of the current gas lift system, installing down-hole electrical submersible pumps, and the possible implementation of modern radial drilling techniques.
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