Tethys has received final governmental approval for the Akkulka Gas Production Contract - Phase 2 of the Kyzyloi/Akkulka gas development.
Final approval was granted for the Akkulka Gas Production Contract (the "Production Contract") by the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan ("MEMR") which gives Tethys' wholly owned Kazakh subsidiary TethysAralGaz LLP ("TAG") the exclusive gas production rights in the Production Contract Area for an initial period of nine calendar years. This approval marks a major milestone for the company with the initial planned gas flow rate from the Production Contract Area being some 20 million cubic feet per day (MMcf/d) (560 thousand cubic metres per day (Mcm/d)) of natural gas. This is in addition to TAG's Kyzyloi Field gas production which, although currently temporarily suspended at the request of the trunkline owner Intergas Central Asia ("ICA"), is at approximately the same rate, giving combined Kyzyloi / Akkulka production of approximately 40 MMcf/d (1,120 Mcm/d) when both fields are fully on stream.
George Mirtskhulava, General Director of TAG and Head of Tethys' Kazakh Business Unit, commented, "We have been working very hard on obtaining this contract approval for some time now, and our negotiating team in Astana have done a great job in getting this contract approved before the end of this year. Once we have negotiated a suitable gas sales agreement for this gas and commenced production we will be generating substantial cash flow from our Kazakh gas production helping, together with our Uzbek oil production, to underpin the Company whilst we move forward with our other projects such as our recent oil discovery in Akkulka, and our exciting exploration portfolio in Tajikistan. This is a really good Christmas present!"
Obtaining contract approval involved the verification of State approved C1 reserves and the approval of six state authorities - MEMR's Committee of Geology, Ministry of Justice, Ministry of Economy and Budget Planning, Ministry of Environmental Protection, Ministry of Public Health, and the Ministry for Emergency Situations. The initial size of the Production Contract area is some 109.5 km2 (27,058 acres). The initial seven wells assigned to this Production Contract are already tied into to Tethys' existing Kyzyloi pipeline infrastructure and additional compression has already been installed and tested at Tethys's booster compressor station ("BCS") on the Bukhara-Urals gas trunkline. These wells all produce almost pure methane gas from a depth of approximately 450 metres (1,476 feet). As such production of Akkulka gas can commence immediately a gas sales agreement has been signed and ICA allocate space in the pipeline system. Unlike Kyzyloi gas which is being sold under a long-term fixed price sales contract Akkulka gas is uncontracted, and now that the Production Contract has been signed negotiations can begin with potential gas buyers on pricing and offtake with a view to commencing gas sales in the early part of the New Year.
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