Lukoil to Begin Drilling on Khauzak Block in Uzbekistan

LUKOIL Overseas has started preparation of equipment, accessories and materials for drilling development wells in accordance with the field development plan of the Khauzak contract area located in the Alatsky District of the Bukhara Region (southwestern part of the Republic of Uzbekistan).

Development of this field makes part of the large project, Kandym-Khauzak-Shady-Kungrad. The PSA on the project was signed on June 16, 2004 in Tashkent in the presence of the Presidents of Russia and Uzbekistan and came into force on November 24, 2004. The project is implemented by the consortium of investors, which includes LUKOIL Overseas (90%) and Uzbekneftegaz (10%). The consortium's share in the profit production is 50%.

The duration of the PSA is 35 years. The volume of approved original gas in place in the contract area totals 329 billion cubic meters. Commercial production is scheduled to start in the last quarter of the year 2007. The peak annual production of natural gas will reach approximately 10 billion cubic meters, while the cumulative production under the project could reach 207 billion cubic meters of gas.

The operating company LUKOIL Uzbekistan Operating has been created for the project management purposes. In the future LUKOIL Overseas will also create a marketing company for joint sales of products (including the share of the Uzbek party).

By now, a 3D field seismic survey was completed on the Khauzak block, group design for construction of development wells was prepared and construction of power lines, access road and preparation for the workover of three wells are in progress. Drilling of the first well on the Khauzak block will start in June 2006. In total, 37 new development wells will be drilled here.

In total, Kandym-Khauzak-Shady-Kungrad project calls for drilling of more than 180 development wells and construction of over 1,500 kilometers of pipelines. Two compressor stations, gathering points, shift camps, high-voltage power lines, 40-kilometer railway line, highways and access roads will also be constructed. The project also provides for construction of a modern gas-processing plan in the Kandym area with a capacity of 8 billion cubic meters of gas per year. As for May 1, 2006, the volume of investment in development of the block reached US $45 million.