Lukoil Begins Development of Khauzak Block in Uzbekistan


LUKOIL Overseas has drilling development wells in accordance with the field development plan of the Khauzak contract area of Dengizkul gas field (southwestern part of Republic of Uzbekistan).

Development of this field makes part of the Kandym-Khauzak-Shady-Kungrad PSA project. 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 being implemented by a consortium of investors, which includes LUKOIL Overseas (90%) and Uzbekneftegaz (10%). The consortium's share in 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 expected to start in the fourth quarter of 2007. Peak annual production of natural gas will exceed 10 billion cubic meters, while cumulative production under the project could reach 207 billion cubic meters of gas.

An operating company, LUKOIL Uzbekistan Operating, has been established for project management purposes. In the future LUKOIL will also create a marketing company for joint sales of production (including the share of the Uzbek party).

To date, a 3D field seismic survey has been completed on the Khauzak block, group designs for construction of development wells has been drafted, and construction of power lines, access road and preparation for the workover of three wells is in progress.

China drilling company TUHA, the winning bidder at the corresponding tender, is the drilling contractor. Horizontal well's depth - 3000 m, drilling time – 4 months. 37 new development wells will be drilled on Khauzak.

In total, Kandym-Khauzak-Shady-Kungrad project involves 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, a 40-kilometer railway line, motor roads and access roads will also be constructed. The project also involves construction of a modern gas processing plant in the Kandym area with a capacity of 8 billion cubic meters of gas per year. In total, investment under the PSA to date is around $100 million.