Tethys Finds IOC to Partner at Promising Tajik Field

Source: www.gulfoilandgas.com 10/29/2012, Location: Asia

Central Asia-focused explorer Tethys Petroleum has signed a memorandum of understanding (MOU) with an international oil company (IOC) for partnership in Tethys' projects in Tajikistan, including a deep subsalt well at its Bokhtar prospect that has "super-giant" potential.

Tethys subsidiary Kulob Petroleum Ltd., the contractor party to the Bokhtar production sharing contract (PSC) in Tajikistan, announced Friday it had signed the MOU with a yet unspecified IOC and that the parties will now negotiate the terms of the farm-out agreement and joint operating deal, which will be executed in the near future. Tethys said in the summer that it hoped to bring in a partner with deep pockets to pay for the first-ever deep subsalt well to be drilled in Tajikistan, targeting a depth of 6 kilometers.

An independent resources report by US-based Gustavson Associates in June estimated that the exploration zone covered by Tethys' Bokhtar PSC holds "gross unrisked mean recoverable prospective resources of 27.5 billion barrels of oil equivalent, consisting of 114 trillion cubic feet (3.3 trillion cubic meters) of gas and 8.5 billion barrels of oil and condensate."

If such resources were realized, the gas reserves alone would be almost three times the size of BP's giant Shah Deniz field in Azerbaijan's sector of the Caspian Sea. Tethys Chief Executive David Robson said at the time the resources report was released that his company's unrisked mean prospective resources in Tajikistan are significantly greater than the estimated remaining reserves and unrisked resources in the UK North Sea (IOD Sep.11'12).

The first part to tapping these reserves will be drilling the deep well, which costs a considerable amount of money. A Tethys spokeswoman estimated that a 6-7 km-deep well would cost $30 million-$40 million.

By bringing in what it describes as "an international oil and gas company" as a partner at Bokhtar, Tethys is slashing its capital requirements and reducing its exploration risk. The move is, to some extent, designed to shield Tethys from suffering the same fate as Kazakhstan-focused independent Max Petroleum, which ran into trouble at its own deep well as its credit lines dried up (IOD Jun.25'12).

In addition to bringing the necessary capital to the project, Tethys may also benefit from the IOC's technical expertise something it could not count on by merely tapping a financial institution for drilling funds. Tethys is 99% sure the farm-out agreement will be completed this year, reflecting the wishes of both companies involved, the spokeswoman said.

Tethys is one of very few companies operating in Tajikistan and its strategy has been to be a pioneer there and secure the best commercial terms.

The 25-year Bokhtar PSC was signed in 2008 and covers a total area of approximately 35,000 square kilometers (8.65 million acres) in the Afghan Tajik portion of the prolific Amu Darya Basin west of the Pamir mountains. The area included in the PSC is in the southwestern part of Tajikistan and is a large, highly prospective region which has existing oil and gas discoveries but which has seen limited exploration to date.

While Tajikistan is not yet famed as a hydrocarbons producer, an industry observer said the country's oil and gas sector is roughly where Kazakhstan's was 20 years ago, suggesting it has significant upside.

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