Tracer Petroleum joins Canneft in Turkmenistan development

Feb. 6, 2002
Tracer Petroleum Corp., Calgary, has entered a joint venture agreement with Canneft Inc., Houston, to participate in development of Adzhiyap block in southwestern Turkmenistan. The Adzhiyap block covers 2,000 sq km, bordering Iran to the south and the Caspian Sea to the west.

By the OGJ Online Staff

HOUSTON, Feb. 6 -- Tracer Petroleum Corp., Calgary, has entered a joint venture agreement with Canneft Inc., Houston, to participate in development of Adzhiyap block in southwestern Turkmenistan.

The Adzhiyap block covers 2,000 sq km, bordering Iran to the south and the Caspian Sea to the west.

Canneft is negotiating a 25-year production-sharing agreement for the block (OGJ Online, Aug. 4, 2000).

Canneft and local partner Turkmengeological have signed a protocol to form a 75:25 joint operating company for Adzhiyap. Canneft has made an offer to spend up to $25 million over 4 years to drill 40 wells and tie-into the pipeline.

Tracer will advance $150,000 (US) to the joint venture over the next 5 months to cover the remaining costs to secure the PSA.
Tracer and Canneft will work together to secure an operator for the project, which may be a contract operator. If the operator does not take a stake in the project, Tracer will have an option to earn a 60% interest in the Tracer-Canneft JV by investing 100% of development capital. If the operator does take a stake, Tracer will have right to a minimum 20% interest in the JV by providing its pro rata share of the required project capital.

Tracer said the project has estimated reserves of 3-6 tcf of gas. Tests have shown a concentration of 1 bbl of condensate/100 Mcf of gas. It could also contain deeper oil reserves, but the possibility has not yet been evaluated.

The 125-mile, 1.18 bcfd Korpedzhe gas line to Iran is only 4 km from proven gas wells No. 6 and No. 1, said Tracer. Korpedzhe is presently carrying only 500 MMcfd.

The Canadian company said Iran buys gas from the Korpedzhe line at $40 (US)/cu m or about $1.13/Mcf.

Also under consideration is an alternate route for a gas pipeline 100 km to the north that would connect to an existing Gazprom line supplying the Ukraine.

Tracer and Canneft also intend to study gas-to-liquids feasibility this spring.

So far, 12 structures have been identified on the block with 2D seismic. Well No. 1 logged 216 ft of gas pay and No. 6 logged 75 ft.