TURKMENISTAN SEEKS ACREAGE BIDS

Turkmenistan has opened an international bidding round for oil and gas rights in the Chardzhou region of the Amu-Darya basin.

Bids are sought for 31 year production sharing agreements (PSAs) on one or more of six tracts covering a combined 15,875 sq km in Turkmenistan's extreme northeast corner. Gas discoveries with combined reserves estimated at more than 10.3 tcf have been reported on four of the tracts, none of which has production.

Each bidder or bidding group will be required to provide proof of financial and technological capabilities before July 20, purchase a $50,000 package of Chardzhou data, report corporate information including lists of officers and directors, and identify corporate officials empowered to act on the bidders' behalf.

Sealed bids, each accompanied by a preset bonus, are to be submitted before Aug. 26 to the Ministry of Oil & Gas of Turkmenistan, Ashgabat, or to WaveTech Geophysical Inc., Denver. Winning bids are to be selected based on:

• Minimum guaranteed exploration commitments during the PSA's 6 year exploratory phase.

• Work proposed in support of guaranteed exploration commitments, indicating how quickly and intensively each tract is to be explored.

• Fewest changes proposed to the model contract under which each PSA is granted.

Officials are to open qualified bids beginning at noon Aug. 31, with bidding results announced on Sept. 5.

CHARDZHOU PROSPECTS

Geological data indicate the Amu-Darya basin until the late Paleozoic was part of a rift system on the southern passive margin of the Turanian plate.

Beginning in the Permian age and into early Jurassic, terrestrial molasse filled the region's deep rift trough.

From middle to late Jurassic, the region became shallower, and sedimentation changed to marine carbonates from terrestrial clastics, probably allowing organic reefs to form throughout the basin.

Next, regional circulation to the open ocean diminished, likely because of collisions with microplates intruding from the south, allowing deposition of evaporates, including salt. Later geological events provided conditions necessary to generate accumulations of Jurassic hydrocarbons held in reef traps by salt seals.

Jurassic oil and gas discoveries in the Amu-Darya basin are perhaps better known in Uzbekistan, on the northern flank of the basin, than in Turkmenistan. But Turkmen officials say widespread reefing, confirmed upper and middle Jurassic source rocks, and a salt seal over virtually the entire basin, place Amu-Darya's hydrocarbon potential among the top three or four basins in the world.

Analog data over 7,000 sq km in the area, part of which includes a portion of the Chardzhou sector, indicate Jurassic recoverable reserves of about 7 billion bbl of oil equivalent (BOE), including about 915 billion cu m of gas and 204 million tons of liquids. Within the analog area, four types of reefs predominate: bedded arch or structural, barrier, platform or atoll cluster, and pinnacle.

TRACT DETAILS

Tracts included in the current tender contain many untested Kimmeridgian and Oxfordian seismic anomalies.

Drilling has occurred on all but one block with some positive results:

• Saman-Tepe Block I is a 1,975 sq km area containing two inactive fields, Saman-Tepe and Metedzhan, with reserves estimated at 3.5 tcf and 900 bcf, respectively.

• Bota Block II is a 1,850 sq km tract with two inactive fields, Bota and Tangikuduk, with reserves of 3.6 tcf and 250 bcf, respectively.

• Shirinkuduk Block III is a 2,350 sq km area with three inactive fields, Yankui, Uzunkuduk, and Sundukli, with reserves of 1.37 tcf, 190 bcf, and 230 bcf, respectively.

• Dugoba Block IV is a 2,800 sq km tract with no fields.

• Dhuramergen Block V is a 3,250 sq km area containing Akkumalyan, a 280 bcf inactive field.

• Gaurdak Block VI is a 3,650 sq km tract with no fields.

Because of limited well data, Turkmenistan in its tender announcement included only gas reserves estimated in the fields'

However, many Chardzhou sector discoveries reported strong shows of hydrocarbon liquids as well. Kokdumalak field on the northern border of Bota Block II, for example, holds an estimated 5.8 tcf of gas and 900 million bbl of oil and condensate.

BIDDING ADVICE, DETAILS

GeoInterTech (GIT), a joint venture of Vnigni, Moscow, and WaveTech Geophysical, is helping with the Chardzhou offering.

GIT advises companies interested in the tender to obtain a notice of offering and a model contract to better understand the business terms and a package of basic Chardzhou data to gain insight into technical issues.

To be considered, bids by qualified companies or groups received by the Aug. 26 deadline are to include:

• A bonus of $7 million for Block I, $15 million for Block II, $6 million for Block III, $4 million each for Blocks IV and V, and $2 million for Block VI.

• Work commitments of at least $20 million each for Blocks I and VI, $28 million each for Blocks IV and V, $30 million for Block III, and $35 million for Block II.

Bidders are required to submit with each offer an amount equal to one fifth of the preset bonus. Companies submitting winning bids are to pay the balance of the cash bonus within 15 days of signing and formal approval of the PSA.

PSA GENERAL TERMS

Turkmenistan's PSA places the responsibility for tract management in the hands of a supervisory committee composed of three members from each party to the agreement and headed by a director general representing the tract contractor.

Under the PSA, 40% of Chardzhou share hydrocarbons is to go to the government and 60% to tract contractors. Share hydrocarbons are defined as total production less royalty and cost recovery.

Chardzhou royalties are set by a sliding scale based on quarterly averages of daily production. The royalty rate is zero for production of 0-999 tons/day, 1% for 1,000-2,999 tons/day, 5% for 3,000-6,999 tons/day, 7% for 7,000-12,999 tons/day, and 15% for 13,000 tons/day or more.

Cost recovery is the lesser of production after royalty times 0.7, or the sum of exploration, development capital, operating, and transportation costs plus spending not recovered in previous years.

Other contractor assessments include a 10% export tax and 25% profits tax.

At the end of each calendar year, a contractor may relinquish from 300 sq km to an entire tract if the yearly work commitment has been fulfilled However, trimming the size of the PSA area does not correspondingly reduce the minimum work commitment, and acreage not included in a development area after 6 years reverts to the state.

For each sq km of acreage retained, a contractor must pay a rental of $20 at the end of 1 year, $50 after 2 years, $100 after 3 years, $200 after 4 Years, and $400 after years 5 and 6.

Turkmenistan's PSA allows contractors to export cost hydrocarbons and their splits of share hydrocarbons.

Large gas pipelines already linking Jurassic fields in Turkmenistan and Uzbekistan north and west of Chardzhou with Russia's gas pipeline grid likely will be the first routes for transporting Chardzhou gas to international markets.

Similarly, an oil pipeline built to transport Siberian crude to the Chardzhou refinery could be reversed to supply oil or refined products to Kazakhstan and points beyond.

Copyright 1994 Oil & Gas Journal. All Rights Reserved.