FSU CONTINUES TO ATTRACT JOINT VENTURE PROGRAMS

Joint venture activity continues unabated in the former Soviet Union (FSU).

Involved in new programs are upstream and downstream projects, interest sales, and progress in international financing. Among them:

Russian oil producer Lukoil and engineering contractor ABB Lummus Crest agreed on a $1.5 billion project to build a 180,000 b/d refinery in the Krasnodar region of southern Russia. The refinery will take crude from western Siberian fields and produce mainly gasoline, jet fuel, and diesel fuel. A 40 km long pipeline will be laid from the refinery to the port of Novorossiysk. Lukoil and ABB are seeking investment in the project.

Chevron International Oil Co. and Lukoil signed a framework agreement outlining terms under which Chevron will buy about 70,000 b/d of Urals blend crude from Lukoil. The accord is expected to allow immediate implementation of Mitsui & Co.'s $700 million loan intended to revitalize Lukoil oil fields. Chevron's purchases of Urals blend crude, intended for the export market, could total about 180 million bbl during the 8 year term of the agreement with Lukoil. The Mitsui loan, backed by Japan's Ex-Im Bank, will be used to enhance and redevelop Lukoil's producing properties by importing advanced technology and equipment to rehabilitate idle oil wells and expand Lukoil's producing activities by drilling in existing oil fields.

World Bank approved a $500 million loan for 17 years plus 5 years of grace to Megionneftegas, Tomskneft, and Yuganskneftegas Russian production associations to restore field production in western Siberia. The groups expect to improve peak production by 166,000 b/d, which amounts to a 2.5% increase in Russia's current output. Rehabilitation is to include well workovers, reconstruction of infield infrastructure, infill drilling, and environmental training.

Overseas Private Investment Corp. signed a letter committing $40 million for development of oil fields by a joint venture of Snyder Oil Corp., Fort Worth, and Russia's Permneft in a 300,000 acre area in the Perm region west of the Ural Mountains.

World Bank approved a $15.7 million loan to bolster efficiencies and long term fiscal health of Kazakhstan's petroleum sector. The technical assistance loan will help Kazakhstan encourage private sector participation, promote foreign investment, and improve management and training in its oil and gas industries.

Oryx Energy Co., Dallas, signed two agreements with Kazakhstan covering development of Arman field on the northern Buzachi Peninsula and exploration of a large block in western Kazakhstan.

Canadian Occidental Petroleum Ltd., Calgary, bought a 40% interest in an oil development project in Kazakhstan near the producing Kumkol field.

Petro-Canada, Calgary, signed a preliminary agreement to sell its Petro-Canada (Cyprus) Ltd. (PCCL) unit, involved in a western Siberian oil field development project, to Beta Well Services Inc., Alberta, for $10 million.

Tyumen regional administration in partnership with local oil and gas producers Nizhnevartovskneftegaz, Noyabrskneftegaz, and Tyumenneftegaz soon will set up a new Tyumen oil company to handle sales of locally produced crude, reports Russian economic weekly Biznes Segodnya. The new company will set up its own bank to handle financing. To date, 85% of all payments to Tyumen have been through Moscow banks, with delays of as much as 6 months.

State Oil Co. of Azerbaijan (Socar) let contract to NW Consultants, Epsom, U.K., for technical and economic consulting services to help Socar in its continuing study of Chirag and Azeri oil fields in the Caspian Sea. MAI recently completed a study of the adjacent Guneshli oil field, which it claims was- the first independent technical and cost engineering review of Azerbaijan's Caspian developments.

PERM PROJECT

SOCO Intentional, a subsidiary of Snyder, is a partner in a 50-50 venture of SOCO Perm Russia Inc. and Permneft, Russia's regional production association responsible for developing oil reserves in the Volga-Urals basin of the Perm region 800 miles east of Moscow.

The contract area holds four major and four minor fields as well as a number of other prospects. The four major fields, delineated with 45 wells, are estimated to contain more than 115 million bbl of proved and probable reserves. SOCO expects 25 of the existing wells to be placed on production, and 400 more will be drilled by the venture using mainly Russian personnel and equipment and western technology.

Permneft, in the process of being privatized, employs 25,000 persons in five production and seven drilling divisions.

The project, known as Permtex, will use western drilling technology such as dual completion techniques and closed loop mud systems. In its first 5 years of operation, Permtex is expected to generate about $54 million in exports of U.S. oil field equipment and services. Local purchasing in the first 5 years is expected to be $55 million.

ORYX'S KAZAKHSTAN AGREEMENTS

Oryx will jointly operate Arman field in a 50-50 venture with two Kazakh state companies.

Arman was discovered in the 1980s but never developed.

The 3 million acre exploration block in western Kazakhstan is covered by a production sharing agreement involving an initial term of 4 years and a minimum commitment of $10 million. The block lies east of Arman field.

Oryx will operate and hold a 100% working interest in the exploration block. It has an option for two more 5 year exploration terms.

CANOXY'S KAZAKHSTAN PROJECT

CanOxy will pay Germany's Deilmann Erdol Erdgas GmbH, a unit of Preussag AG, $15 million for a 40% interest in the Kazakhstan project and first phase of an evaluation and development program.

The deal involves the Turan petroleum project, a joint venture that holds rights to Kyzl-Kiya, Aryskum, and Maybulak fields and the South Kumkol exploration area in the South Turgai basin of Central Kazakhstan.

Hurricane Hydrocarbons Ltd., a Calgary independent, has a 10% interest in the Turan project and has conducted extensive evaluation work. The remaining 50% interest is held by Yuzhkazneftegaz and Yuzhkazgeologia of Almaty, Kazakhstan.

CanOxy said the fields contain 85 million bbl of proved and probable reserves of crude and potential reserves of more than 150 million bbl.

The companies hope to be producing 5,000 b/d within 12 months of an initial phase of the project. Objective of the first phase is to confirm feasibility of field scale development.

PETRO-CANADA/BETA DEAL

Petro-Canada formed its Cyprus unit for a joint venture with a Russian firm to evaluate part of and develop a trial production phase in Polyanovskoye field of western Siberia. That portion covers 20 wells and 300 sq km.

The joint venture of PCCL and Yugraneft Joint Stock Co. completed initial feasibility work in 1993. The study showed a potential for significant hydrocarbon production, Beta said.

After exploration in the early 1970s, about 75 exploratory/delineation wells were drilled in the 1,500 sq km Polyanovskoye field area. There is no detailed operating/development strategy for the field, but PCCL conducted tests of three wells during December 1992-March 1993. PCCL retains an option to buy back a 20% share of Beta's interest in the project for 1 year after production begins.