MORE DEALS FORGED IN FORMER U.S.S.R.

More western operators are shaping upstream deals with republics of the former Soviet Union.

These deals were disclosed last week:

Equity Oil Co., Salt Lake City, and Coastline Exploration Inc., Houston, formed Symskaya Exploration Inc. for exploration/development in the Krasnoyarsk region of eastern Siberia in the Russian republic. Equity will own 80% of the stock of the company and Coastline the rest.
Maxus Energy Corp., Dallas, and Yakutskgeophysika of the Yakut republic signed a technical evaluation agreement covering a 148 million acre area in eastern Siberia. The area consists of three regions: the Lena-Anabar trough, Verkhoyansk fold belt and foredeep, and Predpatom trough.
There also were these developments:
Uzbekistan in Central Asia has started developing a plan for competitive licensing of several areas for oil and gas exploration/development by non-Soviet operators. Uzbekneft, Uzbekgeophysica, and Uzbekgeologia have signed an agreement with Jebco Seismic Inc., Houston and London, to sell and distribute information related to hydrocarbon exploration in Uzbekistan.
The Kirgizstan republic a member of the Commonwealth of Independent States (CIS), named Seabeco U.S.A. Inc., West Hempstead, N.Y., as its trade and economic attache for the U.S. Seabeco Pres. Zane Alpert said Kirgizstan officials expect to have a packet of geological and geophysical data ready to release about the end of March. Preliminary geological reports indicate Kirgizstan has significant oil and gas reserves, Alpert said.
U.S. legal specialists helping draft a new Russian oil and gas law say that process could be wrapped up by midyear 1992.

EQUITY-COASTLINE

Following negotiations in Krasnoyarsk and Moscow last December, Equity-Coastline's Symskaya combine signed a protocol with Eniseygeofizika and Eniseyneftegasgeologiya (ENI), two entities composing a State Geological Enterprise with the right to sign contracts for oil and gas exploration and production in the Krasnoyarsk region of the Russian republic.

The intent of the protocol has been approved in principle by the State Committee on Geology and Use of Mineral Resources of the Russian republic as well as local and regional governmental entities.

The protocol outlines the general terms under which Symskaya, after the purchase of a geological and geophysical data package, will have the right to select 10% of about 45,000 sq km (11 million acres) in the Symskaya area of the Krasnoyarsk region. Symskaya will have the exclusive right to explore, develop, and share in production on the acreage it chooses.

Specific terms of the exploration, development, and production sharing contract will be detailed in a production sharing agreement to be negotiated.

A preliminary review of the geological and geophysical data provided by ENI for the Symskaya area shows there are a number of major structural features in the area to be explored, Equity said.

While there has been very little drilling in the area, structural features, regional stratigraphy, and geophysical data indicate a "high potential" for discovery of large oil and gas reservoirs.

Fred H. Evans, Equity president, said, "While exploration in eastern Siberia is unquestionably in the category of true frontier exploration, the unique circumstance presented by the exclusive right to explore on 1.1 million acres, combined with the large amount of available geophysical data and the possibility to drill an initial test well using drilling equipment already in place on a major structure, presents an unprecedented opportunity."

MAXUS VENTURE

Maxus will conduct an 8 month initial evaluation of its area, then select one or more technical evaluation areas ranging in size to as much as 50,000 sq km (12.5 million acres). A 12 to 24 month evaluation period for those areas will follow. Maxus will then have the option to choose several smaller blocks for detailed seismic surveys and drilling.

Martin Schuepbach, Maxus senior vice-president of exploration, said, "The Yakutia area has excellent potential for discovery of large oil and gas fields." He cited at least five major discoveries, each with estimated reserves of as much as 6 tcf of gas and 500 million bbl of oil, adjacent to Maxus's technical evaluation areas.

"And yet Yakutia is only lightly explored," Schuepbach said. "Yakutia could become one of the major producing regions of Russia."

UZBEKISTAN LICENSING

Jebco plans to work with the Uzbek oil and gas groups to promote exploration and development and develop terms for a formal competitive licensing round. The Uzbek groups already prepared detailed information on several areas to be offered in an initial round.

Jebco hopes to avoid difficulties faced in other Soviet attempts to design competitive bidding situations, said D. Wayne Turner, Jebco managing director.

"Several other groups in the former Soviet Union have attempted to hold competitive license rounds and have met with little interest from the foreign companies," he said. "Generally this was due to a very high cost for data packages and bonus payments, coupled with unrealistic acreage terms.

"We are not going to make the same mistakes. We plan to develop a degree of consensus with input from oil companies that are interested in working in Uzbekistan."

Top Uzbek oil and gas executives have made presentations in Houston to several major oil companies that expressed interest in pursuing development options, Jebco said.

Jebco plans to formulate terms for the competitive bidding round this spring and hopes to open a round by early summer 1992.

The planners are considering a wide range of options, including joint ventures and several modifications of production sharing agreements.

Uzbekistan has produced oil for more than 100 years, and recent deep drilling has proved world class gas reservoirs in the mature Ferghana basin, Jebco said.

The western portion of Uzbekistan is gas prone, although new deep drilling has found liquids in a major Paleozoic rift feature.

Uzbekistan was the second leading producer of gas behind Russia in the former Soviet Union.

Uzbekistan covers an area of about 175,000 sq miles extending generally from the Aral Sea southeast to the border with Afghanistan.

Jebco has been active in the former Soviet Union since 1988. It is a joint venture partner with a unit of the Russian State Committee of Geology for development of foreign exploration and production projects in Russia and has been active in Azerbaijan and Khazakstan as well.

KIRGIZSTAN DEVELOPMENT

When more data are available, Kirgizstani officials intend to move ahead quickly to negotiate exploration and development agreements, Seabeco's Alpert said,

"The government wants to establish direct access for negotiations, and we're here to make it happen," he said.

"We're looking to bring to the table development methods that western companies are used to, not what they've become accustomed to in the Soviet Union,"

Presently, Alpert said, Kirgizstan's largest source of energy is hydropower, some of which it exports to other republics of the old Soviet Union. The republic's most significant developed mineral resource is gold, and much of its oil and gas potential is in the gold producing area.

Kirgizstan is a net oil importer.

Western companies interested in developing oil and gas in Kirgizstan should have good access to markets in the republic as well as in other CIS member republics, Alpert said.

"In the past, Kirgizstani leaders looked at developing oil reserves from the standpoint of earning export dollars," he said. "Today, they are beginning to think about domestic needs, not only within Kirgizstan but the entire commonwealth."

RUSSIAN OIL LAW

George W. Hardy III, director of the University of Houston Law Center Foundation, said the team of U of H specialists writing a model Russian oil and gas law are to complete first English language drafts by the first week in February and have Russian translations in the hands of Russian leaders in March.

If that timetable is met, Hardy said, it is reasonable to expect the Russian Supreme Soviet to pass a final oil and gas law next summer if there are no serious political or social disruptions.

Hardy based his prediction on a path followed by a resources law the law school team helped draft last year (OGJ, Nov. 11, 1991, p. 26).

Last year's deadline for submitting resource code proposals was supposed to be mid-September. But a competing proposal was not submitted until late October, after which the process bogged down in the Russian Supreme Soviet for 2 1/2 months.

Before significant progress began at the legislative level, the competing resources laws had to go to the executive branch, through the council of ministers, and the choice of which law to support came at the ministerial level, Hardy said. "The final debate-up or down-is taking place this week."

The resource law is an umbrella for oil and gas provisions.