Republics of the Commonwealth of Independent States are pressing their campaigns to enlist foreign partners in an effort to bolster petroleum sectors.
In the latest action, Turkmenistan awarded oil and gas development contracts in its first bidding round, and an Amoco Corp. unit moved one step closer to Azeri field development (OGJ, Oct. 19, 1992, p. 25).
However, Itar-Tass reported Russia has stopped registration of enterprises exporting crude oil, petroleum products, and chemical fertilizers. The Ministry of Foreign Economic Relations said 30 Russian firms hold licenses to export crude, and 80 can export oil products. Illegal petroleum exports are a major concern to the Russian government.
Tass said registration of other ventures involving "strategically important" raw materials will continue.
TURKMENISTAN
Turkmenistan awarded development rights covering three of four South Caspian basin tracts offered in its first round of competitive bidding.
Officials assigned the acreage in January under 25 year joint enterprise contracts with 56-50 joint ventures made up of foreign partners and either Turkmeneft (TMN) or Chelekenmornftegas (CMNG) production associations.
Combined adjusted proved reserves on the awarded blocks are estimated at more than 1.1 billion bbl of oil and 4.9 tcf of gas. Turkmenistan said geological analyses show potential reserves could be 200% greater or more.
Winning companies on each tract offered the highest cash bonus above a specified minimum bid. Nine companies registered to bid in the tender.
Turkmenistan made these awards:
- Lam-Zhdanov Block II, with proved developed reserves of 230 million bbl of oil and 1.87 tcf of gas, to a combine of Larmag Energy, Amsterdam, and Noble Drilling Corp., Houston, with CMNG for a bonus of $15.25 million.
- Kotur-Tepe Block III, with proved developed reserves of 642 million bbl and 2.16 tcf, to Eastpac International, Dubai, with TMN for a bonus of $20 million.
- Keimir-Akpatlaukh Block IV, with proved undeveloped reserves of 230 million bbl and 890 bcf, to Bridas Sapic of Argentina with TMN for a bonus of $30 million.
Block II lies in the Caspian Sea, while Blocks III and IV are onshore.
Minimum bids acceptable to Turkmenistan were $15 million for Block II, $20 million for Block III, and $30 million for Block IV.
Each joint enterprise contract requires a specific minimum work commitment from the winning bidders and sets royalties according to a sliding scale based on levels of production. On each tract awarded, Turkmenistan retains a different share of existing production adjusted for future declines.
Most other contractual terms have been standardized.
Only Block 1, on which officials set a minimum bid of $25 million, did not receive an acceptable offer. It was the only nonproducing block offered in the competitive round.
Turkmenistan estimated Block 1 adjusted undeveloped reserves at 454 million bbl of oil and 2.2 tcf of gas. Wells drilled on or near the crests of the Gubkin, Barinov, and Livanov structures have yielded 400-2,100 b/d of oil and condensate and 15-35 MMcfd of gas.
Government officials said operators could expect problems controlling high pressure mud volcanoes on the tract. With insufficient information available to work up a convincing development analysis, officials said a 3-D seismic survey would be needed to gather more data.
BLOCK II TERMS
The Larmag-Noble-CMNG combine is to receive 30% of future production from existing wells on Block II. The other 50% remains with Turkmenistan, adjusted for normal production decline.
The joint venture is committed to spend $60 million during 5 years plus future revenue received from its 50% share of existing production.
Block II includes Lam, Zhdanov, and Precheleken Kupol fields.
Zhdanov since 1972 has produced about 8 million bbl of oil and 60 bcf of gas from 58 wells, and Lam since 1978 has produced 18 million bbl and 57 bcf from 52 wells.
Turkmenistan estimates combined remaining reserves in the two fields at 565 million bbl of oil equivalent (BOE) but said recoveries could approach 1 billion BOE. Officials said production rates could be much higher if partners apply improved completion technology or maintenance procedures.
The Block H contract sets royalty at zero if joint venture production is 03,649 BOE/d, 2% at 3,650-7,299 BOE/d, 5% at 7,300-10,949 BOE/d, 7% at 10,950-18,249 BOE/d, and 15% at 18,250 BOE/d or more.
BLOCK III TERMS
The Eastpac-TMN team is committed to spend $50 million during 5 years on Block III plus future revenue from selling its share of existing production.
Block III includes eastern, central, and western sectors of Koturtepe field and Komsomol field. Combined production since 1959 amounts to 1.24 billion bbl of oil and 2.6 tcf of gas. Partners are to receive 10% of future production from about 1,000 active wells in the block. The other 90% remains with Turkmenistan.
Turkmenistan estimates Block III remaining reserves at 642 million bbl of oil and 2.16 tcf of gas. Officials say major additions to reserves and production rates are possible through applications of tertiary recovery techniques.
The joint venture contract for Block III sets royalties at the same sliding scale used for Block 11.
BLOCK IV TERMS
The Bridas Sapic-TMN venture on Block IV is to receive 30% of future production from existing wells. The joint venture is committed to spend $50 million during 5 years on the tract plus future revenue it receives from selling its 30% share of existing production. The other 70% remains with Turkmenistan.
Block IV includes Keimir and Akputlaukh fields, which went on production in 1982 and 1988, respectively. Cumulative production is not substantial.
Turkmenistan said the two fields probably link up below 2,500 m into a single 80 km long field bounded on the north by Okarem field and on the south by Chikishliar field. Adjusted proved reserves are estimated at 610 million BOE, but officials said major reserves increases are assured by completing numerous missed oil zones - evidence of an enlarged structural area - and drilling on the flanks of fields on the tract.
The Block IV contract sets royalties at zero if joint venture production is 07,299 BOE/d, 2% at 7,300-21,899 BOE/d, 5% at 21,900-36,499 BOE/d, 7% at 36,500-51,099 BOE/d, and 15% at 31,100 BOE/d or more.
GENERAL TERMS
All joint enterprise contracts under which Turkmenistan awarded acreage have 25 year primary terms with optional 10 year extensions.
In all the agreements, when joint venture revenue is not enough to pay expenses, the foreign partner must pay 100% of shortfalls up to $10 million. Payments above that amount are considered advances to the respective Turkmenistani partner and may be recovered from the domestic partner's shares of distributable profits.
Taxes payable under the contracts are guaranteed against increases. joint venture profits are subject to a 35% tax unless reduced by treaty or new legislation. A net operating loss may be carried forward for 5 years. Royalties are to be deducted from joint venture profits when determining taxable profits.
Joint venture partners may sell production abroad or within the C.I.S. and receive fair market value in convertible currency. Partners are to receive quarterly profit distributions in convertible currencies, and foreign parties may repatriate profits without restrictions. Currency may be imported, exchanged, exported, or retained abroad.
Joint venture management boards are made up of four members-two appointed by foreign partners and two by domestic production associations. The director general responsible for operation is to be nominated by foreign partners. The nomination is deemed approved by the board unless overruled by majority vote.
AZERBAIJAN
Amoco Caspian Sea Petroleum Co.'s agreement with Azerbaijan's state oil company Socar outlines some of the principles under which operator Amoco would develop and produce Azeri field, about 90 miles southeast of Baku in the Caspian Sea.
Amoco said a recently completed technical and economic evaluation indicates field reserves of about 1.8 billion bbl of oil.
The accord on principles is the forerunner of a joint development agreement that will be negotiated by Socar and Amoco, which will contain commercial terms and production sharing terms.
"We expect Azeri field is capable of producig in excess of 300,000 b/d with a field life of more than 30 years," said Robert L. Blanton, chairman of Amoco Caspian Sea Petroleum. "Once all conditions for implementing the joint development agreement are met, operations will begin with oil production to follow in 3-4 years."
Work on the joint development agreement is to begin immediately, Amoco said.
Initial implementation of the joint development agreement will include further delineation drilling and a 3-D seismic survey to better define the extent of the field. Plans include installation of at least one drilling and one production platform. More platforms may be installed.
Amoco and other operators in the area are evaluating the possibility of shared infrastructure, including an offshore gathering system, onshore processing, an operations base, and an export pipeline (OGJ, Dec. 7, 1992, p. 37).
Western partners with Amoco 45% are Unocal Azeri Ltd. 25%, McDermott Azerbaijan Inc. 10%, BP Exploration (Azerbaijan) Ltd. 12 2/3%, Den norske stats oljeselskap AS 6 1/3%, and Ramco Oil Services plc 1%.
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