Regional Report

Turkmenistan’s E&P projects achieve good pace

Continued good exploration results and a growing market for natural gas exports are pushing upstream activity levels higher throughout Turkmenistan

 Sergei Rudnitsky, Russian Petroleum Investor, Moscow

 Upstream activity has been very good for Turkmenistan over the last year. When final figures are in, Turkmenistan expects to have produced 10 million t of oil (about 200,000 bopd) and 70 Bcm of natural gas (6.77 Bcfgd) during 2002. These figures compare to 8 million t of oil (159,350 bopd) and 51 Bcm of gas (4.93 Bcfgd) in 2001.

 To achieve such growth, operators conducted extensive exploration and development drilling, enhanced existing production, and introduced new technologies and equipment. Per government goals, such tactics should significantly boost output during the next three to seven years. Turkmenistan’s development program envisions producing 28 million t of oil (557,700 bopd) and 85 Bcm of gas (8.2 Bcfgd) by 2005, and then 48 million t of oil (955,000 bopd) and 120 Bcm of gas (11.6 Bcfgd) by 2010. 

 Officials would like to see operators establish the capability to rapidly develop hydrocarbon fields. At present, operators’ main task is exploration and development of oil and gas deposits in deeper, secondary layers. According to a forecast by state corporation Turkmengeologia, the best prospects for discovering new, large hydrocarbon deposits are within zones in the range of 5,000 to 6,500 m (16,400 to 21,325 ft). During the last year, exploration was conducted in these prospective territories within western, central and northern Turkmenistan. Meanwhile, special emphasis is being given to southwestern Turkmenistan, which is considered to be the main activity region, where new hydrocarbon deposits, mainly in liquid form, should be discovered. 

 To make exploration efforts more efficient, the government has invested funds to introduce new technologies and equipment. Beginning in 2000, 3D seismic methods were introduced. Drilling rigs with the capability to drill deep and super-deep wells were also bought. One of the major geological exploration projects carried out in 2002 was a joint effort between Turkmengeologia and Western Geco. The firms conducted 2D and 3D work, aimed at exploring new onshore structures, as well as the transit zone in the Turkmen sector of the Caspian. Government officials appropriated $93 million to fund this project and purchase necessary equipment.

To satisfy a thirst for greater reserves, drilling in Turkmenistan should quadruple by 2005.

 During the current four-year period (2002 – 2005), a considerable increase in geological prospecting is planned, to achieve a significant gain in proved reserves. Thus, in comparison with the previous four years (1998 – 2001), the 2002 – 2005 period should see 3D seismic work increase by 2.5 times, to 2,950 sq km (1,139 sq mi). The amount of 2D work should also increase 2.5 times, to reach 9,000 km (5,593 mi).

 During the same period, exploratory drilling should quadruple, to more than 846,000 m (2.775 million ft). As planned, all these efforts should yield reserve increases of about 74 million t of oil (538 million bbl) and 470 Bcm of gas (16.6 Tcf). Compared to the previous four years, there would be a 4.5-fold increase in new oil and a tripling of natural gas additions.

  NATIONAL FIRMS RETAIN KEY ROLE

 Turkmenistan’s main producers – Turkmenneft and Turkmengas – remain state concerns. During 2002, Turkmenneft produced just over 88% of the country’s oil output and 16% of the gas. Turkmengas produced 84% of the nation’s gas output and about 2.5% of the oil. Foreign companies, working on PSA terms, produced the remaining 9% of crude volume. 

 Turkmenneft is developing 22 oil and gas fields in western Turkmenistan. About 86% of active production wells are on artificial lift. The most effective methods of operation are now gas lift and dual-completion production. During the first three quarters of last year, the company commissioned 32 new wells and produced 194,000 additional tons of oil (3,865 bopd) from them. In addition, 38 wells were put on high-pressure gas lift , resulting in extra output of 163,000 t (3,245 bopd). Another 57 wells were transferred to mechanical pumping. Well workovers significantly increased production, with 835,000 t of oil (16,630 bopd) produced from 530 repaired wells. 

 Intensified output at old fields, development and exploitation of new fields, and exploration of new prospects are among priority tasks that Turkmenneft has underway. Immediate plans for late 2002 and early 2003 include putting 40 new wells onstream; rehabilitating and restoring to operation 242 idle wells; overhauling about 770 wells; and transferring 63 wells to mechanized pumping. The company also has begun drilling and developing deeper (3,500 to 5,000 m, or 11,480 to 16,405 ft) deposits. 

 For the first nine months of 2002, Turkmenneft produced 5.8 million t of oil (115,523 bopd). This is a 10% increase, when compared to the same period in 2001. More than 50% of produced oil – 3.7 million t (73,700 bopd) – was from core fields, including Koturdepe, Barsagelmes, Cheleken, Kumdag and Nebitdag. Concurrently, most of the production growth was due to intensive drilling and construction at South Kamyshlydzha, Keimir, East Cheleken and other fields in southeastern Turkmenistan. 

 Turkmenneft produces natural gas in the western part of the country from 283 wells spread over 12 gas and gas-condensate fields. From 2002 to 2010, the firm plans to drill 50 to 75 new gas wells at fields in western Turkmenistan. Drilling is already underway at Korpeje, Ordekli, South Kamyshlydzha, Keimir, Akpatlavuk and Chekichler fields.

 Meanwhile, Turkmengas produces natural gas at 30 gas and gas-condensate fields in the eastern part of the country. The firm’s producing gas wells total 691. In-fill drilling continues at several developed fields, including Dauletabad, Malay, 10 Years of Independence and Elgui. Drilling is also active at fields being prepared for commissioning, including Gagarina, North Balgui and others.

 To increase gas production at old and newly developed fields between 2002 and 2005, Turkmengas plans a large volume of development and exploratory drilling. The firm’s drilling during 2001 totaled 85,000 m (278,871 ft). By 2005, the figure will be 229,000 m (751,312 ft), including 85,000 m (278,871 ft) of production drilling. 

 Foreign contractors are providing services to these national firms, as they attempt to fulfill various investment projects. Indeed, Turkmengas in September 2002 began a new project. Its goal is to intensify gas production at Shatlyk, one of the largest gas deposits in eastern Turkmenistan. This $43.6-million project was approved by a corresponding decree from Turkmenistan President Saparmurat Niyazov. Chief contractor is Shenlin Oil Administrative Bureau, along with SINOPEC. Turkmengas awarded this company a $22-million contract for drilling out packers from 65 Shatlyk field gas wells. This contract is in effect from September 2002 to February 2005.

 Turkmengas will determine other contractors in the near future through tenders. These tenders will be for purchasing equipment and materials necessary for a $7.6-million overhaul of wells, plus an increase in gas output. In addition, $14 million will be spent on reconstructing a booster station at Shatlyk, plus building another unit for gas compression and dehydration. 

Offshore last year, Dragon Oil and Petronas Carigali struck significant oil and gas finds, respectively.

 While the country’s oil output is limited only by producing companies’ capacities, the growth of gas production is linked directly to export volumes. Thus, in 2002, plans called for producing 70.8 Bcm of gas (6.86 Bcfgd). Of this amount, 15 Bcm (1.45 Bcfgd) were used to cover internal demand. In accordance with signed contracts, 56 Bcm of gas (5.41 Bcfgd) were exported. About 40 Bcm (3.87 Bcfgd) of this amount went to Ukraine, and another 6 Bcm (580.5 MMcfgd) were exported to Iran.

 Gas production during the first nine months of 2002 amounted to 39.7 Bcm (5.14 Bcfgd), or 11% more than output for the same period in 2001. Meanwhile, gas exports totaled 29.7 Bcm of gas (3.84 Bcfgd), or 14% more than in the same period a year earlier. 

 Although a final list of export orders for 2003 had not been finalized at press time, Neftegas Ukrainy had preliminary plans to purchase 36 Bcm. Russia demonstrated its readiness to buy gas – beginning in 2003 – in accordance with what is called the “residual principle.” In other words, gas would be purchased in volumes corresponding to the amount of pipeline capacity available after existing contracts are supplied. However, experts’ latest estimates show that the capacity of the Central Asia-Center pipeline is not more than 45 Bcm/year. 

  PSAs READY FOR ACTIVE DRILLING PERIOD

 Foreign companies, working in Turkmenistan on PSA terms, spent last year increasing their rates of oil production growth. To that end, some companies last year had active exploration and development drilling programs. Other firms were still preparing for such work in 2003.

 During 2002, four PSA projects with foreign participation (including two offshore) were underway in Turkmenistan. Oil production was active at three projects. A fourth PSA was still in the exploration phase. It was expected that, in 2002, total oil output from these projects would be 1.6 times the level of 2001, or about 1.5 million t (29,877 bopd). Thus, the portion of Turkmenistan’s oil output that came from foreign PSAs during 2002 would be 15%, compared to 10% during 2001. 

 In the Turkmen part of the Caspian, only Britain’s Dragon Oil operates crude production. Output is from the Cheleken Block, which includes Chelekenyngummez (Pricheleken cupola), Jeytun (LAM) and Jygalibeg (Zhdanov) oil fields. These fields’ total proved reserves are about 85 million t (618 million bbl) of oil and 62 Bcm (2.19 Tcf) of natural gas. In October 2002, Dragon Oil completed tests on a fourth production well at Jeytun field. It flowed 3,956 bopd from two zones between 2,367 and 2,989 m (7,765 and 9,805 ft). 

 This is already the company’s third well that has been put onstream since the beginning of 2002. It helped Dragon Oil reach a 15,000-bopd production target by the end of 2002. Dragon Oil now produces commercially from two fields – Jeytun and Jygalibeg.

 A fifth well was set to drill at Jeytun field as this article went to press. By the end of last year, the company had drilled two new production wells at Jeytun. The final oil production figure for 2002 was expected to be 570,000 t (11,343 bopd) versus 320,000 t (6,374 bopd) in 2001. Investments during 2002 were $80 million, compared to $60 million in 2001. 

 Turkmenistan’s second offshore PSA project (Block 1) has been operated since 1996 by Malaysia’s Petronas Carigali. It includes Garagel-Deniz (Gubkin), Deyarbekir (Barinov) and Magtymguly (East Livanov) fields. Last August, the company’s fourth and final exploration well was drilled. On test, it flowed 539,000 cmgd (19 MMcfgd) and 1.937 t of oil (14 bopd). 

 In the opinion of company specialists, recent results bolster the belief that large hydrocarbon resources exist in the Turkmen part of the Caspian Sea. During February 2002, Petronas drilled its third well, which flowed 770,000 cmgd (27.2 MMcfgd) and more than 300 t of gas condensate (2,400 bcpd). The company plans to evaluate exploratory results before deciding to commercially develop the field. This year, company investments in the project will be $80 million. 

 According to independent experts’ estimates, Block 1’s proved resource base is more than 350 MMtoe (2.54 billion toe). In addition, significant unexplored potential remains. Given the dominant role of gas in the block, Petronas is formulating further plans to develop the field and commercially utilize the gas. The company is consulting Turkmen authorities to reach mutually agreeable solutions. 

 A consortium of Turkmenneft (operator) and Austria’s Mitro International operates the Khazar tract in western Turkmenistan. Last year, the group began a drilling program that should run for the next five to six years. At least 30 production wells will be drilled at East Cheleken field (including horizontal and super-deep, vertical wells). Drilling of the first super-deep well (projected depth of 6,500 m, or 21,325 ft) was begun last July using a Bentek rig. The rig has a capacity to drill deeper than 23,000 ft. Earlier, this consortium used the same rig to drill a well in the same field to 4,700 m (15,420 ft). 

 Consortium members expect that deep drilling in the western region (home to the main hydrocarbon resources) will result in the lower oil-and-gas-bearing deposits coming onstream. Consortium investments were estimated at $65 million during 2002. These funds were used almost exclusively for drilling new production wells. The consortium expected final production figures to be 400,000 of oil t (7,967 bopd) last year, versus 210,000 t (4,183 bopd) in 2001.

 Britain’s Burren Energy operates a PSA project in the Nebitdag territory, on land near Balkanabat (formerly Nebitdag) and has completed a development drilling program. In the contracted territory, there are five oil fields – Burun, Nebitdag, Kumdag, Gyzylkum and Karatepe – for which additional resources should be explored. Residual recoverable volumes are about 22 million t of oil. In 2002, commercial production from 80 wells in Burun field averaged 1,400 t/day (10,180 bopd). This level is 75% greater than the output figure in 1997, when the PSA went into force.

 During 2002, the Burun budget was $24.4 million vs. $16.0 million in 2001. Some of these funds went toward 2D and 3D seismic work, as well as exploratory drilling. Burren Energy plans to conduct a deep drilling program at Burun after data acquisition and evaluation. Company specialists say that tremendous potential exists for deep deposits to be exploited economically. The company expected its final 2002 production figure to be 530,000 t of oil (10,556 bopd) vs. 410,000 t (8,166 bopd) last year. 

  NEW TECHNOLOGIES DETERMINE EVERYTHING 

 Authorities in Ashgabat believe that introduction of new technologies and equipment into the upstream industry will ensure successful realization of governmental plans for hydrocarbon production growth. This is one of the priorities of Turkmenistan’s current investment policy in the oil and gas industry. During a roundtable discussion in Ashgabat last May, government officials told foreign suppliers about the requests of state companies for modern technologies, equipment and services, as well as possibilities for cooperative development in this sphere. Foreign participants were asked to give concrete proposals to Turkmen enterprises in this regard during last month’s international conference / exhibition in Ashgabat. 

 Turkmen producing enterprises have had positive experiences cooperating with foreign companies. Accordingly, Turkmenneft has successfully introduced technology for dual completion production. The firm says dual completions keep drilling costs down, increase production and accelerate exploitation of new deposits.

 At Korpeje and South Kamyshlydja fields, this method is being introduced as a variable scheme. In other words, it offers the possibility of varying oil and gas production according to seasonal demand. Such schemes were implemented with the cooperation / participation of Schlumberger. In 2001, Turkmenneft introduced this technology at 18 wells. In 2002, Turkmenneft installed dual completion equipment at 11 additional wells.

 The necessity of deep wells led to application of new technical solutions for drilling and completing such wells. Thus, for the first time in Turkmenistan, complex research was conducted on a well at East Cheleken that was drilled to a depth of 4,600 m (15,090 ft).

 From various foreign companies’ offers, Turkmen officials select and introduce those technical packages that correspond best to domestic geologic conditions. To expedite introduction of new technologies and equipment into all stages of development and production, Turkmen concerns are cooperating actively with foreign firms. Most recently, Chinese companies have successfully introduced technologies. For instance, to control sand in wells at Goturdepe field, a technology developed by Chinese Oil Engineering and Construction was used to strengthen the bottomhole zone. Last May, Chinese Oil and Gas Exploration and Development Co. began a contract with Turkmenneft to repair wells at Kumdag field, in western Turkmenistan.

 Turkmenistan’s market for upstream equipment and technologies until 2010 is estimated at $8 billion. The government stands ready to cover, in full volume, expenditures for these purposes. Thus, the potential for foreign equipment / supply firms to gain additional business in Turkmenistan appears to be very good.