Tethys Farms-Out Prospective Acreage

BMI View: Tethys Petroleum has reached an initial agreement to farm-out its large and highly prospective Bokhtar concession to an unnamed international oil and gas company. The farm-out deal will help Tethys progress with plans to start drilling at the block, which c ould confirm the hydrocarbons potential of the Afghan-Tajik basin within which Bokhtar lies. In Tajikistan's murky business environment, farming-in to existing blocks could allow firms to partially de-risk their investment by cooperating with a partner already familiar with the country. This would benefit smaller existing players in Tajikistan , if and when interest in the nascent oil and gas sector grows.

Central Asia-focused independent Tethys Petroleum has reached an initial agreement to farm-out its Bokhtar concession in Tajikistan to an unnamed 'international oil and gas company' (IOC). A memorandum of understanding (MoU) has been signed that will see the IOC take a stake in a production sharing contract (PSC) at Bokhtar, located in south - west Tajikistan in the Afghan-Tajik basin. The deal will be finalised at a later (but uns pecified ) date, subject to government approval.

Tethys has a n 85% controlling interest in the Bokhtar PSC , via its wholly owned subsidiary Kulob Petroleum . It is one of the few players that are currently active across Tajikistan ' s largely underexplored acreage.

Table: Bokhtar Production Sharing Contract
Contract Term 25 years
*Estimated gross un-risked mean recoverable resources. Source: Tethys Petroleum
Area 35,000 sq km
Region Afghan-Tajik portion of Amu Darya Basin
Early estimates* 3.22tcm of gas, 8.5bn bbl of oil

Significant Prospectivity

The Bokhtar PSC could deliver large returns. In July 2012, an independent report by Gustavson Associates found that the 35,000sq km Bokhtar concession could hold gross unrisked mean recoverable prospective resources of 27.5bn barrels of oil equivalent (boe) - 3.22trn cubic metres (tcm) of gas and 8.5bn barrels (bbl) of oil. Tethys' CEO Dr. David Robson said potential volumes could be considerably greater than the estimated remaining reserves and unrisked resources available in the UK North Sea.

The US Geological Survey (USGS) has adopted more conservative estimates. According to a 2011 survey, undiscovered, technically recoverable conventional resources for the 97,000sq km Afghan-Tajik Basin - stretching over Afghanistan and Tajikistan and within which Bokhtar lies - could be as much as 946mn bbl of crude oil, 196bn cubic metres (bcm) of gas and 85mn bbl of natural gas liquids (NGLs).

However, these estimates are based on seismic surveys, and drilling could see these figures rise. As an extension of the hydrocarbons-rich Amu Darya Basin, where Turkmenistan's giant South Yolotan field lies, it is hoped that a similar geological profile could see the Afghan-Tajik basin demonstrate as much commercial potential. Afghanistan put six of the blocks located in the basin up for tender on March 7 2012, in the hope that it would be possible to cash-in on potential oil and gas resources. ExxonMobil had been one of the players rumoured to have shown interest in it the auction.

The completion for Bokhtar's farm-out would most likely see Tethys begin drilling in H1 2013. The drilling campaign is notable as it will include a deep well targeting the concession area's subsalt play. The outcome of the campaign would further confirm the country's oil and gas potential.

Opaque Operating Environment

Tethys' farm-out would help bring in much-needed capital to boost exploration and production (E&P) activity in Tajikistan. Despite the country ' s potential, only a handful of players are involv ed in its oil and gas industry. They include independents like Tethys and Manas Petroleum and Russian gas behemoth Gazprom - thanks to the legacy of Tajikistan's Soviet past. Many of these small independents have limit ed financial muscle and this has slowed the speed at which they can carry out E&P activity in a country with an u nderdeveloped oilfield services sector. Meanwhile, one of Russia's geopolitical goal s - to bind Tajikistan through energy import dependency - has led to half-hearted attempts by the majority state-owned Gazprom to invest in Tajik oil and gas .

Heavily Import Reliant
Tajikistan's Oil Production, Consumption & Imports (LHS, in '000b/d) And Gas Production, Consumption & Imports (RHS, in bcm)

Domestic production would be welcomed by a country that is heavily reliant on imports to meet its oil and gas requirements. Despite the considerable demand, private investment is weak because of the lack of clarity with regard to oil and gas licensing terms. BMI's business environment rating for Tajikistan is only 34.3, which is below the Central And Eastern Europe (CEE) average of 52.3, a result of the difficulty of investing and operating in an opaque regulatory environment where the rule of law is weak.

TABLE: Tajikistan - Risk Rating
Latest Rating* Last Month Rating** Previous Rating** Regional Avg Global Mkts Avg
Source: BMI
S-T Political 50.6 50.6 50.6 64.0 65.6
L-T Political 42.2 42.2 42.2 64.1 63.2
S-T Economy 44.4 50.4 50.4 54.4 54.4
L-T Economy 42.4 46.8 46.8 53.5 53.7
Business Environment 34.3 34.3 34.3 52.3 48.6
Composite 41.3 43.1 43.1 54.5 52.8

While opaque regulations have never been a big deterrent to oil and gas investment, farm-in deals might offer companies interested in Tajikistan an easier way to enter the market . They would allow external companies to work with a partner that is already familiar with the country's operating environment, de-riskin g investment. This could mean that the small number of early entrants into Tajikistan , such as Tethys and Manas , will benefit if and when interest in the country ' s large hydrocarbon s potential takes off .

This article is tagged to:
Sector: Oil & Gas
Geography: Tajikistan

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