A Promising Land: Russian State Companies Expect Major Discoveries In Central Asia

Gazprom and Rosneft are accelerating exploration efforts in Central Asian onshore projects. Their experience may show that interesting opportunities exist away from the Caspian Sea oil and gas fields, where most of the business focuses on.

Prowling Gazprom

Gazprom has made a discovery of a gas deposit in Central Asia, the first one since the demise of the Soviet Union. Its wholly-owned subsidiary Gazprom Zarubezhneftegaz (GZNG) found the Dzhel field on the Shakhpakhty block on Uzbekistan’s Ustyurt Plateau. The daily flow rate from the well is 350,000 cubic meters.

The Russian company holds geological study licenses to several blocks in this part of Uzbekistan. They were obtained after Gazprom signed an ‘agreement on main principles of carrying out geological studies of subsoil on investment blocks of the Ustyurt Region’ with Uzbekneftegaz .

A GZNG executive told RusEnergy: ‘We hope to discover about a dozen of deposits on the contract territory with reserves in excess of 400 mln t of oil equivalent.’ GZNG expects the discoveries to be made before 2012. Gazprom officials refer to their Uzbek venture as a project ‘at an advanced stage of progress.’

If the plan is implemented in full, Gazprom will control Central Asia’s largest onshore reserves of gas among foreign players. The Russian company started with a small depleted field and has shown how it is done in Uzbekistan.
Wells and Fields

men_at_workThe wildcat on Dzhel was preceded by a program of seismic studies in 2008, a part of an exploration program drafted a year earlier by Russia’ VNIIgaz and Uzbekistan’s IGITNIGM institutes. The program envisages drilling more than 50 wells to the depth of 3,500-4,500 m and 3D surveys on 1,200 km2, in addition to acquisition of 13,700 km of 2D profiles.

In late February 2009, the Government of Uzbekistan issued Ordinance 42 ‘On Additional Measures Aimed at Actualization of the Program of Staged Exploration Works in the Ustyurt Region’ and the Russian company used this opportunity to identify the most promising blocks and drop some of the less alluring ones .

In 2009-2010 operations will continue at Aktumsuk, Agyin, Nasambek and Shakhpakhty. The first three blocks on this list will see acquisition of 1,600 km of 2D profiles, 400 km2 of 3D seismic surveys, and aerospace sounding on 800 km2. Wight wildcats will be drilled totaling 36,655 m. A total of earlier six wildcats will be completed and tested on the four blocks.

To appraise reserves of the discoveries, Gazprom is also planning to drill five exploration wells totaling 15,000 m. In all, the Russian company’s investments in the Ustyurt project this year will amount to $35.5 mln out of the total investments of $140 mln through 2011.
Sags and Highs

The GZNG executive went on: ‘Gazprom has subscribed to investing over $400 mln in the Ustyurt project and the money comes on schedule. Currently almost 20 wildcats are being drilled simultaneously, and seismic studies are going ahead, too. We can be proud of these achievements.’

The achievements of the Russians are a result of a revision of the Ustyurt development concept. Earlier, the search focused on identified traps within major tectonic highs, ignoring the Kulbai and Atotbai sags.

Explorers drilled 172 wells totaling almost 570,000 m on the highs within 52 blocks during the previous 40 years, but only seven large discoveries were made. The average was not impressive: just 0.65 mln t of oil equivalent (in C1+C2 categories) per well or 198.8 t per one meter of well.

Today, the operator is targeting sags rather than highs. Russian and Uzbek geologists predict seven to nine discoveries there with reserves totaling 420 mln t of oil equivalent. The new fields are expected to become the main producing base of Gazprom in Central Asia.
Shores and Seas

pictureAnother Russian state company, Rosneft, is also making an emphasis on onshore projects in the area. Arai Petroleum, a joint venture of Rosneft and Sinopec, is planning to complete exploration of the Adai block in 2011. The block’s main acreage is located in the Zhylyoy District of Kazakhstan’s Atyrau Region.

The JV has already discovered the Biikzhal and South Kaskyrbulak oil fields in oversaline horizons on their block with reserves totaling 21 mln t but the explorers’ main hope is associated with subsalt sediments at the depths between 4,000 and 5,000 m. Geologists claim that 130 mln to 250 mln t of oil reserves may be discovered there. If the prognosis is true, Adai Petroleum will become the third largest owner of oil reserves in the Atyrau Region, after the North Caspian offshore project and Tengiz.

Rosneft has an additional stimulus to develop Adai: it could be a compensation for the failure in exploring the offshore Kurmangazy project in the Kazakh sector of the Caspian Sea. A second wildcat was as dry as the first one. The Russian company hoped to find from 250 mln to 1 bln t of oil there, but now has to reconsider these estimates and plans.

The oil company is actually following in the steps of Gazprom, which has also reconsidered the concept of development at Ustyurt. A new scientific approach to appraising the potential of Ustyurt may prove to be efficient.

The experience of Gazprom and Rosneft shows that onshore exploration in Central Asia may be quite encouraging. Investors are queuing to acquire onshore licenses in Uzbekistan, and in Kazakhstan.

Such ventures are less costly that projects on the continental shelf in the Caspian Sea or Aral Sea. And underexplored subsalt reservoirs may even contain larger oil and gas deposits than offshore plays.
First Gas

Gazprom Zarubezhneftegaz (GZNG) received a commercial flow of gas from Wildcat Number 1, drilled to 3,049 m. The producing horizons were found in the range of 2,387 to 2,396 m. The daily flow rate through a 12mm gauge was 350,000 cubic meters. Tests are going on at the well.

The explorers are going to base consequent plans of operations on the results of the test and seismic data interpretation.

The Dzhel field is located 15 km west of the rehabilitated Shakhpakhty field, which has been developed since 2004 by an alliance of GZNG and Gas project development Central Asia AG. It is possible to use the existing infrastructure to save on development costs of Dzhel.
Gazprom’s Ustyurt blocks

RusEnergy research