CNPC pushes ahead with upstream plans in Uzbekistan

23 March 2017, Week 11 Issue 635

A subsidiary of state-owned China National Petroleum Corp. (CNPC) has said it plans to begin developing a trio of gas fields in Uzbekistan in the second half of this year.

The announcement comes just weeks after reports emerged that CNPC had shelved construction of a pipeline through Uzbek territory that would have pumped gas to the Chinese market.

New Silk Road Oil & Gas (NSROG), a joint venture between the Chinese firm and Uzbek NOC Uzbekneftegaz, operates the Karakul block in the country’s southern province of Bukhara. In a 2017 investment report published on March 16, NSROG said the Tashkent government had signed off on a feasibility study for the block’s development. Specifically, the firm will target the Dengizkul, Khojadavlat and Sharky Alat deposits, with combined output anticipated to peak at 869.6 mcm per year of natural gas and 57,600 barrels per year of condensate.

The cost of development is earmarked at US$377.5 million.

NSROG noted that China Petroleum Engineering & Construction Corp. (CPECC), a servicing unit of CNPC, had been selected as a general contractor for the project. The company will be tasked with design, transport, construction and commissioning of field facilities. XIBU Drilling Engineering, another Chinese contractor, will sink 11 production wells at the block. The services firm already has experience in working in Uzbekistan, having drilled several wells for Russia’s LUKoil at the Aral Sea in the north of the country. The repair and testing of wells will be carried out by China National Logging. Development will be funded by Chinese loans, according to NSROG, with CNPC acting as a guarantor.

CNPC made its foray into Uzbekistan in 2006, when it struck a deal with Uzbekneftegaz on the exploration of Karakul and four other blocks in the Ustyurt, Bukhara-Khiva and Fergana oil and gas basins. By 2011, the Chinese firm had shot some 8.9 million km of 2D and 1 million square km of 3D seismic work, and had also drilled 13 exploration wells. Its investments at the site at that time totalled US$260.2 million.

The Beijing-based producer then signed a memorandum of understanding (MoU) with Uzbekneftegaz in late 2013 to develop the Baysun, Surhan and Karakul blocks.

Development of Karakul was originally slated to start in 2014, although the deadline was then pushed back to 2015, and then again to 2016.

Earlier this month, Russia’s RIA Novosti cited unidentified sources as saying that CNPC had shelved construction in Uzbekistan of the fourth string of the Trans-Asia-Gas-Pipeline (TAGP) network. Tashkent has signed an agreement with Beijing for the delivery of up to 10 bcm per year of gas via TAGP, and the Karakul block is earmarked as a potential source for some of this fuel.

However, there is scepticism that Uzbekistan will ramp up deliveries to this level given the expected rise in domestic demand and the apparent cancellation of TAGP’s fourth line. According to China’s General Administration of Customs (GAC), Uzbekistan pumped 3.61 bcm of gas to the Chinese market in the first nine months of 2016, up 240% year on year.

Edited by

Andrew Kemp

Editor

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