Tethys Petroleum Limited has received its first payment for commercial gas sales.Tethys recently completed a 35 mile (56 km) pipeline and associated compression plant, connecting Tethys’ Kyzyloi Gas Field to the Bukhara-Urals trunkline, one of Central Asia’s major export trunklines.
Gas production commenced from the Kyzyloi Gas Field on December 19, 2007. An initial two month run-in period was agreed with the gas buyer in order to optimise and adjust the compressors and the input pressures to the Bukhara-Urals. Average rates during this run-in period are planned to be approximately 17.6 MMcf/d (500 MCM/d). To date a maximum flow rate of some 26.7 MMcf/d (757 MCM/d) has been achieved into the Bukhara-Urals trunkline.
Tethys is receiving USD$1.03/MCF for a base load of production from the Kyzyloi Field. Phase 2 production, which will be produced from the surrounding Akkulka Block, is expected in fourth quarter 2008, and will be sold on the local market at a price related to spot prices.
Gas prices in the region continue to rise strongly. The current price of gas in the Bukhara-Urals trunkline that Tethys will sell into, which transports gas from Central Asia to Russia and onwards into Europe, has risen several times since Tethys concluded this original contract and has just risen a further 30% to USD$3.68/MCF in January 2008, with a further rise to USD$4.27/MCF agreed by the principal regional producers for July 2008.
Russian Industry and Energy Minister Viktor Khristenko has recently been quoted as indicating that Russia will offer Central Asian gas exporting countries a price equal to the average cost of the fuel on the European markets, “In 2008 Russia must work out a pricing formula with Turkmenistan, Uzbekistan and Kazakhstan. We are also interested that the contracts be signed for a term of not less than 15 years. Everybody understands the situation on the gas market is changing significantly.”