Tethys to Export Kazakh Gas to China After Hanhong Tie-Up

Tethys Petroleum Ltd., an explorer focused on Central Asia, plans to export Kazakh natural gas to China and double output after securing a Beijing-based partner.

Tethys plans to increase gas production in Kazakhstan to about 1 million cubic meters (6,100 barrels of oil equivalent) a day from about 3,000 barrels now, said Executive Chairman David Robson. The Guernsey, U.K.-based company may export the fuel east as soon as 2015 through the planned Kazakhstan-China pipeline after agreeing to sell half of its fields to a unit of Hanhong Private Management Co.

“We can do it fairly quick,” Robson said Nov. 20 in an interview in London.

Tethys pumps most of its oil and gas in Kazakhstan. It teamed up with Total SA (FP) and China National Petroleum Corp. in December to explore the Bokhtar area in Tajikistan, adjacent to South Yoloten, Turkmenistan’s largest gas field. If fuel is discovered there, it may be also exported to China, Robson said in February.

CNPC started building a pipe from Kazakhstan’s largest city of Almaty to the border town of Khorgos earlier this year. In September, KazTransGas and a partner started filling a section between the towns of Bozoi and Shymkent in southern Kazakhstan. Both links will be part of the longer pipeline from the Caspian Sea to China.

Georgia, Myanmar

“We’ve just agreed effectively an initial three-year budget” with Hanhong, Robson said. He expects the agreement between the two companies will be approved by the Kazakh authorities by the middle of next year. “We are working with them today as if we’ve got the deal done.”

Hanhong will pay Tethys $75 million and possibly a further $30 million depending on the exploration success, the chairman said. The partners may invest more than $25 million in Kazakhstan next year.

Tethys, which had $51.2 million at the end of September and will get $55 million more in cash from the deal with Hanhong, has been looking for new projects. It secured interests in Georgia in July and decided not to bid for blocks in Myanmar, Robson said.

“There are projects in Kazakhstan available, but the pricing for me is too expensive,” he said. “Kazakhstan is no longer a cheap place to work,” partly because of labor costs, excessive regulation and changing taxation.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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