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Dragon Looks to Export Turkmen Gas as State Talks Drag On

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Aug. 6 (Bloomberg) -- Dragon Oil Plc, an explorer in Turkmenistan, is in talks with potential natural-gas buyers outside the Central Asian state as contract negotiations with the government drag.

“There are a few potential customers around that are willing to get our gas,” Chief Operating Officer Hussain Al Ansari said today in a telephone interview, declining to identify any of the parties. “We are discussing with a few other people within Turkmenistan and the region.”

Dragon pumps out gas in conjunction with crude oil in the country, which already produces its own fuel and has held off striking an accord while demand remains muted. That leaves the company to burn off the gas or feed it into a state-owned pipeline for free. It has been in talks with Turkmenistan since 2010 on a sales contract.

Dragon plans to increase production by about 36 percent to 100,000 barrels of oil equivalent a day in 2015. It already has a production-sharing agreement that allows it to look beyond the government for gas sales, including for export, Al Ansari said.

The Dubai-based company intends to build a gas-treatment plant in Turkmenistan, allowing it to separate liquids from the fuel before selling it. The facility would be able to process 360 million cubic feet of gas a day, stripping out about 3,600 barrels of condensate, the company said today in a statement.

Delayed Approval

Getting approval from state agencies for the plant has taken “a bit longer than we anticipated” because the government wants to “synchronize” oil and gas output with other companies, Al Ansari said. The producer is still in talks with Turkmenistan about gas sales, he said.

Dragon expects to award contracts to build the plant in the fourth quarter and start operating the facility in 2016, the executive said, declining to estimate the cost of development.

The company today reported a 22 percent slump in first-half net income to $241.4 million after revenue dropped 16 percent amid lower oil prices. Dragon shares fell 0.2 percent to 613.5 pence in London, trimming their gain this year to 11 percent.

While Dragon focuses on Turkmenistan, where its main asset is Cheleken in the Caspian Sea, the company also has exploration blocks in Tunisia, Afghanistan and Iraq.

Dragon will start production tests at its Hammamet West-3 well in the Bargou area off Tunisia this week, Emad Buhulaigah, the company’s general manager of petroleum development, said today. Dragon and its partners are targeting about 100 million barrels of oil-equivalent resources.

“If it proves commercial in the current section, we will have to go through the development plan,” Buhulaigah said. “If not, then we also have a plan to continue drilling further.”

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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