Tethys Venture Expects Nod for North Sea-Size Deposit by March

Tethys Petroleum Ltd. expects Tajikistan to approve its venture with Total SA and China National Petroleum Corp. this quarter, speeding up exploration in an area that may hold more oil and gas than the North Sea.

A group of executives from the three companies is holding talks with Tajikistan government officials, David Robson, executive chairman and president of London-based Tethys, said today in an interview in Hong Kong. With the funding and expertise of the partners, the pace of exploration will be accelerated, he said.

“I talked to Tajikistan’s president last week and he’s very supportive of the project,” Robson said. “The deal will put Tajikistan onto Asia’s energy map. It’s very unlikely we won’t get approval.”

The Bokhtar contract area, covering 35,000 square kilometers (13,500 square miles) at the eastern end of the Amu Darya Basin, may hold an estimated 27.5 billion barrels of oil equivalent, Tethys said in June. The deal will allow China National Petroleum to secure supplies for fueling growth in the world’s second-largest economy and provide Tethys and Total access to the biggest energy market globally.

Total, Europe’s third-biggest oil company, and China National Oil and Gas Exploration and Development Corp., a unit of state-owned CNPC, will each hold a third of the Bokhtar project. The new partners will pay about $60 million to Tethys to refund almost two-thirds of costs already incurred and will carry some of the project’s future spending.

Tethys shares fell 0.4 percent to 34.875 pence in London yesterday. Total gained 0.4 percent to 39.895 euros in Paris.

China Link

Tethys has drilled four wells in the Bokhtar block since acquiring the exploration rights in 2008 and all wells have discovered hydrocarbons, Robson said. The project is located near the Turkmenistan-China natural gas pipeline, built and operated by CNPC, China’s biggest energy producer.

Natural gas output from Tajikistan could be connected to the main pipeline and sent to China, Robson said. Tethys and its partners have also talked about building a pipeline directly though the nation’s mountainous east to China’s Xinjiang region, which would cut transmission distance by more than two-thirds.

“It really depends on how much gas we can get from the project,” Robson said.

Tajikistan’s reserves could meet China’s natural gas consumption for 25 years, according to an outside estimation, Robson said, without providing details.

Rival Bids

Tethys and CNPC made rival bids for Afghanistan’s first oilfield auction in Aug. 2011. CNPC won after agreeing to pay a 15 percent royalty and build a refinery.

The Afghanistan oilfields at the Amu Darya basin are located in the same geological zone that extends well into Turkmenistan and Uzbekistan. Although CNPC’s Afghanistan oilfields are only divided by a river from the Bokhtar development, Tethys has no plan to get involved in the CNPC project.

The concessions and royalty “are too high” in the Afghanistan project, Robson said. “I don’t think our shareholders would allow us to do things like that.”

Tethys owns other oil and gas projects in Central Asia’s Kazakhstan and Uzbekistan. The company is open to diluting stakes in those projects, although Tethys has no immediate need to raise money, Robson said.

“We’ll talk and we’ll listen, but we don’t have to rush for anything at this stage,” he said.

The cash brought in by Total and CNPC should be enough for oil and gas exploration in Tajikistan for the next two to three years, he said.

Tethys lost $16.6 million in the first nine months of 2012 because of high administrative and operation costs, the company said in a statement on Nov. 14. Average oil production from its biggest commercial oilfield, Doris field in Kazakhstan, was 2,234 barrels a day, according to the statement.