Dragon pursuing growth in Turkmen Caspian sector

Production from the Cheleken Contract Area fields offshore Turkmenistan averaged 58,000 b/d of oil during the first half of this year, up 25% from the comparable period in 2010.

Offshore staff

ASHGABAT, Turkmenistan – Production from the Cheleken Contract Area fields offshore Turkmenistan averaged 58,000 b/d of oil during the first half of this year, up 25% from the comparable period in 2010.

According to operator Dragon Oil, this was due in part to commissioning at the end of last year of new infrastructure, which included the 30-in. (76-cm) trunkline, associated 20-in. (51-cm), 18-in. (46-cm), and 14-in. (35-cm) infield pipelines, and the expanded Central Processing Facility.

The balance of the production growth this year has come from six wells which were put into production on the Dzheitune (Lam) 28 and B platforms.

On the minus side, the Dzheitune (Lam) B platform area has not been very prolific, Dragon says, although it will continue to assess such areas and use resultant information to optimize its future drilling plans.

This year Dragon expects to drill and complete 12 wells and a side track, and to perform a workover of one well.

The contracted NIS and Iran Khazar rigs are currently drilling the next two development wells on the Dzheitune (Lam) field, respectively 28/158 and B/159. Iran Khazar will then mobilize to the Dzheitune (Lam) A platform for a workover.

The group’s own Rig 40 is drilling the Dzheitune (Lam) 13/160 development well, to be followed by a sidetrack. This year Dragon expects to drill and complete a total of 12 wells and a sidetrack, plus the single workover.

Construction of the Dzheitune (Lam) C wellhead and production platform should be delivered this fall. The block 1 riser platform, which will act as a gathering station and help increase throughput capacity of the Dzheitune (Lam) West area, is in water and should be commissioned within the next few weeks.

Recently Dragon awarded contracts to various companies for construction of the block 4 riser platform and associated pipelines in the Dzhygalybeg (Zhdanov) field. The block 4 facility should be completed during 2Q 2012 and will act as a gathering station for production from new wellhead and production platforms in the Dzhygalybeg (Zhdanov) field.

Both the Dzhygalybeg (Zhdanov) A platform and the Super M2 jackup drilling rig should be delivered early next year. Potential delays to these two projects have led Dragon to adjust its forward drilling plans for 1Q 2012 to maintain flexibility and ensure continuous drilling during this period.

Construction and delivery of a 100-metric ton (110-ton) crane vessel could also be delayed, but Dragon has access to alternative crane vessels, so this should not impact operations.

Capital expenditure for the Cheleken Contract Area during 1Q 2011 was roughly $151 million. Around 45% was related to infrastructure and the remainder to drilling.

For 2011 as a whole, infrastructure capex should range from $200-$250 million, with around $600-700 million slated overall for infrastructure projects during 2011-13.

During this period, Dragon plans to tender out contracts for construction of at least three new wellhead and production platforms and associated pipelines, to be located in both fields and to be named Dzheitune (Lam) D, Dzheitune (Lam) E, and Dzhygalybeg (Zhdanov) B.

Based on its various programs, Dragon expects production to grow this year by up to 20%, with average growth of 10-15 % during 2011-13.

It is continuing discussions with the government of Turkmenistan on gas monetization from the Caspian fields. The company is pursuing both a short-term arrangement for the near future, given the relatively low global gas demand at present, and a long-term agreement based on the expectation of more favorable gas market conditions in future.

07/27/2011

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