Tethys starts gas production in Kazakhstan

Commercial gas production from Tethys Petroleum’s Kyzyloi gas field in Kazakhstan commenced.

Tethys’ three compressor units were fired up this morning and gas began flowing from the Kyzyloi Field into the major Bukhara-Urals trunkline, marking an important milestone for Tethys and commencing production from what Tethys believes to be the first non-state, dedicated dry gas development in Kazakhstan, and a significant step in the development of the Kazakh gas market.

Gas flows from the Kyzyloi field along a 35 mile (56 kilometres) pipeline to Tethys’ compressor station adjacent to the tie-in point to the major Bukhara-Urals export trunkline system where three gas fired compressors compress the gas into the trunkline. These compressors have the ability to pump gas into the line at a pressure of up to some 785 psi (54 atmospheres). This is the sales point for the gas, and Tethys’ control and measurement system is fully integrated with that of the trunkline which is owned and operated by the Kazakh State company Intergas Central Asia.

The initial production is being sold under the long-term take-or-pay contract signed with the gas trading company GazImpex in January 2006. This contract relates to 30 billion cubic feet (Bcf) (850 million cubic metres (MMcm)) of gas from the initial Kyzyloi development only, and has been assigned to Kazakhstani Petrochemical Company Kemikal LLP, who will utilise the gas in the domestic Kazakh market.

The planned gas supply volumes for this month and for January 2008 have now been invoiced with the contract price being US$1.03 per thousand cubic feet (Mcf) (US$34.5 per Mcm) including VAT which Tethys can offset against VAT costs on the Kyzyloi project. The average daily contract quantity for the next two months estimated at 21.2 million cubic feet (MMcf) (600 thousand cubic metres (Mcm)) from an initial six wells and is expected to increase to approximately 22.1 MMcf (625 Mcm) of gas per day by March of 2008.