Caspian Energy (CEL) has signed an agreement that will enable it and a new partner to proceed immediately with plans production expansion in the East Zhagabulak oil field of Kazakhstan.

Its subsidiary Caspian Energy has arranged the sale of a 10% interest in Aral Petroleum Capital, the operating entity in East Zhagabulak, to Asia Sixth Energy Resources.

Asia Sixth Energy has also acquired the 50% of Aral previously owned by Azden Management.

Asia Sixth Energy has agreed to provide a loan (facility agreement) of up to $2m to Aral to conduct immediate workovers on production wells in the East Zhagabulak field; and seek a total $80m in debt financing (including the $2m facility agreement) for Aral to conduct further development and exploration drilling.

The partners have planned to drill a series of development wells in East Zhagabulak, beginning with one well in the first quarter of 2011 and if successful, this will be the third production well on the field, to date, with a further three wells to be drilled sequentially.

Aral holds a 25-year production contract with the Republic of Kazakhstan for East Zhagabulak and it also holds a three-year exploration licence for the balance of the property known as the North Block.

Aral will now be owned 60% by Asia Sixth Energy Resources and 40% by Caspian Energy through Caspian Energy after closing of this transaction.

In consideration of acquiring a 10% interest in Aral from CEL, Asia Sixth Energy is required to enter into a facility agreement with CEL.

Subject to the fulfilment of certain conditions precedent, Asia Sixth Energy will advance up to $6m in loans to CEL in three $2m tranches over a two-year period.