This is the first time a report has been commissioned for these properties under the rules of Canadian National Instrument 51-101 and was carried out by the UK based reserve auditing firm TRACS International.
No new wells have been explored to date by the company in Tajikistan with the focus to date having been on designing and implementing an extensive seismic program that will be concluded later in 2009, and working over existing old wells that have provided invaluable data for future drilling prospects as well as limited gas production.
The results of this report has validated the company’s strategic objective of entering Tajikistan to gain exposure to high impact exploration acreage to provide significant upside potential to Tethys Petroleum’s future growth prospects with also the potential for early cash flow from discovered deposits.
The report says that the gross unrisked prospective resources in the area at a “mid case” total some 1,132 million barrels oil equivalent (MMboe). Some of these prospective resources will be further targeted by the present seismic acquisition program (which has just commenced in the Dushanbe area), and which should provide additional data in order to identify the most optimal drilling targets as well as firming up the potential of existing discoveries.
Some of the main conclusions of the resource report were that there are a large number of leads in several horizons that have been identified in the PSC contract area and that a large number of these leads are relatively shallow and would be relatively inexpensive to drill. The resource report states that one of the uncertainties with this play is the type of hydrocarbon that would be encountered and the resources reported are based on the assumption of a 60% chance of encountering oil and a 40% chance of encountering non-associated gas. The “mid case” is considered the best estimate based upon the outcome of a probabilities analysis. This term is a measure of central tendency of the uncertainty distribution.
TRACS also assessed specific existing discoveries in the PSC contract area with a view to establishing Reserves and Contingent Resources within the framework of the existing limited data set which will be improved on and developed by the ongoing Tethys seismic and future drilling.
On the Komsomolsk field, situated near and under the city of Dushanbe, prospective and Contingent Resources were assessed at a gross unrisked summed mid-case of some 74.95 billion cubic feet (Bcf) (2.12 billion cubic metres (Bcm)) of natural gas and with Proven plus probable gross reserves being assessed as 1.55 Bcf of natural gas plus a small amount of gas condensate. Tethys Petroleum hopes to drill directional inclined wells to target these reserves and resources, which lie beneath the city of Dushanbe and have not been developed primarily due to the lack of directional drilling technology. Any success on these wells would move the prospective resources into the reserves category. This field lies next to the capital city Dushanbe and has existing pipeline infrastructure in place. Presently Tajikistan imports almost all its gas at a price of $240 per thousand cubic meters ($6.80 per thousand cubic feet).
In December 2007 the company announced that it had signed an contract to take a partner on these projects in Tajikistan that would have given Tethys Petroleum a 51% operating interest in these projects that includes the PSC. As at March 31, 2009 this partnership had not been completed and as such Tethys Petroleum presently owns 100% of the contractor interest in these assets, but discussions are currently underway with the partners as to certain issues relating to the possible completion of this agreement. It is not known what the commercial terms would be at this time but any commercial arrangement could reduce the attributable reserves and resources in this report to the Company by whatever the percentage of the ownership in Kulob Petroleum Limited, (“KPL”) is agreed to be assigned to the partner. Tethys Petroleum’s interest in the prospective and contingent Resources and Gross Reserves is subject to the terms of the PSC. Under the PSC , KPL will recover 100% of its costs from up to 70% of total production from oil and natural gas. The remaining production will then be split in accordance with a fixed formula between KPL and the Tajik State.
David Robson, president and chief executive officer of Tethys Petroleum, commented, “We are very pleased that the TRACS report has confirmed the Company’s decision to enter Tajikistan to gain exposure to very high exploration upside potential. Over a billion barrels of Prospective Resources is a remarkable asset to have for a company of our size and bodes well for our future growth prospects. The current seismic program will provide additional high quality data that will allow us to firm up these resources and to evaluate the best prospects to drill in the future. This will move us a step closer to achieving our goal of enabling Tajikistan to gain energy independence.”
