CNPC, Partners Sign Tajikistan Oil and Gas Deal

CNPC, Total and Tethys to Jointly Develop Assets Updated June 18,2013

HONG KONGChinese oil giant China National Petroleum Corp. and France's TotalSA FP.FR 1.06% on Tuesday completed an agreement with Tethys Petroleum Ltd.TPL.T -4.65% to develop oil and gas assets in Tajikistan. The venture is another piece in a jigsaw of projects being put together by China's state oil companies to diversify their energy supplies through investments in domestic and foreign oil and gas assets and the construction of a global network of refineries, pipelines and receiving terminals. London- and Toronto-listed Tethys, which also is developing oil and gas fields in Kazakhstan and Uzbekistan, first announced plans to bring in partners for its Bokhtar project in Tajikistan last October. In December it revealed a draft agreement and production-sharing pact with CNPC unit China National Oil and Gas Exploration and Development Corp. and Total. Each will take a one-third stake in the concession which Tethys has said may contain 3.22 trillion cubic meters of gas and 8.5 billion barrels of oil. The companies signed the deal in the Tajik capital Dushanbe on Tuesday. "We believe the Bokhtar PSC is a world-class asset with enormous potential," Tethys Executive Chairman David Robson told The Wall Street Journal. The first phase of exploration will cost between $80 million and $100 million, he said. Mr. Robson said the Tajik government has also added a further 1,186 square kilometers of highly prospective acreage not previously included in the project, which could add to the block's reserves by 10%. In a statement, Total Exploration & Production Senior Vice President Michael Borrell said the agreement "positions Total in one of the world's most prolific gas basins." Tajikistan imports over 90% of the oil and gas it uses, and the government is eager to develop its domestic resources, much of which lie in the southwest of the country in an extension of the Amu Darya basin which feeds huge gas fields in neighboring Uzbekistan and Turkmenistan.

"Tajikistan's reserves could meet China's natural gas consumption for 24 years. I think in terms of the early development, it will probably be three years away, and the full development in terms of export of gas, maybe by about 2020," Mr. Robson said. CNPC, the country's top oil and gas producer, has been importing gas from Central Asia since 2010 through a Turkmenistan-Uzbekistan-Kazakhstan-China pipeline completed in 2010, supplying fuel to the industrialized east and south China. Chinese companies also are building a network of liquefied natural gas import terminals along its coast.

China plans to boost the share of natural gas in its energy mix to 10% by 2020, from under 5% in 2010, to cut dependency on coal, which now supplies 70% of its energy needs. Part of this will be met by China's huge shale gas reserves, although large-scale production of shale gas isn't expected before late this decade. CNPC is close to completing twin pipelines through Myanmar to southwestern China capable of carrying 440,000 barrels a day of overseas crude and 12 billion cubic meters of Myanmar's natural gas a year. Another project, still on the drawing board, is to pipe in gas from Russian fields. Chinese companies CNPC, China Petroleum & Chemical Corp. 600028.SH 1.11%and Cnooc Ltd. 0883.HK -2.15% have racked up a string of major oil and gas acquisitions in recent years, including Cnooc's purchase of Canada's Nexen Inc. for $15.1 billion. Cnooc and Canadian energy firm Husky Energy Inc. HSE.T -0.43% are developing three deep water gas fields under the South China Sea, with commercial production due to start later this year.