| A Unique Central Asian Oil Opportunity
Manas has acquired six exploration licenses covering 3,152 sq. kilometers in the Kyrgyz Republic. The licenses lie within a proven petroleum system known as the Fergana Basin which extends across parts of Kyrgyz Republic and into Uzbekistan and Tajikistan, and is, in part, analogous to the prolific hydrocarbon province of the Tarim and Junggar Basins in Western China which contain many large oil fields. Several of Manas' concession's deep under-thrust structures are only a few kilometers away from existing oil production, decreasing risk to the company even further. Manas' technical team has already identified many deep structures on its licenses. |
Joint Venture with Australian Major
In November 2006, Manas entered into an agreement with Santos International Holdings Pty Ltd, a subsidiary of Australia's third largest oil and gas company, Santos Limited, to execute a phased farm-in agreement under which Manas retains 20% equity and Santos earns a 70% operating working interest in Manas' six exploration licenses in the Kyrgyz Republic. This 70% is being granted in exchange for Santos making a commercial discovery as the intended consequence of its funding and conducting a $54 Million seismic, exploration and appraisal drilling program.
Manas has subsequently increased its equity stake in the project to 25% by purchasing a 5% interest from Kyrgyzneftegas the Republic's state energy company. |
Santos International Holdings Pty Ltd., Manas' farm-in partner on the Kyrgyz project is planning an 865 kilometer 2D seismic program in the first quarter of 2007, and anticipates drilling a number of wells in 2008 and 2009. The program will target deeper prospects with the potential reserves exceeding 200 million produceable barrels of oil.
Nanai Prospect
Manas' Nanai prospect is just north of the Fergana Basin's Minbulak discovery. The concession has two known structures. Each structure is large enough to hold more than 100 million barrels of oil. The Nanai is approximately 50 kilometers north of the Minbulak oil field which has the same type of structure as those to be tested at the Nanai. The Minbulak is the only deep under-thrust structure to be drilled in the basin. It was drilled in 1992 just as the Soviet Union was collapsing. The Minbulak's reserves totaled 200 million barrels and its wells produced as much as 16,000 barrels of oil per day.
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Clearly Oil and Gas Rich
The Fergana Basin has been producing hydrocarbons since 1902. The total discovered reserves from 58 fields are estimated to be in excess of 1.2 billion barrels of oil and 5.5 trillion cubic feet of gas, with cumulative production to date of more than 600 million barrels.
The Fergana Basin covers parts of Uzbekistan, Kyrgyzstan and Tajikistan. The areas of the basin with oil fields are principally in The Kyrgyz Republic and Tajikistan. The basin and the Kyrgyz Republic lie within an oil trend which begins in China's 15 billion barrel Tarim basin and ends in the west in the Caspian where its deep giant fields are well known. To the immediate north-east of the basin is Kazakhstan, home to the super-giant Tengzig oil field, the 10th largest in the world. China's Tarim basin is to the Fergana basin's direct southeast where the massive Xinjiang field supplies roughly a fifth of the oil that China consumes. The Fergana Basin, has the same geology as China's Tarim basin and like all three areas it was first known for its shallow oil production.
Manas' six concessions are in the Fergana. Working with the Kyrgyz state oil company Kyrgyzneftegaz, which is a Manas shareholder, the company has acquired what it views as the best lands in the basin.
Kyrgyz Deep Under-thrust Potential Not Tested Until The Late 1980s
The Fergana's production of light sweet crude oil goes all the way back to 1902. Significant reserve and production growth was just getting underway in the late 1980s when the Soviets started to test deeper more complex structural concepts. Local geologists could see that faults were not vertical but over-thrust, but dared not to contradict their bosses in Russia, who insisted that, similar to Siberia, all faults must be vertical. At the time the small size of most shallow fields in the Fergana was taken to indicate that its potential was limited. This was before the tectonic thrust faulting was understood by most Soviet managers. Most shallow production in the Fergana is from reservoirs that have lost much of their original oil. They are the remaining erosional remnants of anticline structures that were far larger millions of years ago. Even the remaining structure holds less oil as it has escaped to form seeps over the eons. The remaining deep structures, however, have not been subject to erosion nor have they had their original oil deposit seeping or draining away for millions of years. As a consequence, additional large, high pressure light oil deposits such as the Minbulak are expected to be found.
The collapse of the Soviet Union in 1991 ended the Soviet's exploration and discovery of large oil fields in the basin's deeper under-thrust structures; however, China's drill testing of the same types of deep structures in the Tarim basin continued uninterrupted. The result was China's discovery of over 15 billion barrels of oil.
Though the Fergana basin covers a smaller area than the Tarim basin, it remains rich in oil.
| Total No. of Fields | Total Oil Reserves | Total Gas Reserves | Cumulative Production |
| 58 | Approx. 1 billion barrels | 5.5 tcf | 600 million barrels |
America's United States Geological Service (USGS) says that the Fergana's undiscovered deeper under-thrust structures should contain another 3 billion producible barrels of oil. The USGS also notes that the oil should be contained in structures similar to the Minbulak, which are the type of structures already outlined on the Manas concessions. The primary reservoir is multiple layers of thick Paleogene (starting 65 million years ago) and Neogene (23 million years ago to present) sandstones. |
A Historic Opportunity
The Soviet Union and its satellite countries' oil production history goes back all the way to the tenth century when at Baku, near the Western Caspian Sea, oil and gas seeps were first reported. By the fourteenth century, Baku oil was exported around the Middle East and by 1846 Baku (now the capital of the Azerbaijan Republic) was producing 90% of the world's oil. The Nobels and the Rothschilds played a major role in the later development of Baku oil. One of Shell Transport & Trading's, (now Royal Dutch/Shell), first businesses was shipping the Rothschild's Baku oil to Western Europe. The WWII battle of Stalingrad was fought for Baku's oil fields.
Communist Victory Causes Kyrgyz Production Collapse
As reflected in the historic oil production profile for the Kyrgyz Republic where Manas is a major player, Soviet oil production collapsed following the Russian 1917 "October" revolution. This occurred as politically motivated purges combined with the nationalizing of Russian oil fields decimated the industry. Standard Oil of New Jersey, (now Exxon) was among the few to continue investing under the new regime as was Vacuum and Standard Oil of New York, (now Mobil). Western investments helped enable Communist Russia's 1923 oil exports to reach pre-revolutionary levels.
1960s Siberian Discoveries Divert Attention from Other Oil Provinces
Currently, Western Siberia remains Russia's largest oil province with proven reserves of roughly 100-150 billion barrels. The first Siberian discovery was announced in the early 1960s and culminated with the discovery of the super-giant 14 billion barrel Samotlor field in 1965. At the time, because West Siberian oil field geology was very simple, production costs were low and its huge reserve potential was easily understood, Soviet planners almost completely ignored all other areas of the former Soviet Union.
Central Planner's Siberian Focus Leaves Other Area's Deep Under-thrust Potential Largely Unexplored
This reality translates to opportunity for Manas Petroleum as the Soviet planners did not explore several areas that still have exceptional potential for holding giant oil deposits. Also, where the Soviets did operate, their "production associations" often overproduced existing fields to meet production quotas without regard for proper reservoir management practices thus damaging future production potential. The crucial point is the Soviet's left much of the Former Soviet Union and Eastern European countries' deeper more complicated oil and gas potential intact, untested and undamaged.
When Soviet oil production peaked in 1988 at 11.4 million barrels per day Siberia was providing roughly two thirds of Russian supply. During the 1980s Manas Director and CEO Alexander Becker was still developing his expertise in Central Asia. He received an award from the Soviets for being the Kyrgyz Republic's best mapping geologist and shortly afterwards moved to Israel to perform (also award winning) geological research.
Following the 1988 production peak the Soviet oil industry's collapse was as dramatic as the implosion of the Russian communist system and by 1996 daily oil production had declined nearly 50%.
Soviet System Collapse Causes Oil Industry Paralysis
The end of Russian communist governance not only resulted in a big drop in domestic oil consumption, but the Soviet's financing of thousands of production associations completely stopped. Consequently, both Eastern European and Former Soviet Union countries' oil industry's went from bad to worse. Originally they were merely deprived of modern Western exploration technology and concepts while being largely ignored because of most Soviet central planners' focus on Siberia. As the Soviet system collapsed all funding for exploration evaporated and workers went for months without pay. A common Soviet refrain at the time was "they pretend to pay us and we pretend to work". This reality quickly forced a halt to what little new exploration and drilling activity there was across the former communist world - no matter how good the results.
One telling example is the 1992 Minbulak oil discovery which is near one of Manas Petroleum's most promising Kyrgyz concessions. The discovery well blew out and subsequent wells ranged from 3,000 to 16,000 barrels per day and yet no significant exploration occurred afterwards.
Treasure Trove of Data Left Gathering Dust for Decades
Critically, the communists' geological associations always reported their results back to the Soviet Central planners. For more than a decade much of this treasure trove of geological information has been largely ignored. It is only now that these meticulously kept records are being re-evaluated using modern Western technologies and concepts.
Manas Petroleum is very much part of this effort. Last summer Manas helped its partner, oil major Santos International Pty Ltd., access Soviet seismic originally acquired in the Kyrgyz Republic during the 1980s. The data has since been re-processed with state-of-the-art Western supercomputers. This remains a critical part of the strategy. Why? Because the area is so large, using the archived raw Soviet data has become an essential, cost efficient way to outline drilling prospects. This information can also be extremely useful when planning modern seismic programs that are designed to further define known structures and survey other highly prospective but yet to be explored areas.
In Kyrgyz Republic's Fergana basin the location of structural traps is the principal challenge. It is already an established fact that the basin has great reservoir rocks and is exceptionally oil rich. Consequently, locating structures which trap the oil remains key. London based Petroleum Engineers Scott Pickford concur and note in a recent report that, "The presence of oil and reservoir is almost ubiquitous in the region". This is why previous results from prospects such as Tuzluk (see cross section) are highly encouraging. Consider the fact that in the 105 year history of the Fergana Basin, all structures found and subsequently drilled have resulted in discoveries.
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Politics & Economy
Politics
- Stable democracy
- World Trade Organization member
- Government protection of foreign investments
- Established history of profitable foreign mining operations
Economy
- Free market economy
- Low cost operating environment; experienced and competent workforce
- Overall government take via direct and indirect taxes is approximately 35%
- Free transfer on outward capital flows
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