06-01-00 New York-based American International Petroleum Corp (AIPC) said that it had signed a protocol of intent to set up a joint venture with a Russian oil company, Tyumenneft (TNK).
The joint venture, which has not yet been named, will develop Shagyrly-Shomyshty, a natural gas-bearing concession located in western Kazakhstan. AIPC was awarded an exclusive 30-year contract for the property, which is also known as License No. 1551, last year. Though AIPC will remain as operator, TNK is now set to take a 50% interest in Shagyrly-Shomyshty and assume half the cost of developing the field.
The press release did not specify the monetary value of the deal but noted that TNK had agreed to tender some payment in cash to AIPC. The Russian company will also help its American partner raise its share of financing for the project.
According to an independent evaluation conducted by Ryder Scott Co LP of Houston, the field -- also known as License No. 1551 -- contains 449 billion cubic feet of gas in proven recoverable reserves and 514 billion cubic feet in probable recoverable reserves. All of these reserves may be classified as proven undeveloped if AIPC is able to conclude a gas sales agreement.
The U.S. company's CEO Joe Michael McKinney said the deal with TNK, which has not worked in Kazakhstan before, would improve the chances for success at Shagyrly-Shomyshty. He also stated that TNK's willingness to sign the joint venture agreement was an indication of confidence that a contract for the sale of gas from the field would be signed soon. AIPC expects to sign a sales agreement with the Russian gas monopoly Gazprom in the first quarter of 2000, McKinney said.
AIPC said in its press release that the field was expected to generate $ 500 million in revenue in its first seven years of production. The company has said it expects Shagyrly-Shomyshty to yield about 200 million cubic feet of gas per day at peak production; Astana's royalties from the project will range from 1.0% to 1.5% depending on output volumes.
AIPC operates mostly in Kazakhstan but has also made efforts to acquire rights to oil- and gas-bearing properties in Russia. It was declared the winner of a tender for exclusive rights to the Shagyrly-Shomyshty field in February of 1999 and also holds a 70% interest in the 4.7 million-acre License No. 953, which includes the Chikuduk field. The company is also involved in the refining, transportation and marketing of petroleum products in the United States.