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Soviets Embarking On Western-Style Oil And Gas Lease Program

January 29, 1991

HOUSTON (AP) _ Plans for the first competitive sale of oil and gas leases in the Soviet Union, touted as a dramatic departure from past policy, were announced Tuesday by Soviet representatives and officials of a Denver-based company.

Some 90,000 square kilometers of the Soviet Turkmen Republic will be available for sealed bids by non-Soviet oil and gas firms in an arrangement put together during the past year by Geointertech, a joint venture of the Ministry of Geology of the Soviet Union and Wavetech Geophysical, Inc., of Denver.

Bids will be taken until Sept. 25 for blocks of about 100 square kilometers in the primarily desert republic in the southwestern part of the Soviet Union, bordering the Caspian Sea, Iran and Afghanistan.

″I don’t think the current political situation should greatly concern Western companies,″ said G.A. Gabrielyants, the Soviet Minister of Geology, referring to the turmoil in the Soviet Baltic republics.

″There are problems I’m sure you’re aware of. They’re natural when going from one (economic) system to another.″

He also noted that the Baltics were thousands of miles from Turkmen Republic and have virtually no oil and gas potential.

Edward Gendelman, president of Wavetech, said contract and lease terms will replace the protracted and often frustrating direct negotiations that several Western oil and gas companies have attempted with the Soviet government.

N.T. Souyounov, a member of the Turkmen Republic president’s council and general director of the production association known as Turkmengeologia, estimated the reserves in his area at more than 10 trillion cubic meters of natural gas and about 1 billion tons of oil.

Officials said one ton of oil is the equivalent of about seven barrels, the method of measurement used by oil companies in the West.

Gendelman, who also served as translator for the Soviet delegation during a Tuesday news conference, said oil companies would put up cash bids and carry the exploration expenses, then share expenses once production would begin. Profits also would be shared.

″After seeing the data, literally this is like being a kid in a candy store,″ Jack Holton, a vice president at Wavetech, said.

Wavetech said Japanese and European companies already have expressed interest in the leases.

Gabrielyants said his ministry in the past year had probably 100 inquiries from non-Soviet oil companies about oil and gas prospects in the Soviet Union.

″No country in the world does oil production and exploration by itself,″ he said. ″We’re obviously interested in their technology. As far as the potential of their investment, the real potential is limitless.″

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