Central Asia and hydrocarbons, that is usually a story limited to Kazakhstan and Turkmenistan, the oil and gas rich countries of the region. Fair enough, Uzbekistan also has some considerable gas deposits, yet it remains a net importer of energy.

Despite some old rusty derricks in the Ferghana Valley, oil and gas in Kyrgyzstan do not play any substantial role. Up until now that is. I remember driving near Sary-Tash and seeing slick Chinese SUVs parading on the bumpy roads in the country’s south. Asking the locals about this sight, they told me that the energy-hungry neighbours are looking for oil in the Ala-Too range.

Not until a few days ago did I remember this strange sight in the inhospitable Kyrgyz heights. Then I read the news of a relatively new oil company having secured drilling rights in Albania. The name of that company made me alert: It is called Manas Petroleum.

The name is no coincidence, and a quick look on the company’s website reveals the extent of the company’s involvement in Kyrgyzstan. Their CEO, Alexander Becker, has lived and worked in the Central Asian country most of his life, and knows the composition of the subsoil structures like no one else:

Mr. Alexander Becker is a PhD Geologist specializing in structural geology and tectonophysics in Central Asia. Mr. Becker was an Exploration Geologist in Central Asia during the 1980s when the Soviets named him the best mapping geologist in the Kyrgyz Republic.

Having secured six exploration licenses in the Ferghana basin, the company hopes to strike more oil the deeper it drills. The reasons for their optimism are fairly straightforward:

• - The Ferghana basin is home to several already producing oil fields, most of which lie on the Uzbek side of the border.
• - Soviet geologists drew up extensive studies during the 1980s, but the dissolution of the empire stalled further work on Kyrgyzstan’s side of the border.
• - The Tarim basin in China is similar to the Ferghana basin in geological make-up. While the already developed Ferghana deposits are situated in moderate depths, the Chinese were most successful below extensive layers of salt, leading to the unlocking of some 16 billions barrels of recoverable oil.

It is of course only reasonable to expect much less than that in Kyrgyzstan, yet only a small fraction of the 16 billion barrels would already be fairly significant given Kyrgyzstan’s small and impoverished economy. As a comparison, the Kashagan field is thought to contain 13 billion barrels of recoverable oil.

This detailed study of the company’s Kyrgyz prospects is interesting to read. It is already fairly upbeat about the company’s prospects in the country - despite the over-reliance on old Soviet geological studies. Having the chief geologist of old times on board, the company considers itself well placed to tap into some of the neglected prospects in the former Soviet Union, including those in the Kyrgyz Republic:

[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.

The next few years will show in how far modern technology and deeper appraisal wells will lead to a small, yet important oil bonanza in Kyrgyzstan.

This inevitably leads to the question what the Kyrgyz government is making of all this. Some basic calculations show that even at small production rates, this could be a valuable source of income for the cash-stripped Central Asian country. First and foremost, though, it could make Kyrgyzstan self-sufficient in oil - and reduce the dependency on expensive imports.

And if all the oil development leads to a production of, say, 100,000 barrels of oil each day, that would yield $6 million USD revenue per day at an oil price of $60 per barrel, adding up to $2 billion per year. Of course the companies involved want to bag a nice profit, and production and transportation costs won’t be cheap.

Yet I am wondering whether the country’s legislators have already started thinking about profit sharing agreements or royalty schemes.

Further reading: A related CAC Analyst article from 2002; “Opening the Soviet time capsule”, an article about Manas Petroleum, focussing on the company’s Kyrgyz operations; a list of relevant legislation governing hydrocarbon development in Kyrgyzstan.

All images and graphics (c) Manas Petroleum.