Dubai's Dragon Oil signs $1b, 10-year extension of Turkmenistan contract
Exploration and production deal to be paid $500m in cash, $500m over next 13 years
Dubai: Dragon Oil, an exploration and production platform owned by the Dubai government, has renewed its contract in Turkmenistan with state-owned Turkmen Oil for 10 years after it expires in May 2025, at a value of $1 billion (Dh3.67 billion).
The deal will see $500 million paid in cash, and the remaining $500 million paid over the next 13 years, including support for Turkmen government projects, community development, education, public health and some benefits of the co-production.
It was signed in the Turkmen capital, Ashgabat, in the presence of Engineer Ali Al Jarwan, CEO of Dragon Oil, and company executives.
The Cheleken complex, located in the East Caspian Sea in Turkmenistan, is the main producing asset of Dragon Oil, and consists of two major offshore oil and gas fields, Lam and Zhdanov, which have been successfully developed and maintained since 2000.
A further potential complex is located between 10 and 40 kilometres off the coast of the Chiliken Peninsula at depths of 10 to 30 metres.
Over a 22-year period, the company has spent $8.1 billion on drilling wells and setting up production facilities to aid a sustainable production, with cumulative production of 437 million barrels of crude oil.
Since 2018, Dragon Oil has shifted production from natural depletion of conventional oil to production supported by water injection, artificial lifting and, lately, gas injection.
The company’s investments, during the contract extension period, are expected to reach further $7 to $8 billion to support expansion and development programmes, while future production levels are expected to range between 60 and 70 thousand barrels per day, and the cumulative production of crude oil to reach 350 million barrels by 2035.
Saeed Mohammed Al Tayer, Managing Director and CEO of Dubai Electricity and Water Authority (Dewa) and Chairman of ENOC and Dragon Oil, expressed his delight at the announcement of the extension of the partnership contract, which confirms the company’s solid commitment to strengthening its presence in Turkmenistan.
He said the company aspires to support the current expansion plans while continuing to work during the forthcoming period to launch several sustainable explorations within the market, creating long-term benefits for all.
Al Tayer added that the relationship between the UAE and Turkmenistan is developing significantly with new investments that consolidate the relationship between the two countries.
He also highlighted the depth of relationship between the two countries through the investments made by Dragon Oil, which has worked for nearly 20 years in the Caspian Sea, to achieve mutual benefits.
Ali Al Jarwan, CEO of Dragon Oil, said: “We welcome the signing of the contract extension agreement, which represents a constant commitment by Dragon Oil towards its profitable investments in the oil and gas sector in Turkmenistan”, adding that the agreement will allow offering more investments and completion of plans to increase the production capacity of the company.”
Over the past decade, Dragon Oil has evolved from a single-origin oil and gas company operating in Turkmenistan only, to a global operator and an international exploration and production platform, with assets in Egypt, Iraq, Algeria and Afghanistan.