Tethys Petroleum Signs Kazakh Gas Supply Deal

Tethys Petroleum’s 100 percent owned Kazakhstan subsidiary has signed a gas sales contract for 2015 gas production, the company announced Wednesday.

The gas supply contract has been signed between TethysAralGas LLP and KazTransGas (KTG), for the Kyzyloi and Akkulka natural gas fields. TethysAralGas LLP has signed a one-year gas supply contract at a price of $75/mcm ($2.12 per 1,000 cubic feet) net of marketing and distribution costs effective January 1, 2015 representing a 42% increase over the current realised gas price, the company said. The contract is for annual volumes up to 100 million cubic meters.

“This price has been realised despite falling oil and gas prices in Central Asia due to the impact of the fall in worldwide prices. The achievement of the higher gas prices reflects the company's view that despite these recent influences, the general direction of gas prices is on an upward trend due to the increasing demand from China as it moves from a coal based economy to utilising more gas,” Tethys stated.

The company believes that once gas shipments commence to China through the already built gas pipeline, it may achieve further increases in pricing some time in 2015.

KTG has agreed that it will take any additional gas produced up to a total annual volume of 210 million cubic metres, but the structure of the contract also allows TAG to sell this additional gas outside of the contract should higher prices be achieved at a later date. This additional flexibility provides a significant advantage over the current contract under which all gas was committed for the whole year.