ENI (Burren Energy PLC)

ENI (BURREN ENERGY PLC)
http://www.eni.it/en_IT/home.html

Company Information
In November 2007, ENI agreed to buy Burren Energy, an oil and exploration production company based in the UK, for 1.73 billion pounds ($3.6 billion).[i] With this purchase, ENI became the sole stakeholder and operator of the Nebit Dag block. ENI is an integrated energy company based in Italy.

Contact Information
Registered Head Office
Piazzale Enrico Mattei, n.1
00144 Rome, Italy

Engineering and Construction
Saipem Parahat 1, 1951 (Yunus Emre)
str., 1, Ashgabat, Turkmenistan

History in Turkmenistan
Burren Energy signed a PSA with the government of Turkmenistan in August 1996 to develop Burun, the largest set of fields in the onshore Nebit Dag area. One of the most detailed sources for information on the project is archived excerpts from the now obsolete Burren Energy website.

The following is one such excerpt, summarizing the history of the project:

In 1995 Burren formed an alliance with Monument Oil & Gas Plc to acquire upstream projects in Turkmenistan which led to the signature of the Nebit Dag PSA in August 1996. Mobil joined the consortium later that year. The consortium of Monument (as operator), Mobil and Burren initiated a rehabilitation and development programme on the Burun field, the western-most field in the Nebit Dag PSA area, which led to the commencement of oil exports in May 1998. Following the takeover of Monument in June 1999 and the merger of Mobil and Exxon in December 1999, the consortium partners decided that Nebit Dag was not of strategic importance to their businesses and Burren acquired their interests, becoming operator with a 100 per cent working interest in August 2000. On taking over operational control Burren cut on-site overheads and administrative and head office costs and terminated most sub-contracting agreements, bringing these services in house. These reductions in operating costs led to operations rapidly becoming cash-flow positive.

Oil has been produced from fields within the Nebit Dag PSA area since the 1940s. The Burun field, which was producing oil at the time the PSA was signed and from which Burren presently derives the whole of its Turkmenistan production, was brought into production in the 1970s but was still under development at the time of the break-up of the Soviet Union.[ii]

More detailed information on the PSA terms and the scope of Burren Energy’s operations is contained in the following 2005 excerpt from the Burren Energy website:

The Nebit Dag PSA area (1,050 km) is located onshore in western Turkmenistan and contains five developed oil and gas fields. Burren has production rights to the Burun field, at the western end of the area, as operator with a 100 percent working interest. The other four fields within the PSA area (Kyzl Kum, Kum Dag, Kara Tepe and Nebit Dag) are operated by the state oil company Turkmenneft. Burren has exploration rights over the rest of PSA area under an exploration license which expires in February 2007. The PSA term runs until 2022, and may be extended for a further 10 years by mutual agreement with the Turkmenistan government. Burren has been the operator of the PSA since 2000.

At the end of 2005, the Burun field was producing approximately 19,000 boepd (barrels of oil equivalent per day) from 135 wells. Development to date has been primarily on the north flank of the field whilst the south flank remains to be appraised. Prior to 2004, well activity consisted of workovers to return shut-in wells to production. Development drilling commenced in 2004. Average working interest production during 2005 increased by 35 percent to 15,410 boepd (2004: 11,430 boepd).”

Gas-lift is now installed on most of the Burun field wells. Oil separation, treatment and storage facilities were upgraded during 2005. A pilot water injection scheme is expected to be implemented during 2006 which, if successful, will be rolled out across the field to provide reservoir pressure support and enhance oil recovery rates.

Burun crude is a light high quality low sulfur crude with an API gravity of 33. Burren has unrestricted rights to the export of its share of crude, which is sold on an FOB basis from Turkmenistan Caspian Sea ports.

Exploration drilling outside Burun began in late 2005 and is expected to continue throughout 2006. Overall production of Burren is 33,000 bpd and the concessions are located in Turkmenistan and Congo, Egypt, Yemen and Oman.[iii]

The following excerpt from a September 2006 review of the company provides a third party analysis of the PSA:

When its PSA was signed in 1995, the planned investment was put at $500m. The ministry of oil and gas in 2000 said the Turkmen side was to continue to receive the same volume of crude oil, then averaging 5,000 b/d, which Turkmenneft used to produce from Burun before the JV was formed. All oil produced over that volume is divided between Turkmenneft and Burren Energy.

The Nebit Dag PSA includes deep reservoirs beneath the Nebit Dag and Kum Dag fields, whose shallow formation had been virtually worked out. Nebit Dag went on stream in late 1997 and now is producing 30-36[degrees] API oil. Originally the output of this and other fields was planned to reach more than 50,000 b/d before end-2000. But the fields are producing far less than that at present. It was agreed in 1995 that these oilfields’ peak production after rehabilitation should reach 180,000 b/d by 2006. Independent experts have said such a target was too ambitious and may not be reached before 2010/12.

The PSA gives the partners rights to a condensate field of Kyzl Kum and the Kara Tepe gas field. It has been said Nebit Dag contains about 2 bn barrels, with a recovery factor of 25-35 percent. It is also said Garashsyzlyk block’s reserves could be as great, or greater than, those of Nebit Dag. The government in 1995 said the two blocks could raise oil output in western Turkmenistan to 500,000 b/d by 2006/7. Again such a target has proved to be too ambitious and is not to be reached during this decade.[iv]

In April 2007, a delegation of Burren Energy’s top company representatives traveled to Turkmenistan and met with President Berdymukhammedov to discuss the possibility for additional partnerships, including prospects for developing Turkmenistan’s offshore hydrocarbon reserves.[v]

In August of 2007, Burren Energy “announced record results from an appraisal oil well in the Burun field in Turkmenistan. The Burun B0-63 well logged 60 metres of virgin net pay in the south-west of the field… The above results have contributed to production in Burren’s fields in Turkmenistan reaching a record 23,400 barrels of oil per day during the first half of August. This compares to average production of 21,800 bopd during the first half of the year.”[vi]

Current Scope of Operations
In October 2009, Berdymukhammedov met with ENI’s CEO Paolo Scaroni to discuss future collaboration. One month later, ENI signed a Memorandum of Understanding with the government of Turkmenistan to “promote and strengthen cooperation in the development of Turkmenistan’s petroleum industry.”[vii]

In 2009, ENI produced 12,000 barrels/day in Turkmenistan.[viii]

Berdymukhammedov again met with Scaroni in June 2010 to discuss expanding their collaboration.[ix] It was reported in August 2010 that Berdymukhammedov had ordered that ENI be issued a new Production Sharing Agreement to further develop the Nebit Dag Field.[x] In September 2010, Turkmenistan gave public support for an ENI project that would transport compressed natural gas via tanker across the Caspian Sea to Azerbaijan.[xi]

In March 2010, Scaroni proposed linking a portion of the proposed South Stream and Nabucco projects, namely a portion from Bulgaria to Austria where the two routes would overlap. This suggestion came as support dwindled for the South Stream project, in which ENI plays a “key technological and commercial” role, and the Nabucco proposal is gaining strength.[xii] However, in January 2011, Scaroni retracted his proposed merger, asserting that the Nabucco project is behind schedule, making it “impossible to have synergies with something that doesn’t exist.”[xiii]

ENI was one of the “Gold Sponsors” of the 2010 Turkmenistan International Oil and Gas Conference, as well as the 2012 Turkmenistan International Oil and Gas Conference.[xiv]

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[i] Tom Bergin, “ENI to Buy Burren Energy for 1.7 bln,” Reuters, 30 Nov. 2007,http://uk.reuters.com/article/businessNews/idUKWLB393820071130. Accessed August 25, 2008.

[ii] http://www.newscentralasia.net/Regional-News/5.html. Accessed August 25, 2008.

[iii] AzerTag, “Burren Energy Wants to Expand Operations in Turkmenistan,” Alexander’s Gas & Oil Connections, 5 Jul. 2006, http://www.gasandoil.com/news/2006/07/cnc62966. Accessed August 25, 2008.

[iv] APS Review Oil Market Trends, “Turkmenistan – Burren Energy,” 25 Sept. 2006, http://www.thefreelibrary.com/TURKMENISTAN+-+Burren+Energy.-a015208076, Accessed August 24, 2008.

[v] Turkmenistan.ru “Gurbanguly Berdimuhammedov Receives Top Managers of Burren Energy Company,” 27 Apr. 2007, http://www.turkmenistan.ru/?page_id=3&lang_id=en&elem_id=9925&type=event&sort=date_desc. Accessed August 25, 2008.

[vi] http://blog.bajaenergy.com/2007/08/turkmenistan-burren-energy-updates.html. Accessed August 25, 2008.

[vii] ENI, “Eni Signs a Cooperation Agreement with the Republic of Turkmenistan,” 25 Nov. 2009,http://www.eni.com/en_IT/media/press-releases/2009/11/2009-11-25-Eni-signs-cooperation-agreement-Republic-Turkmenistan.shtml. Accessed February 10, 2011.

[viii] ENI, ENI in the World: Turkmenistanhttp://www.eni.com/en_IT/eni-world/eni-world.shtml?navint=azienda. Accessed February 23, 2011.

[ix] ENI, “Eni: CEO Paolo Scaroni Mt with President Gurbanguly Berdimukhamedov of Turkmenistan,” 2 Jun. 2010, http://www.eni.com/en_IT/media/press-releases/2010/06/02-06-2010-scaroni-met-gurbanguly.shtml?menu2=media-archive&menu3=press-releases. Accessed February 10, 2011.

[x] Catherine A. Fitzpatrick, “Turkmenistan Weekly Roundup,” Eurasianet.org. 24 Aug. 2010,http://www.eurasianet.org/node/61789. Accessed February 10, 2011.

[xi] Staffetta News, “Natural Gas, Turkmenistan in Favor of ENI’s CNG Project,” 23 Sept. 2010,http://www.staffettaonline.com/staffetta_news/articolo.aspx?ID=10097. Accessed February 10, 2011.

[xii] Socor (17 Mar. 2010).

[xiii] Migliaccio (10 Jan. 2011).

[xiv] 17th Turkmenistan International Oil and Gas Conference, “Sponsors,” Turkmenistan International Oil and Gas Conference; http://www.oilgasturkmenistan.com/sponsors. Accessed July 5, 2012.