A Historic Opportunity
The Soviet Union and its satellite countries' oil production history goes back all the way to the tenth century when at Baku, near the Western Caspian Sea, oil and gas seeps were first reported. By the fourteenth century, Baku oil was exported around the Middle East and by 1846 Baku (now the capital of the Azerbaijan Republic) was producing 90% of the world's oil. The Nobels and the Rothschilds played a major role in the later development of Baku oil. One of Shell Transport & Trading's, (now Royal Dutch/Shell), first businesses was shipping the Rothschild's Baku oil to Western Europe. The WWII battle of Stalingrad was fought for Baku's oil fields.
Communist Victory Causes Kyrgyz Production Collapse
As reflected in the historic oil production profile for the Kyrgyz Republic where Manas is a major player, Soviet oil production collapsed following the Russian 1917 "October" revolution. This occurred as politically motivated purges combined with the nationalizing of Russian oil fields decimated the industry. Standard Oil of New Jersey, (now Exxon) was among the few to continue investing under the new regime as was Vacuum and Standard Oil of New York, (now Mobil). Western investments helped enable Communist Russia's 1923 oil exports to reach pre-revolutionary levels.
1960s Siberian Discoveries Divert Attention from Other Oil Provinces
Currently, Western Siberia remains Russia's largest oil province with proven reserves of roughly 100-150 billion barrels. The first Siberian discovery was announced in the early 1960s and culminated with the discovery of the super-giant 14 billion barrel Samotlor field in 1965. At the time, because West Siberian oil field geology was very simple, production costs were low and its huge reserve potential was easily understood, Soviet planners almost completely ignored all other areas of the former Soviet Union.
Central Planner's Siberian Focus Leaves Other Area's Deep Under-thrust Potential Largely Unexplored
This reality translates to opportunity for Manas Petroleum as 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.
When Soviet oil production peaked in 1988 at 11.4 million barrels per day Siberia was providing roughly two thirds of Russian supply. During the 1980s Manas Director and CEO Alexander Becker was still developing his expertise in Central Asia. He received an award from the Soviets for being the Kyrgyz Republic's best mapping geologist and shortly afterwards moved to Israel to perform (also award winning) geological research.
Following the 1988 production peak the Soviet oil industry's collapse was as dramatic as the implosion of the Russian communist system and by 1996 daily oil production had declined nearly 50%.
Soviet System Collapse Causes Oil Industry Paralysis
The end of Russian communist governance not only resulted in a big drop in domestic oil consumption, but the Soviet's financing of thousands of production associations completely stopped. Consequently, both Eastern European and Former Soviet Union countries' oil industry's went from bad to worse. Originally they were merely deprived of modern Western exploration technology and concepts while being largely ignored because of most Soviet central planners' focus on Siberia. As the Soviet system collapsed all funding for exploration evaporated and workers went for months without pay. A common Soviet refrain at the time was "they pretend to pay us and we pretend to work". This reality quickly forced a halt to what little new exploration and drilling activity there was across the former communist world - no matter how good the results.
One telling example is the 1992 Minbulak oil discovery which is near one of Manas Petroleum's most promising Kyrgyz concessions. The discovery well blew out and subsequent wells ranged from 3,000 to 16,000 barrels per day and yet no significant exploration occurred afterwards.
Treasure Trove of Data Left Gathering Dust for Decades
Critically, the communists' geological associations always reported their results back to the Soviet Central planners. For more than a decade much of this treasure trove of geological information has been largely ignored. It is only now that these meticulously kept records are being re-evaluated using modern Western technologies and concepts.
Manas Petroleum is very much part of this effort. Last summer Manas helped its partner, oil major Santos International Pty Ltd., access Soviet seismic originally acquired in the Kyrgyz Republic during the 1980s. The data has since been re-processed with state-of-the-art Western supercomputers. This remains a critical part of the strategy. Why? Because the area is so large, using the archived raw Soviet data has become an essential, cost efficient way to outline drilling prospects. This information can also be extremely useful when planning modern seismic programs that are designed to further define known structures and survey other highly prospective but yet to be explored areas.
In Kyrgyz Republic's Fergana basin the location of structural traps is the principal challenge. It is already an established fact that the basin has great reservoir rocks and is exceptionally oil rich. Consequently, locating structures which trap the oil remains key. London based Petroleum Engineers Scott Pickford concur and note in a recent report that, "The presence of oil and reservoir is almost ubiquitous in the region". This is why previous results from prospects such as Tuzluk (see cross section) are highly encouraging. Consider the fact that in the 105 year history of the Fergana Basin, all structures found and subsequently drilled have resulted in discoveries.
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