Bank of China provides a $177.7 million loan for Phase 1 of Karakul Gas Field Project (Linked to Project ID#54069, #39659, #39658, #54489 and #39997)

In September 9, 2013, China National Petroleum Corporation (CNPC) and Uzbekneftegaz established a special purpose vehicle (SPV) and joint venture — called New Silk Road Oil & Gas Limited Liability Corporation (新丝绸之路石油天然气有限责任公司 or NSROG or Новый Шелковый путь or СП ООО "Новый шелковый путь Нефт и газ") — to jointly develop three natural gas fields (Dengizkul, Khojadavlat and Sharky Alat) in the Karakul block. Then, on May 13, 2017, the Paris Branch of Bank of China provided a $177.7 million loan to New Silk Road Oil and Gas Company for Phase 1 of the Karakul Gas Field Project. CNPC issued a corporate guarantee in support of this loan. The Karakul Gas Field Project was implemented in three phases. The total cost of the first phase was $377.5 million. The purpose of the project was to develop three gas condensate fields (Dengizkul, Kojadavlat, and Sharky Alat) in the Bukhara-Khiva region of Uzbekistan. Upon completion, the three fields were expected to produce 869.6 million cubic meters of natural gas for exportation and 6,400 tons of gas condensate for domestic markets annually. The project was implemented by three CNPC subsidiary companies: China Petroleum Engineering & Construction Corporation (CPECC) will develop the fields, designs, logistics, construction, and commissioning of facilities for the project; XIBU Drilling Engineering Company Ltd. will drill 10 production wells; and China National Logging Corporation will repair 6 wells and test production wells. The project was originally scheduled to begin in 2014, but construction did not begin until May 30, 2017. On December 4, 2017, gas production commenced in the Dengizkul field after the drilling of 2 new gas wells and repairing of 3 gas wells. This milestone marked the completion of the first phase of the project. As of May 17, 2018, the development of the Kojadavlat and Sharky Alat gas fields (the second and third phases of the project) was underway. All three gas fields became operational by August 2018. However, pipeline construction activities were still ongoing in late 2018 and early 2019. All three phases of the project were completed on May 5, 2019. All natural gas from the Dengizkul, Kojadavlat, and Sharky Alat fields (approximately 1 billion cubic meters of natural gas per year) is to be exported to China via Turkmenistan-China Gas Pipeline (which was constructed with financing from China Development Bank and Bank of China, as captured via Project ID#54489 and Project ID#39997).

Additional details

1. This project is also known as the New Silk Road Project or Gas Condensate Field Khojadavlat Project. The Chinese project title is 新丝绸之路项目 or 卡拉库利气田地面建设项目 or 卡拉库利气田项目 or 西莎、西吉和东阿拉特气田开发. The Russian project title is 3 газовых месторождения -- Денгизкуль, Ходжадавлат и Восточный Алат or проекта Каракульского блока газоконденсатных месторождений (ГКМ). 2. The spelling was a little different in each source for project site names, specifically Sharky Alat vs. Sharqiy Alat and Dengizkul vs. Khojasayat (the name of the overall region). 3. The Chinese translation of the September 9, 2013 agreement is 《新丝绸之路石油天然气有限责任公司创建协议》. 4. Leading up to the development of these fields, the China National Oil and Gas Exploration and Development (CNODC) — a subsidiary of CNPC — conducted a 5 year geologic oil survey worth $359 million in 2006 (as captured via Project ID#54069), drilled 13 exploratory wells worth $260.2 million in 2011 (as captured via Project ID#39659), and undertook further oil exploration activities worth $14.9 million in 2012 (as captured via Project ID#39658). 5. The borrowing institution (SPV), which is jointly owned by CNPC (50% equity stake) and Uzbekneftegaz (50% equity stake), is also known as New Silk Road Oil & Gas Company Ltd. Uzbekneftegaz is a state-owned oil and gas company in Uzbekistan. CNPC is a state-owned oil and gas company in China. 6. Several sources suggest that multiple CNPC-guaranteed loans were issued in support of this project, which makes sense since the proceeds of the $177.7 million Bank of China loan were only to be used for the project’s first phase. The sources of financing for the project’s second phase and third are unknown. This issue merits further investigation.

Number of official sources

14

Number of total sources

45