Berdymukhammedov eventually decided for the moment to go with Russia's Gazprom for exporting Turkmenistan's natural gas, though he subsequently signed a treaty with China as well for a gas pipeline.

Under the radar, however, one relatively obscure Western oil company managed to beat out mega-competitors such as ExxonMobil, Chevron, BP and Royal Dutch Shell to develop Turkmenistan's nascent Caspian oilfields. In a plot straight out of the film "Syriana," Ireland's Dragon Oil beat out its heavyweight competition, the result of years of careful planning during a time when oil traded for below $20 a barrel, and an eye for opportunities overlooked by its massive competitors, who were seeking gargantuan projects.

Dragon Oil is an independent oil development and production company registered in Ireland. In 1999 the Emirates National Oil Co., owned by the government of Dubai, became the major shareholder in Dragon, when it acquired 69.4 percent of the shares.

In November of the same year, Dragon Oil signed a 25-year production-sharing agreement to develop its 367-square-mile Cheleken concession on Turkmenistan's Caspian Sea shelf, in depths ranging from 26 to 140 feet. The PSA stipulated the eventual production of 80 million tons of oil over the life of the PSA.

Cheleken's LAM and Zhdanov (later renamed Dzheihun and Dzhigalybek, respectively) fields were the largest in the contract territory. Dragon Oil had been developing the Cheleken territory since 1993 under a joint venture agreement. Under terms of the PSA, the Cheleken development was projected to generate $8.9 billion in revenues, with Turkmenistan receiving 53 percent of the profits and Dragon Oil 22 percent, with the remaining 25 percent going to recoup initial investments. The concession's reserves at the time were estimated at roughly 82.2 million tons of oil and 65 billion cubic meters of associated gas. While the two fields were discovered and exploited during the Soviet era, they were regarded as largely tapped out, but Dragon Oil was determined to redevelop them, a vision that has paid off handsomely.

Dragon Oil has been developing the Cheleken territory since 1993 under a joint venture agreement. Quick off the mark, it delivered equipment to modernize existing wells and announced ambitious plans to rebuild 12 Caspian platforms, pipelines to connect the fields to onshore oil refining and storage facilities, in addition to adding 50,000 tons of oil storage capacity. As if to spur Dragon Oil's efforts, at the time Ashgabat was in talks with Exxon on a PSA to develop fields on the right bank of the Amu Darya River.

In June 2001 Dragon Oil completed drilling a 12,000-foot test well in its Cheleken contract offshore Dzheihun field, its first well to be drilled in the concession. In 2002 it boosted oil production, drilling four new wells and raising output from 6,000 to 15,000 barrels per day.

The company's plans had its critics, however; in February 2002 its shares lost 20 percent after management announced it was planning to invest $45 million in Turkmenistan on top of the $73 million already spent on Cheleken.

By January 2003 Dragon Oil launched its fifth well at the Dzheihun field, which produced 1,260 tons a day. Specialists predicted that over the next few years, oil extraction there would increase ten-fold, as new oil fields came online. Dragon's oil production surged from 13,300 bpd in 2005 to 19,400 bpd in 2005, resulting in net profits that more than doubled in 2005 to $106.4 million, as the company announced that it would invest an additional $100 million to develop its concession; of the 211 test wells drilled, more than 30 were producing.

In 2006 Dragon Oil's net profit increased 41 percent to $180.47 million, as the company announced ambitious plans for a 2007-2008 program for Cheleken involving drilling 25 production wells. By October it had increased its average daily oil production from Cheleken to 39,650 bpd.

Last year would prove to be Dragon Oil's most productive since the PSA went into effect, as it extracted 1.5 million tons of oil, a 50-percent increase above the 1 million tons produced the previous year. On Jan. 4 Dragon Oil Chairman and Chief Executive Officer Hussain M. Sultan said, "I am very pleased to report that we have delivered on our promise to achieve a production rate of 40,000 barrels per day by 2008."

In a further comment that undoubtedly induced much hand-wringing in Houston boardrooms, Sultan added, "I am also pleased to announce that we were honored with a very positive meeting with the president of Turkmenistan on 26th December 2007. His Excellency, the President, expressed his support for Dragon Oil's strategy to increase oil production as well as our plans for the utilization of the considerable gas resources contained in the Cheleken Contract Area."

For Dragon Oil, its long-term vision has paid off, while major Western energy companies can only watch as Gazprom and China slowly inhale future Turkmen production.

Sometimes small really is better.

(e-mail: [email protected])

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