Kazakh fund: Kashagan contract extension to be discussed after 2014-2015

Photo: Kazakh fund: Kashagan contract extension to be discussed after 2014-2015 / Oil&Gas

Kazakhstan, Astana, Dec. 26th / Trend, D. Mukhtarov /

The issue of extending the contract on field development at Kashagan will be discussed after 2014-2015, managing director of the Kazakh Sovereign Wealth Fund Samruk-Kazyna Malik Salimgereyev told the media today.

"It is too early to speak about extending the term," he said. "Firstly, extending the contract is a duty of the Kazakh Oil and Gas Ministry."

The PSA for the Kashagan oil field was signed by the Kazakh government and investors in 1997 for a period of 40 years. According to conditions, the cost of deposit exploration is paid for by income from commercial oil production. Now, foreign investors arguing economic expediency are seeking to increase the terms of the contract for another 20 years.

He added that shareholders of the consortium for the North-Caspian project (Kashagan) must lay out further development plans for the field by 2014-2015.

"Therefore, when we have determined how to operate in the future, we will then consider extending the contract," he said.

Kashagan is one of the largest fields discovered in the past 40 years. According to analysts, Kashagan has the potential to unite the top five largest oil companies in the world. Kazakh geologists estimate geological oil reserves of 4.8 billion tons. According to the project operator, total oil reserves are 38 billion barrels (six billion tons), with a recoverable volume of about 10 billion barrels. Natural gas reserves are estimated at over one trillion cubic meters.

An agreement was signed in late May of 2012 to settle certain issues between the Kazakh Government and contracting companies working on the North-Caspian project. According to agreements, the parties approved an amendment to the plan and the development budget of the Kashagan. It authorizes commercial production in the period from December 2012 to June 2013.

Launching oil production at "Kashagan" was postponed several times. The consortium of foreign companies led by Eni initially promised to guarantee commercial production in 2008, later it was postponed until 2011. Another memorandum was later signed. Commercial oil production at the "Kashagan" field in the Caspian Sea was postponed until 2013.

At present, the Kashagan project's participants are Eni, Royal Dutch Shell, Exxon Mobil, Total and KazMunaiGas, which own equal numbers of shares (16.81 per cent), as well as ConocoPhillips - 8.4 per cent and Japan's Inpex - 7.56 per cent.

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