Kazakh КаzМunaiGas Exploration Production increases proved oil reserves
Azerbaijan, Baku, Oct. 19 / Trend E. Kosolapova/
Kazakh КаzМunaiGas Exploration Production (КМG EP) announced the results of the assessment of reserves prepared by the independent reserve auditing firm Miller and Lents Ltd (MLL) as at 31 December 2012.
According to the MLL report, КМG EP's proved plus probable reserves, excluding the stakes in JVs and associates as at 2012 end amount to 148 million tonnes (1.092 billion barrels). Proved oil reserves are 116.8 million tonnes (863 million barrels), proved plus probable plus possible reserves stand at 183.5 million tonnes (1.352 billion barrels).
According to the MLL report, proved oil reserves are 53 percent higher than proved reserves as of December 31, 2011 as assessed by the independent consultant Gaffney, Cline & Associates (GCA). The increase in proved reserves is largely due to MLL applying a longer period to estimate proved reserves.
According to the MLL report, КМG EP's proved and probable reserves as of December 31, 2012 declined by 34.5 percent compared to the proved and probable reserves as of December 31, 2011 assessed by GCA.
The decline in the 2P reserves assessment prepared by MLL is primarily due to higher long-term (after 2021, when the production license at the Company's largest fields expires) production decline rates at the most likely level of 18 percent assumed by MLL. The production decline rates assumed by MLL are significantly higher than historical production decline rates as MLL has relied upon results of the preceding three years with the lowest production levels, which includes 2011 when production rates were hit by labour strikes at Ozenmunaigas. The Company estimates long-term production decline rate at 10-12 percent. In its year end 2011 reserves assessment GCA assumed decline rates of approximately 7 percent per annum. Correspondingly, MLL estimated that the economically feasible period of the fields development will end by 2032, whereas GCA estimated that the economically feasible period of the fields development will end by 2050.
The Company used MLL production profile as a basis for the impairment valuation in 2012 and the first half of 2013.
During the period from 2006 till 2011 the reserves assessment reports were prepared by Gaffney, Cline & Associates (GCA).
Miller and Lents Ltd and Gaffney, Cline & Associates prepared their assessments in accordance with the Petroleum Resources Management System (PRMS) Definitions and Guidelines of the Society of Petroleum Engineers, World Petroleum Council, American Association of Petroleum Geologists and Society of Petroleum Evaluation Engineers. The consulting firms have used different assumptions in their assessments, which led to notable differences in the reserves assessments. Since March 2013 KMG EP has worked with both auditors to reconcile the differences between the reserve assessments and to reach a common understanding of the reliable assessment of the reserves of the company. Given the inability to reach a consensus between the company and the auditors of the past two years on the right basis on which to assess the reserves of KMG EP, the company has decided to appoint a third party to provide additional reserves assessment for 2011 and 2012.
The results of the reserves assessment of this third party for 2011 and 2012 are expected in the first quarter of 2014.