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Wood Mackenzie: Kazakhstan's new Subsoil Use Code critical to keep its attractiveness for investing (Exclusive)

Oil&Gas Materials 2 July 2018 13:09 (UTC +04:00)

Baku, Azerbaijan, July 2

By Leman Zeynalova – Trend:

Kazakhstan's new Subsoil Use Code is critical to keep its attractiveness for investing, Ashley Sherman, Principal Research Analyst – Caspian at UK-based Wood Mackenzie, a global energy, chemicals, renewables, metals and mining research and consultancy group told Trend.

“Kazakhstan's new Subsoil Use Code took effect in late June. Together with the new Tax Code, this is critical to the long-term strategy of keeping Kazakhstan an attractive place to invest – for both established operators and new entrants alike. We are already seeing more interest in offshore acreage, home to the country's greatest exploration potential,” he said.

Sherman pointed out that Kazakhstan's oil industry is – and will remain – dominated by its three largest projects: Tengizchevroil, Kashagan and Karachaganak.

“The continued ramp-up of oil production at Kashagan is the headline of 2018. Kashagan is still in the commissioning phase, but current output of 320-330,000 barrels per day makes it the second largest source of Kazakh liquids production,” said the Wood Mackenzie analyst.

He went on to add that the medium-term strategy of Kazakhstan is also focused on new investment at the other super-giant projects.

“2018 is a pivotal year for the $36.8 billion expansion at Tengizchevroil. More than $7 billion will be spent in 2018 and major milestones are already being achieved. The first modules will soon arrive into the Caspian Sea from fabrication yards in South Korea and Italy. New investment projects are also gaining momentum at Karachaganak – to extend the current liquids production plateau,” added Sherman.

Kazakhstan's Energy Ministry has forecasted oil production growth to 2.2 million b/d (104 million tons) by 2025, he said.

“Reaching this level will require successful delivery of Tengizchevroil expansion for 2022 start-up, further growth at Kashagan and, crucially, more investment at brownfields to limit decline. New offshore projects, most notably the Kalamkas More and Khazar fields, could further boost the outlook after 2025,” noted the Wood Mackenzie analyst.

According to the new Subsoil Use Code entering into force on July 1, new companies investing in the development of the Kazakh fields will have the opportunity to receive all the permitting documents in 15 days. Moreover, the companies will conduct exploration work at the new sites without going through the auction procedure.

The Kashagan field in the northern part of the Kazakhstan sector of the Caspian Sea is one of the largest oil fields discovered over the past 40 years. Its recoverable reserves are estimated at approximately 9-13 billion barrels of oil.

North Caspian Operating Company BV (NCOC) consortium is engaged in the development of the field. Currently, the composition of shareholders of NCOC is as follows: Kazakhstan KMG Kashagan B.V. – about 16.88 percent, Agip Caspian Sea B.V. - about 16.81 percent, ExxonMobil Kazakhstan Inc. - about 16.81 percent, Shell Kazakhstan Development B.V.-about 16.81 percent, Total EP Kazakhstan - about 16.81 percent, Inpex North Caspian Sea Ltd. - 7.56 percent, and CNPC Kazakhstan B. V. - 8.33 percent.

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