Status of Kazakh oil and gas projects in Dec. 2018

Baku, Azerbaijan, Jan. 11

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North Caspian Project

The North Caspian project is the first big project on development of offshore oil and gas fields in Kazakhstan. It includes five fields as Kashagan, Kalamkas - sea, Aktoty, Kayran, South-Western Kashagan.

The Kashagan field is located in the northern part of the Kazakh sector of the Caspian Sea. Its recoverable reserves reach approximately 9-13 billion barrels (1-2 billion tons) of oil.

The first commercial oil production started at Kashagan in 2016. The project operator North Caspian Operating Company (NCOC) shipped the first million tons of oil for export in early 2017. By mid-2017, NCOC reached an actual production level of more than 200,000 barrels per day.

Presently, NCOC includes seven big experienced energy companies, namely, "KMG Kashagan B.V." (16.9 percent), "Shell Kazakhstan Development B.V." (16.8 percent), "Total E&P Kazakhstan" (16.8 percent), "Agip Caspian Sea B.V." (16.8 percent), "ExxonMobil Kazakhstan Inc." (16.8 percent), "CNPC Kazakhstan B.V." (8.3 percent) and "Inpex North Caspian Sea Ltd." (7.6 percent).

Project status

In October 2018, it became known that NCOC is developing an alternative concept for the gas re-injection project. This concept will increase production at the Kashagan field to 450,000 barrels per day. The project is planned to be implemented after the first phase – experimental-industrial development.

In October 2018 Kazakh Energy Minister Kanat Bozumbayev said that the production at the field reaches around 340,000 barrels per day and the production is planned to be increased up to 370,000 barrels per day in the coming months.

According to the initial plans of the NCOC consortium, it was planned to reach the level of 370,000 barrels per day by the end of 2017, but technical difficulties arose due to problems with reservoir intake at the Kashagan field.

In the middle of March 2018, the operator stopped the operation at a number of wells for gas production and injection into the reservoir, and production at the field decreased from 300,000 to 214,000 barrels per day. By the end of April, production returned to the level of 300,000 barrels per day.

In December 2018, the Kazakh Ministry of Energy and NCOC signed an agreement for the NCOC shareholder companies to submit the Kalamkas-Sea field development plan for the approval of management committee for the North Caspian Sea Production Sharing Agreement till the fourth quarter of 2019.

Tengiz

The Tengiz oil field was discovered in 1979 and is one of the biggest and deepest oil fields in the world. The total explored reserves of Tengiz reach 3.2 billion tons, while recoverable reserves range from 890 million tons to 1.37 billion tons.

In 1993, Tengizchevroil LLP, which is the project operator, was established on the basis of an agreement between Kazakhstan and Chevron. Presently, Tengizchevroil includes Chevron (50 percent), ExxonMobil Kazakhstan Ventures Inc. (25 percent), KazMunayGas (20 percent) and LukArco (5 percent).

During the years of development of the Tengiz oil and gas field, Kazakhstan received more than $132 billion as direct financial payments from Tengizchevroil to the state. For the first three quarters of 2018, payments exceeded $7.2 billion.

Project status

Presently, Tengizchevroil produces 28 million tons of oil per year which is fully exported.

In January-September 2018, 21.5 million tons of oil or 171.3 million barrels were produced at Tengiz. During the first three quarters, Tengizchevroil also sold over one million tons of liquefied gas, 6.9 billion cubic meters of dry gas, as well as 1.8 million tons of sulfur.

The current plans for the expansion of production at the field through the implementation of the Future Growth Project and the Wellhead Pressure Management Project are estimated at $36.8 billion.

After the completion of the abovementioned project, the annual volume of oil production at Tengiz field is expected to increase by 12 million tons, while daily oil output - by 260,000 barrels and will reach about 39 million tons of oil per year or 850,000 barrels per day. During the period of maximum production, this figure is expected to exceed 900,000 barrels of oil per day.

"Karachaganak"

The oil production at the Karachaganak field, according to the Kazakhstan Information and Analytical Center of Oil and Gas, reached 12.4 million tons in 2017.

"Karachaganak Petroleum Operating B.V." consortium produces oil and gas from the Karachaganak field. The shares in the consortium are distributed as follows: Eni - 29.25 percent, Royal Dutch Shell - 29.25 percent, Chevron - 18 percent, Lukoil - 13.5 percent and KazMunayGas - 10 percent.

Project status

On September 13, 2018, a project was launched to lift restrictions on gas production of the Karachaganak processing complex.

The implementation agreement was signed between the authorized body of Kazakhstan - PSA LLP and the project shareholders represented by Eni, Shell, Chevron, Lukoil and KazMunayGas. The maximum level of production at the Karachaganak field will be maintained thanks to the project of the Karachaganak processing complex.

In early October 2018, the Kazakh government and the shareholders of the Karachaganak project agreed on a methodology for dividing up oil revenues. The parties signed an agreement on principles outlining the main terms of the settlement.

According to these principles, the consortium will pay the compensation worth $1.111 billion to Kazakhstan. The changes will be made to the production sharing mechanism, which will provide the country with additional revenues from the project in the amount of about $415 million till 2037 at a price of $80 per barrel.

The consortium will also provide Kazakhstan with a long-term loan for 10 years for the construction of infrastructure in the amount of $1 billion or pay the equivalent amount of the loan worth about $200 million.

During the three quarters of 2018, 9.1 million tons of oil and 14.2 billion cubic meters of gas were produced on the Karachaganak oil and gas condensate field. The production volume of the Karachaganak consortium reaches about 14 percent of total oil production and 35 percent of total gas production in Kazakhstan.

Eurasia project

"Eurasia" is a project that envisages discovery of hydrocarbon deposits in the area of the Caspian Basin.

The Kazakh Ministry of Energy, together with the Geology and Subsoil Use Committee of the Kazakh Ministry for Investments and Development, signed a memorandum of understanding with potential participants in the Eurasia project in June 2017.

Among the interested companies are KazMunayGas-Eurasia LLP, Rosneft, SOCAR (Azerbaijan), NEOS GeoSolutions, CNPC (China) and Agip Caspian Sea B.V. (Italy).

The research and drilling operations are planned to be carried out at a depth of 15 kilometers in the Caspian Basin upon the project. The estimated project cost is $500 million. The implementation period is until 2020.

The Kazakh geologists and scientists pin great hopes on the project to explore the Caspian territory for the discovery of new hydrocarbon deposits. It is supposed that it will allow not only to discover new big oil deposits, but also to make a breakthrough in the field of production technologies.

Project Status

In an interview in March 2018, coordinator of the Eurasia project Baltabek Kuandykov noted that a separate company KazMunayGas-Eurasia had been created to work on the project, which is in talks with major foreign companies that have advanced technologies in their arsenal and which meet modern environmental standards.

He also said that Russia created a separate company for the Eurasia project. Kazakh and Russian specialists are jointly developing the methodology and technology of work in order to create a unified picture of the development of the Caspian Basin.

At a press conference in May 2018, president of the Kazakhstan Society of Petroleum Geologists Baltabek Kuandykov said that during the negotiations on the Eurasia project, Rosneft (Russia) and NEOS Geosolutions (US) companies had withdrawn from the list of participants. Their place was taken by the company Shell (Netherlands).

Urikhtau block

The Urikhtau gas condensate field is located in the Aktobe region. The Urikhtau Operating is working on the project. KazMunayGas is a sole shareholder there. The reserves of the field are about 200 million tons of oil.

Project status

Presently, geological exploration, design and development work is being carried out at the field, drilling and testing of wells is underway.

"N" block (Nursultan and Rakushechnoye Sea structures)

The N section is in the southern part of the Kazakh sector of the Caspian Sea and covers a total area of ​​7,625 square kilometers. The water depth is 29 meters, "Rakushechnoye-sea" - 47 meters on the Nursultan structure.

The N Operating Company is the operator on the section.

Project status

The projected hydrocarbon resources of the N block were estimated at 637 million tons of conditional fuel. In total, three wells were drilled at the N section. In accordance with the exploration work carried out at the South Nursultan structure it was announced about the potential discovery of hydrocarbons. Earlier it was reported that production at "Rakushechnoye-sea" will start in 2018-2019.

Satpayev project

The Satpayev site is located in the northern part of the North Caspian shelf, 90 kilometers off the coast. It includes three promising structures: Satpayev, Satpayev Eastern, Karina. The forecasted resources at Satpayev site hit 250 million tons.

The operator of the project is the Satpayev Operating. The subsoil users are Kazakh "KazMunayGas" - 75 percent, Indian ONGC Videsh Limited (OVL) - 25 percent.

Project status

Over the past years, detailed seismic field work, engineering and geological survey, as well as drilling of an exploration well were carried out at the site. In 2017, the Kazakh Ministry of Energy, KazMunayGas and ONGC Videsh Limited signed an addendum to the 2010 contract for exploration and production of hydrocarbon raw materials at the site, which is expected to bring the project to a new stage of work.

"Zhambyl"

Zhambyl field is located in the northern part of the Kazakh sector of the Caspian Sea. The water depth in the operation area is 4-5 meters. The field includes the following structures: "North-West", "Abylaikhan", "Kameralnaya" and "Zhetysu".

Zhambyl Petroleum, KazMunayGas and the Korean Consortium companies are the operators of the projects.

Project Status

Predictable recoverable resources of the Zhambyl site are 172 million tons. Over the past years, gravity magnetic surveys, 2D seismic surveys were conducted, and the Caspian Explorer offshore drilling rig was built.

Fountain inflows of oil were obtained as a result of drilling of exploration wells on the Zhambyl field, while inflows of oil and gas were obtained as a result of drilling of exploration wells on the Zhetysu field.

"Pearl"

The territory of the site belongs to the zone of the Caspian Sea with a depth of 7-10 meters. Four promising structures - Khazar, Auezov, Naryn and Tulpar were identified on the "Pearl" Oil and gas bearing "Pearl" project is estimated at 100 million tons of oil, according to the Kazakh geologists.

Caspi Meruerty Operating Company B.V. is the operator of the development of the field.

The participants in the production sharing agreement include Royal Dutch Shell, KazMunayTeniz and Oman Pearls Company Ltd.

Project status

During the years of the field’s development, seismic exploration and geological survey were carried out, exploration and appraisal wells were constructed and drilling was implemented. The work continues on the further drafting of the project’s development concept.

"Abai"

The "Abai" field is located in the waters of the Kazakh sector of the Caspian Sea at a distance of 60-70 kilometers north-west from the coast of the Bozashi peninsula. The sea depth in the area of ​​work is 8-10 meters. Geological reserves of hydrocarbons on the "Abai" block are estimated at over 350 million tons of oil equivalent.

Project status

In 2013, the company Statoil left the project, which at the exploration stage had to take on all the costs. Kazakhstan’s KazMunayGas company hasn’t yet managed to find a new project partner which must have the appropriate state registration, own capital worth of at least $200 million, and also have at least five years of experience in geological exploration in the Caspian Sea.

"Kurmangazy"

"Kurmangazy" field is located in the North Caspian Sea, 80 kilometers from the port of Bautino.

Participants in the project are "RN-Exploration" (subsidiary of "Rosneft") - 50 percent, Kazakh "KazMunayTeniz" (subsidiary of "KazMunayGas") - 50 percent.

Project status

In November 2018, Kazakh Minister of Energy Kanat Bozumbayev said that drilling at the Kurmangazy oil field yielded no results, so the decision was made to increase the area for contractors by more than 2,000 meters.

It is assumed that the companies will jointly conduct geophysical studies, and on this basis they will decide on the possibility of drilling an exploratory well.

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