Chevron Corp. and the Kazakhstan Republic last week signed a joint venture agreement to develop Tengiz and Korolev oil fields on the northeastern Caspian Sea coast in western Kazakhstan.
The 50-50 venture will spend $1.5 billion in the first 3 years and $20 billion during the 40 year life of the project. Present production of 60,000 b/d will increase to 700,000 b/d by 2010. The two fields hold as much as 25 billion bbl, of which 6-9 billion bbl are recoverable.
The project is the largest joint venture vet between a major Commonwealth of Independent States republic and a major oil company (OGJ, May 18, p. 35).
In other developments covering operations in the former U.S.S.R.:
- Apache International Inc. received approval of the government of Azerbaijan to study the feasibility of developing Kapaz oil field in the Caspian Sea. This agreement follows negotiations that began last year, leading to two protocols with Kaspmorneftegas, the republic's offshore exploration and production company, to conduct joint development evaluation.
- Symskaya Exploration Inc. is proceeding with acquisition and analysis of geologic and geophysical data on the 11 million acre Symskaya area of the Krasnoyarsk region in eastern Siberia. Drafting of documents relating to a production sharing agreement to be negotiated between Symskaya and state owned Eniseygeofizika and Eniseyneftegasgeologiya (ENI) also is under way.
Symskaya is a partnership of Equity Oil Co., Salt Lake City, and Coastline Exploration Inc., Houston (OGJ, Jan. 20, p. 28).
In addition, Denton Hall Burgin & Warrens, a London law firm, won a contract from the European Commission to advise Russia's Parliament on drafting of its new petroleum and mining laws and on privatization of the Russian petroleum and mining industries.
Denton Hall, along with Houston law firm Bracewell & Patterson, also will provide legal support to Ernst & Young for a study of the Russian oil transportation system.
CHEVRON JOINT VENTURE
Officials of Chevron and Kazakhstan signed their joint venture agreement last week in Washington, D.C., ending 2 years of negotiations.
The Tengizchevron joint venture will begin operations in January after the parties complete an operating agreement and wrap up plans for an export pipeline. Chevron will be operator.
Kenneth T. Derr, Chevron chairman and chief executive officer, said, "This project represents a tremendous long term opportunity for the Republic of Kazakhstan and Chevron. Our journey to this point has been a long and sometimes difficult one.
"We anticipate a long business relationship with tremendous benefits to both parties, and we are looking forward to participating in development of one of the most important resources of a vibrant and progressive new nation, Kazakhstan."
Chevron said during the life of the project, after taxes and royalties, it will receive about 20% of the income from the project. As part of its involvement, Chevron is required to build roads, schools, and hospitals.
The Oman Oil and Gas Ministry, J.P. Morgan investment bank, and British law firm Slaughter & May aided Kazakhstan in negotiations.
Tengiz field, a 1979 discovery, went on production in 1991. Korolev field was found in 1986 and is due to go on stream in 1999. Chevron said about 60 wells have been drilled in Tengiz field but a total of 600 will be needed in both fields.
The fields are productive from presalt, Paleozoic carbonate reservoirs.
The 200 sq mile Tengiz field has an upper reservoir at 4,000-4,700 m and a lower reservoir at 4,700-5,400 m. It is one of the deepest supergiant oil fields ever found.
The reservoir, which had initial pressure of more than 11,000 psi and temperature of 225 F., produces 46 gravity high sulfur crude.
Korolev is about 1/10th the size of Tengiz and 800 m deeper. The crude contains a little more hydrogen sulfide. Sulfur will be removed from all oil.
The reservoirs also hold tens of trillions of cubic feet of gas, with potential production of 2.5 bcfd. Gas will be desulfurized and liquids stripped.
Initially, some gas will be sold in the domestic market, but in about 10 years it will be reinjected as part of a secondary recovery program.
Chevron plans to trade its share of Tengiz production for C.I.S. crudes available for export, which it will sell for hard currency.
The company expects a 400 km pipeline to be laid in about 5 years to bridge a gap in the C.I.S. network and enable Chevron to export its share of Tengiz production from a Black Sea port.
Tengiz and Korolev fields are on a 1,300 sq mile concession granted to Chevron. The company said the concession contains three or four smaller structures that might hold a total of 300-500 million bbl of oil in place.
APACHE AGREEMENT
Under terms of Apache's agreement, approved by the Azerbaijan prime minister upon recommendation of the Council of Ministers and of Goseconomplan, Apache International and Kasmorneftegas will conduct technical and commercial feasibility studies and develop a plan to delineate and develop Kapaz field.
Three Kapaz wells have produced hydrocarbons.
Terms for participation in development and sharing of production will be negotiated among Apache International, officials of the republic, and Kaspmorneftegas and its parent company, Azerineft.
Kapaz field, previously named October Revolution, is a 1987 discovery. It lies in 250-325 ft of water.
On trend with several large Caspian Sea producing fields, it is about 9 miles east of Azeri field, earmarked for development by a group of western companies led by a unit of Amoco Corp. (OGJ, Oct. 7, 1991, p. 28).
SYMSKAYA PROJECT
During first quarter 1992, Symskaya paid ENI $250,000 for a data package covering the Symskaya area that includes geological information and about 3,000 km of seismic data.
Equity said initial review of the data package indicates at least 15 "significant structural features" that may be included in the 1.1 million acres--10%--of the Symskaya area on which Symskaya will have exclusive exploration and development rights.
Exploratory and development drilling on these structures may develop hydrocarbon reserves of more than 5 billion bbl, Equity said.
Seismic data are being reprocessed by ENI, with delivery of reprocessed data expected by the end of the second quarter.
If the reprocessing of the seismic data confirms the initial analysis and is delivered on schedule, Equity said, Symskaya may be able to complete negotiations for a production sharing agreement and a drilling contract for an initial well by the end of the third quarter. Drilling would begin shortly after that.
PETROLEUM, MINING LAWS
Denton Hall's project involves advice and assistance on how to draft Russia's new petroleum and mining laws to attract foreign investment in those industries.
It also involves advice on the workings and administration of the mining and petroleum industries in other countries and assistance with development of a structure in Russia for efficient administration of the new laws.
Denton Hall also will advise on possible establishment of a Russian national oil company and on privatization of producer associations.
The contract will last for 3 months at first. Three Denton Hall lawyers will be assigned to the project.
TRANSPORTATION STUDY
Ernst & Young will conduct its study of the Russian oil transportation system under contract with World Bank and the Russian Ministry of Fuel and Energy. The 6 month assignment will evaluate the current system and recommend ways to achieve a transition to a western market model "while promoting the oil sector's viability and economic growth,"
Conducting the study will be Ernst & Young's San Francisco, Moscow, and London offices.
The consulting firm will:
- Establish a method for setting transportation rates and pipeline tariffs.
- Develop a regulatory and commercial framework to enable pipeline companies to set up appropriate organization and ownership structures.
- Draw up a set of laws and regulations that spells out rights and obligations for pipelines and producers to ensure arrangements for control of pipeline capacity.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
