KAZAKHSTAN AIMS TO TAP CASPIAN OIL AND GAS

Kazakhstan is stepping up a campaign to develop oil and gas resources under its 103,000 sq km share of the Caspian Sea. As a first step, the republic formed Kazakhstancaspishelf (KCS) to oversee exploration and development of offshore areas. KCS is headed by B.M. Kuandykov, Kazakhstan's deputy energy and fuel resources minister. Kazakhstan foresees a prelicensing exploration period beginning in fourth quarter 1993 and lasting through 1995, offshore licensing in 1996, exploratory and

May 10, 1993

4 min read

Kazakhstan is stepping up a campaign to develop oil and gas resources under its 103,000 sq km share of the Caspian Sea.

As a first step, the republic formed Kazakhstancaspishelf (KCS) to oversee exploration and development of offshore areas. KCS is headed by B.M. Kuandykov, Kazakhstan's deputy energy and fuel resources minister.

Kazakhstan foresees a prelicensing exploration period beginning in fourth quarter 1993 and lasting through 1995, offshore licensing in 1996, exploratory and appraisal drilling starting in 1997, and development and production in 2000.

Current 2D seismic data in the Kazakh Caspian Sea region show oil and gas resources might be larger than those of supergiant Tengiz oil field. Kazakh officials said development costs could exceed the $30 billion estimated for Tengiz.

To make up for its lack of offshore experience, Kazakhstan plans by September to form a group of international oil companies under KCS leadership to form a prelicensing plan.

KCS plans to send a draft prelicensing contract to likely partners. Those that might be included in the KCS offshore group are to be allowed right of first refusal on tracts offered for licensing.

OVERVIEW OF STRATEGY

Under current plans, prelicensing exploration is to be based on existing 2D seismic data. Detailed 2D and possibly 3D data will be collected in the most prospective offshore areas identified by members of the KCS group.

Blocks of acreage are to be formed, but tract dimensions won't be settled until near the end of the prelicensing phase.

KCS expects exploratory and appraisal drilling to get under way in 1997, with development and production beginning by 2000.

A Kazakh delegation led by Energy and Fuel Resources Minister K.K. Baikenov presented the proposed exploration and development plan at a meeting in Houston attended by 38 petroleum industry companies.

KEY TO ECONOMY

Development of offshore oil and gas will play a key role in Kazakhstan's economic program. Kazakh officials expect to use hard currency flowing from petroleum industry exports to expand the country's industrial base and improve social services. Major growth in Kazakh electrical power capacity also is planned.

Kazakhstan produces about 27 million tons/year of oil and condensate, enough to satisfy internal demand. But sharp increases in oil and gas production are on tap.

Even without Caspian Sea production, Kazakhstan expects to increase hydrocarbon flow to about 50 million tons/year of oil equivalent by 2000 and 80 million tons/year by 2010. Offshore fields after 2000 are expected to ramp up production to higher levels.

Among recent action, Kazakh state oil company Kazakhstanmunaigaz and Chevron Corp. formed Tengizchevroil, a 50-50 venture to develop reserves in Tengiz and Korolev fields (OGJ, Apr. 12, Newsletter).

Baikenov said talks are progressing with members of the proposed large diameter Caspian oil export pipeline, a cornerstone of oil development in the republic. The western segment of the line, from Grozny to Novorossiysk on the Black Sea, is to be complete in 2-3 )rears.

The pipeline is to transport Kazakh oil to world markets, first from Tengiz and Korolev fields and later possibly from supergiant Karachaganak oil, gas, and condensate field and wells in the Caspian Sea. Agip and British Gas were last reported drafting a plan to jointly develop Karachaganak reserves (OGJ, July 13, 1992, p. 24).

Kazakhstan also signed a production sharing contract with Oman Oil Co. covering onshore acreage near Atyrau, north of the Caspian Sea in the pre-Caspian depression.

Late in 1992, Kazakhstan unveiled details of its first competitive bidding round for exploration licenses (OGJ, Dec. 21, 1992, p. 23). Included in the offering are the Kamenskiy and Chinariovskiy areas in West Kazakhstan oblast near Karachanagak and the Baiganinskiy area in the Aktiubinsk region near Tengiz.

Elf unit Elf Neftegaz since last July has been collecting seismic data in Volga and Temir fields under an exploration-production sharing agreement (OGJ, Oct. 19, 1992, p. 25). In addition, Baikenov said, three Japanese companies have begun design engineering for a 6 million ton/year refinery planned at Mangistau.