To all:
This is a little long, but good 30,000 foot overview of
Kazak oil...... if AIPN's holdings can rival Tengiz then
things could get interesting.
Thanks.
Bob J.
Source:
Updated Country Analysis Briefs on Kazakhstan and Uzbekistan are now
available. To access these reports, the World Wide Web addresses are:
eia.doe.gov
United States Department of Energy Energy Information Administration
OIL NATURAL GAS COAL ELECTRICITY PROFILE
December 1997
Kazakhstan
Kazakhstan is important to world energy markets because it contains significant oil and gas reserves. In particular,
the Tengiz oil field in northwestern Kazakhstan is estimated to contain between 6 and 9 billion barrels of proven oil
reserves. Among former Soviet republics, Kazakhstan ranks third in energy production and fourth in energy
consumption.
OIL
Kazakhstan produced 520,000 barrels/day of oil in 1996, and is the second largest oil producer among former Soviet
republics after Russia . Kazakhoil, the state oil and gas company, is a partner in almost three-fourths of this production.
Kazakhstan has undertaken a number of reforms in its oil and gas sectors in order to further develop its potential. On June 28,
1995, Kazakhstan adopted a new oil and gas law which is widely recognized as a critical step in attracting foreign investment.
Among other measures, the law contains a broad provision for competitive bidding on energy projects. Under the law, the
Kazakh government may grant exploration rights by competitive tender or through independent, direct negotiations. Contracts
may be in the form of joint ventures , service agreements, or production-sharing arrangements. As of July 1997, $2 billion had
already been invested in Kazakhstan's oil and gas sector. Kazakhstan's reform process has included privatizing a number of
existing energy concerns. In November 1996, Hurricane Hydrocarbons (Canada) bought 89.5% of Yuzneftegaz, an oil
company with many peripheral businesses that accounts for 80% of the economic activity in the Aral Sea region, and began
restructuring the company to focus on its core oil and gas business. In April 1997, Kazakhstan sold a 60% stake in its largest
oil producer, Mangistaumunaigaz, to Central Asia Petroleum (Indonesia) for $248 million.
Almost half of Kazakh production comes from three large onshore fields - Tengiz, Uzen, and Karachaganak. By far the largest
of these is the Tengiz field, estimated to contain up to 6-9 billion barrels of oil. In April 1993, Chevron (United States)
concluded a $20 billion joint venture (Tengizchevroil) to develop the Tengiz oil field, located in the North Caspian Basin. In
April 1996, Mobil (United States) announced that it had purchased a 25% share in Tengizchevroil, with Chevron (45%),
Kazakhoil (25%), and LukArco (5%, United States/Russia joint venture between Arco and Lukoil) owning the remainder.
Production had been constrained by lack of an export outlet, as well as by Russian complaints over the presence of
mercaptans - corrosive, foul-smelling compounds of carbon, hydrogen, and sulfur - in the oil. Tengizchevroil exports about
160,000 barrels/day of crude oil through the Russian pipeline system, by barge and rail to the Baltic, and by barge and rail to
the Black Sea. Given adequate export outlets, Chevron believes it can reach peak production of 750,000 b/d from the field by
2010. Tengiz oil will be exported by the Caspian Pipeline Consortium (CPC) to world markets via a 900-mile, $2.2 billion oil
export pipeline connecting to the Russian Black Sea port of Novorosiisk. The pipeline is expected to be commissioned in
1999, but it will not reach full capacity of 1.34 million barrels/day until sometime after 2000. CPC members include Russia
(24%), Kazakhstan (19%), Chevron (15%), LukArco (12.5%, Russia/United States) , Mobil (7.5%), Rosneft-Shell (7.5%,
Russia-U.K./Netherlands), Oman (7%), BG (2%, U.K.), Agip (2%, Italy), Kazakh Munaigaz (1.75%, Kazakhstan), and
Oryx (1.75%, United States).
Other export options are also being explored. In November 1997, the governments of Kazakhstan and Iran agreed to resume
oil swaps between the two countries. Under this swap arrangement, up to 40,000 barrels/day of Kazakh oil would be
delivered by tanker via the Caspian Sea to refineries in northern Iran in exchange for the delivery by Iran of a similar value of
crude to Kazakh clients. The Chinese market is another possibility, and Tengizchevroil has made test deliveries to China by
rail. Kazakhstan has been building ties with China, and in June 1997, the China National Petroleum Corporation signed an
agreement under which China will invest $3.5 billion to build an 1,800-mile pipeline to China and develop 3 fields in
Kazakhstan's Aktyubinsk region in exchange for a 60% interest in the Kazakh company developing the fields
(Aktyubinskmunaigaz). The 3 fields have total oil resources (proved plus possible reserves) that are estimated to be as much
as 1 billion barrels.
Development of the offshore potential of Kazakhstan in the Caspian Sea has been slowed by a dispute over ownership rights.
This disagreement ties in with a broader debate between Russia and other Caspian Sea Region states over how the Caspian
Sea should be treated under international law. Russia cites a 1940 treaty between the Soviet Union and Iran, which says that
the Caspian is not a sea, and therefore should be developed in common by all five coastal states. Kazakhstan disputes this
view, and counters that each state should have rights to oil and gas resources developed in their own offshore areas.
Offshore development in the Caspian Sea began in December 1993 with the formation of the international consortium
KazakhstanCaspiShelf (KCS). Exploration began in September 1994, and in May 1997 KCS announced that its had
completed its $218 million seismic profile of the Kazakh zone of the Caspian seabed. The survey estimated that the offshore
areas could contain as much as 60 billion barrels of possible reserves and cost as much as $150 billion to develop. All KCS
members - Agip (Italy), British Gas (U.K.), BP/Statoil (U.K./Norway), Mobil (United States), Shell (U.K./Netherlands),
Total (France), and Kazakhoil - will have an equal share of just under 14.29%.
Refining
Kazakhstan has three oil refineries supplying the northern (at Pavlodar), western (at Atyrau), and southern (at Chimkent) areas
of the country. Because Kazakhstan has two separate pipeline networks, Pavlodar and Chimkent are supplied mainly by a
crude oil pipeline from Western Siberia, while Atyrau runs solely on domestic crude from northwest Kazakhstan. Two of the
refineries have been privatized. The American company CCL won rights to a 3-year concession to the Pavlodar refinery in
1996. Vitol (Switzerland) now operates the Chimkent refinery; however, Kazakhstan has threatened to oust Vitol following
accusations of impropriety. The Atyrau refinery is still on the privatization block. |
