"NECESSITY IN ALTERNATIVE EXPORT PIPELINES IS TO APPEAR AFTER 2010"
- VLADIMIR SHKOLNIK, MINISTER FOR ENERGY INDUSTRY AND MINERAL RESOURCES OF KAZAKHSTAN
Caspian Energy: Vladimir Sergeyevich, how would you assess the level of investment stability and attractiveness of the investment atmosphere of Kazakhstan for strategic investor?
Vladimir Shkolnik: The investment into prospecting and development of the hydrocarbon crude has increased from $0.9 to $4.7 bln within 1996 to 2001.
The investment for the prospecting and development of the hydrocarbon crude made about 74.5% of all investment in the mineral crude complex of the country.
Out of which more than 86% comes to foreign investment. This remarkable growth of the investment in a comparably short time is an indicator of the high level of investment attractiveness of Kazakstan and the stability of the investment atmosphere of Kazakhstan.
The potentialities of the work of our strategic investors in the oil and gas industry of Kazakhstan are related first of all with further development of the existing projects, as well as with mastering the Kazakh sector of the Caspian.
Kazakhstan's priorities in the development of the oil and gas industry are:
- international cooperation;
- keeping to the interests of the Republic of Kazakhstan, reducing the risks in concluding contracts in earth bowel usage;
- complex and wasteless utilization of the hydrocarbon resources;
- provision of the ecological security, introduction of progressive and safe technologies;
- keeping to Kazakhstan's and international rules, standards of industrial and fire safety, industrial sanitary, labor and environment protection;
- encouragement of domestic
- producers;
- creation of favorable conditions
- for drawing in investments;
- diversification of export routes.
C.E.: According to what principles the offshore blocks are to be distributed among the investors, and what part is KazMunayGaz State Company to play in the process?
V.Shk.: The offshore blocks are to be distributed among the investors on the bases of competitions organized by the government of Kazakstan. The contracting companies that will submit the best proposals will be guaranteed the right to make use of the earth bowels. Besides, in accordance with the legislation of the of the Republic of Kazakhstan, the national companies will get the right to use the earth bowels on the bases of direct talks with the competent body.
At the beginning KazMunayGaz is to present the interests of the state in the project by means of obligatory production share participation. As the national company develops and strengthens she will perform the functions of the project operator.
The blocks of the Kazakh sector of the Caspian are to be represented taking into account the equal inclusion of the northern, central and the southern parts of the shelf, which will enable to ensure their equal study and reduction of the ecological burden avoiding the excessive concentration of great volume of work in a limited territory.
The blocks adjacent to natural units protected by the state, recreational zones, units of the defense complex and large settlements can be excluded.
C.E.: Are you satisfied with the current work of the consortiums functioning in the offshore shelf of Kazakhstan?
V.Shk.: At present Agip CCO is performing oil operations in the Kazakh sector of the Caspian Sea in the frame of PSA on the northern Caspian dated November 18, 1997. The rest of the projects are either in the stage of preparation to accomplish the least of the working program or negotiations are being conducted on the terms and provisions of the contracts on earth bowel usage.Touching upon the Agip CCO project, it is necessary to point out the tremendous work done. Up to date the contractor has performed the minimum work program drilling 3 prospecting wells at Kashagan and Kalamkas fields. Drilling and testing of 4 wells at eastern Kashagan have been completed in the frame of the appraisal program.
All this enabled to declare the discovery of commercial Kashagan field on June 30, 2002, which has become the largest discovery in the world for the last dozen of years, while the discovery of Kalamkas field was announced on September 19, 2002.
It is necessary to note the efficient work of the contracting companies, competent body and plenipotentiary body on the project, which closely interact among themselves and decide the springing out problems constructively. But all the same the key moment, on which we'll judge about efficiency of the work of contracting projects, is to be the start of the commercial output at Kashagan field in 2005.
C.E.: Could you tell at what stage the development of the export projects are, those that are alternatives to CPC? When is their practical construction to start?
V. Shk.: At present the basic routes of Kazakh oil exports are transportation along the Atyrau-Samara pipeline and further by transit via the Russian territory. A long term agreement has been signed last summer between Russian and Kazakhstan on transit of Kazakh oil. According to this agreement Kazakhstan is guaranteed an opportunity of transit of no less than 15 mln tons of oil a year in the direction of Atyrau-Samara, and no less than 2.5 mln tons of oil a year in the direction of Mahachkala - Novorossiysk. In future the country is planning to increase transportation on the Atyrau-Samara pipeline up to 19 mln tons in 2004 and up to 22 mln tons in 2005.
The CPC project is also related with the transit via the territory of Russia and aims at ensuring Kazakhstan's oil access (basically from Tengiz and Karachaganak fields) and Russian oil to Black Sea port of Novorossiysk. The chief priority in CPC pipeline system development for 2003 is accomplishment of the commitments to CPC shareholders, as well as drawing in additional oil volumes of the third partner consignors.
Taking into account the potential output volumes in the Kazakh shelf and under the condition of maximum extension of the existing oil transportation capacities, we assume that the necessity for additional export pipelines is to spring out after 2010.
At present Kazakhstangives consideration as alternative directions to three pipeline projects, i.e. Aktau-Baku-Tbilisi-Ceyhan. Western Kazakhstan-China, Kazakhstan-Turkmenistan-Iran.
The Baku-Tbilisi-Ceyhan pipeline is known to be built by the end of 2004. Kazakhstan is currently realizing regular transportation of oil from Aktay to Baku by tankers. Negotiations and feasibility estimations are underway on the rest of directions, there fore, we will be able to deal with concrete terms of putting this routes into operation only after those projects are approved by all parties concerned.
Kazakhstan supports the idea of transporting the oil along the Aktau-Baku-Tbilisi-Ceyhan transportation corridor, and that 15% of the BTC pipeline construction project belongs to companies functioning in Kazakhstan. This also testifies the interest of out country to Trans-Caspian export route via Baku and further towards Turkey.
Last March negotiations were held in Almaty with the representatives of Azerbaijanian side to discuss the technical and legislative aspects of Kazakhstan's joining the said project. The parties in question reached an agreement about forming the Aktau-Baku oil transportation corridor. A special transportation company is to be set up for the corridor to function which is to conclude a contract with BTC Co. We are planning this year to draw out appropriate agreement on joining the Aktau-Baku and Baku-Tbilisi-Ceyhan routes.
C.E.: Is Kazakhstan's joining to Central Asian project of gas exports via Afganistan and Pakistan to Arabian Sea possible?
V.Shk.: In the problems of hydrocarbon crude exports Kazakhstan keeps to the principle of diversification. We take interest in those projects that enable us to export oil and gas most efficiently to the world markets and sell them at an attractive price. The TransAfgan project is currently in the preparation stage, until Turkmenistan, Afganistan and Pakistan sign only the intergovernmental frame agreement about the construction, there isn't even feasibility estimation.
Various problems spring out at the moment concerning the gas-line security, economical solvency of the project and its financing. Therefore, it is too early to say whether Kazakhstan will take part in the project or will export her gas along the pipeline in case it is realized successfully.
I'd like also to point out that our country also takes interest in developing the eastern direction of the gas exports via her own territory to China and to other Asian Pacific countries. It is not ruled out that Turkmenistan herself will display an interest to this direction.
C. E.: How would you fancy the common system of pipelines for the export of energy bearers from the Caspian region?
V. Shk.: The appraisal potential of the hydrocarbon crude in the Republic of Kazakhstan is rather high. But availability of the large crude reserves is an obligatory, but insufficient condition for the development of the industry. Therefore, great attention is paid to the development of transport infrastructure to ensure maximum access for the oil producing companies to export routes.
Kazakhstan adheres to the policy of diversification of the pipeline construction. Economical expediency of the route and the desire of the oil producing companies play a leading role in the choice of the pipeline construction.
Kazakhstan is also ready to give consideration to the possibility of using the pipelines of other countries to export her oil, such as the second line of the Baltic Pipeline System, Druzhba and Adria, Konstantsa-Triest and others.
Besides, Kazakhstan is developing her internal pipeline network most actively. So the introduction of the first starting complex of Kenkiyak-Atyrau pipeline that took place last March 28, 2003, allowed us to join the oil field of Aktuba and Atyrau provinces with the existing Atyrau-Samara and CPC export pipelines of the Republic of Kazakhstan. At the same time, successful completion of the Kenkiyak-Atyrau pipeline construction enabled to lay the foundation for the construction of the Trans-Continental Western Kazakhstan - Western China pipeline main, which will contribute in the development of economical relations between the Republic of Kazakhstan and the People's Republic of China.
At present a number of projects are in various stages of realization. The major goal of building the internal Kumkol-Aralsk-Kenkiyak and Kumkol-Jusali pipelines is joining all pipeline mains of Kazakhstan into a united pipeline network.
C.E.: Could, in your opinion, the Caspian littoral oil and gas producing countries unite like a cartel in order to affect the price "atmosphere" in the world market"
V. Shk.: A decision was taken about formation of the common market for oil and gas last February 2003 at the regular session of the Inter-Governmental Council EuroAsian EC, which means creating conditions for the growth of efficiency of the joint geological explorations, joint development of the new oil and gas fields, construction of joint oil and gas refineries, etc.
At present the oil output in the Russian Federation makes about 10-% of the world volume, while Kazakhstan's output volume is just about 1.5%. Taking into account the potential out[put growth in the Caspian region, probably, the Caspian littoral countries will take a leading position in the world oil market and thus will be able to affect the price formation.