KAZAKHSTAN'S CASPIAN PROJECTS GOING UP
The wave of going up in price in oil and gas projects following after the Caspian countries. Foreign investors in the Caspian region make certain that as far as had a big mean of successful preparation period for oil projects. Any mistakes at this stage come to participants more expensive and more time spend for organization and realization of the project. Taking into consideration all above there is continued the negotiations about Kazakhstan purchasing of BG share in mega-project Kashagan
To 25-50%
After rose in price of oil and gas projects of Azerbaijan to 25%, in particular Baku - Tbilisi - Ceyhan oil pipeline project, development of "Shah Deniz" field, there is expected that "Kashagan" field's development can make more expensive, than was planned. At present prices to oil will not be caused to freezing of the project. The North-Caspian Consortium will have to make some changes to course of Experimental-Industrial Development (EID) of "Kashagan".
"Agip KCO" is the operator of the North-Caspian project providing the development of four sea fields, and "Kashagan" among them is the largest with 11 - 13 bn bbl reserves. EID provides the beginning of oil production in 2007-2008 and the output by 2013, on the level of production in 22.5 mln tons. Cost of the project according to operator will make at $9.8 bn.
The letters of "Agip KCO" employees from Atyrau represent the request for increasing of budget and prolongation of realization terms of the various projects on the base of EID.
According to info, among the requesters were the sea projects department, Karabatan gas transferring plant, the staff and other divisions. Summarizing the contents of requesters, the probable variant of development of events will become the reception date transfer of "early" oil to 2009 and EID cost's rise in price of cost to 25 %-50%.
Account to money
Certainly Kashagan continues being as the central unit of Kazakhstan authorities' attention, including the perspectives of direct country's joining to project. After some silence, at the end of January there appeared the news about negotiation regarding republic's buying of British Gas share.
The Minister of Energy and Mineral Resources Vladimir Shkolnik thinks that Republic is going to get all BG share together with participation in Production Sharing Agreement at principles of "equality fellowship". The equality in relations with investors during the last some years was quite long and not simple.
On its behalf NC "KazMunayGaz" (KMG) is interested in participation in the project of Kashagan field's development, and hopes to get right for management of BG share.
"If state gets BG share, KMG will hope to be the first candidate for management by this share", - declared U.Karabalin. According to information U.Karabalin, the following negotiation concerning BG share between the government of the Republic of Kazakhstan and participants of "Agip KCO" consortium is planned within coming decade. U.Karabalin reminded, that the basic approval of participation of Kazakhstan in the consortium has already received from all of its participants.
"At present, Kazakhstan at governmental level will fulfill the negotiation. KMG participates as a consultant. "It is interesting for us to participate in such kind of project because of some reasons. The first, the increasing of oil production volumes. Kashagan is the largest field, which has been found for last 30 years in the world. The work under such project is favourable in the future for company", - told U.Karabalin. The second, as he noted, onto this project operate the largest oil companies of the world with the best technologies and samples of management. The third, this project is the leader of oil operations in the sea.
"Concerning the percentage correlation then whether all BG share will be bought by government or the part is a subject of negotiation, which are not completed today", - U.Karabalin mentioned.
Kazakhstan is able to purchase up to 100% of BG share in Kashagan project. As it was declared by the Prime Minister of the Republic of Kazakhstan Daniel Akhmetov "50% or 100% - is the process of negotiation … We are going to continue it". Prime Minister appreciates of Kazakhstan share getting in Kashagan project very positively. He thinks that it will allow "after five years to stocks of "KazMunayGaz" will be recognized at stock exchanges in London and others".
The participants of International Consortium Agip KCO regarding the North-Caspian project (by oil production onto the Kashagan field) expressed their agreement for getting of BG (British Gas) half share at this project by Kazakhstan. It was informed during meeting with Senate Parliament's deputies of the Republic of Kazakhstan by Minister of Energy and Mineral Resources of Kazakhstan Vladimir Shkolnik.
Cost of full BG share holding will make 1 bn and 230 mln USD so, the half of BG share totally 8,335 percent of stocks that the members of Consortium provided by their consent to give it to Kazakhstan and it will make approximately 615 mln. USD. "I hope that we will able to fulfill this transaction. It means the reverting to the State ownership of biggest asset that is acceptable and need to State", - declared chief of Kazakhstan Ministry of Energy and Mineral Resources. Kazakhstan is going to complete the transaction concerning buying of 8,33% BG stocks in development of Kashagan field in 2005, however "from the point of juridical view it is very difficult subject".
Speaking about facilities for buying of 50% BG share holding, V. Shkolnik noted that at the present time the situation at the finance market of Kazakhstan "is very favourable, and government is able to satisfy by funds from the budget". Moreover, as chief of Ministry of Energy and Mineral Resources of the Republic of Kazakhstan "National Company KazMunayGaz can borrow these funds at the market, also it can use own facilities that are quite enough for realization of purposes".
As it was informed by the first Vice Minister of Energy and Mineral Resources of the Republic of Kazakhstan Bakhitkozha Izmukhambetov, in 2004 the investments to development of Kashagan field made $1,095 mln.
Complex preparation
Today experts converge in opinion, that the basic complexities at Kashagan development can arise because of shoal, severe conditions of environment, when the sea is covered with ice within 4-5 months within one year, ecological sensitivity of sites, difficult mountain-geological conditions, high seam pressure. Despite of high quality of Kashagan oil - 460 API (density in degrees), it differs by high gas factor, contents of sulphuretted hydrogen and mercaptans.
Within Kashagan's development are used, and will be used "the best technologies", that has already been trialed in the world projects and capable to minimize the damage to a nature and people. General term of operation of field from the beginning of oil production under Product Sharing Agreement (PSA) will make 40 years.
The realization of the project of experimental-industrial development of Kashagan includes three stages. The first, the duration for four years, is considered the construction of industrial objects, pipelines and production 450 mbpd of oil. The investments at the 1st stage of development cycle are estimated at $9 bn.
At the first and second stages the common crude oil production under the program of experimental-industrial development will reach more than 20 mln. tons of oil per year. Half of extracted accompanying gas will be pumped back to wells on the sea, and the second part of gas will pass the processing on the ground complex.
Project considers that within EID will appear three production artificial islands: till 2007 - "A" and "D", and from 2008 to 2013 - one more module No. 5. Three modules will control the area equal to approximately 20% of NCC contract territories. Extractive islands will be connected with Unique center by preparation of produced hydrocarbon by trade pipelines. The raw material supplied via it would be divided to oil and gas, fluids would be supply to coast and gas partly by the same way and partly pumped back to sheet.
Hydrocarbons will reach to Oil and Gas Complex Preparation Unit where they will be dried and cleaned from the high content of sulfur (Look at Supplement 2 "High-gravity oil"). Pipelines among the Unique center and OGCPU have the following parameters. Carrying capacity of pipeline is 22.5 mln. tons of oil per year, gas pipeline - 6,6 bcm of gas per year. One more pipeline will revert the gas to trade peninsulas which using by oil industry workers for processing and common demand. Its carrying capacity 1,8 bcm per year.
High-gravity oil
Kashagan's oil from processing and selling point of view combines itself the positive and negative physic-chemical features. Kashagan's oil characterized as high-gravity, light, high sulfuric, content of mercaptan sulfur is more than 1000 mg/kg, paraffin - 5%, congelation temperature is -150°C. Average meaning of sheet temperature equal to 1110°C (in depth 4300 m). Collection technology and preparation of oil and gas for using of expensive equipment by cleaning of oil from mercaptans and gas from acid components.