ONE OF MORE PERSPECTIVE ROUTES OF KAZAKHSTAN'S GAS EXPORT - VIA CASPIAN SEA TO TURKEY, - Minister of Energy and Mineral Resources of the Republic of Kazakhstan, Shkolnik Vladimir Sergeyevich says
What the amount of investments was attracted in exploration and development of Kazakhstan's fields and how the dynamic of investment profitability in oil and gas production field of Kazakhstan will be changed in the nearest decade?
Analyzing and estimation of situation in the investment market of oil and gas sector of the Republic of Kazakhstan in 2004 showed an increased of trust and growth of investments on behalf of the largest western investors. There is expected that during 2006-2008 the economy will be developed under high prices to raw material with high regime provided political stability, sovereign rating of state not less than present's level and profitable investment climate respectively.
There will be continued the investment in main operating largest projects - Karachaganak, Tengiz and North-Caspian for 2006-2008. There is also expected the beginning of other large-scale projects on the shelf of the Kazakhstan sector of the Caspian Sea (KSCS) and some infrastructure projects with participation of foreign investors, including "KazMunaiGaz".
"KazMunaiGaz" role and level of its influence to investment processes in the field is significant. After company's joining into the North-Caspian project with 8.33% of share participation KMG position will be enhanced in long-term perspective. However in medium-term perspective the share of KMG's oil production in the republic on the base of our estimations will be reduced till 2008 that explained with more acceptable growth of production in major companies-competitors (Look at table 1).
Let's note that the presence in the structure of KMG such kind of other structures like "KazTransOil", "Atyrau ORP" and other infrastructure units, including perfect KMG status providing with additional priorities and possibilities in investment activity and negotiation processes with potential investors that Company strives to use more effectively.
In 2004, the main direction of investment in the Republic of Kazakhstan as during previous years was the exploration and production of hydrocarbon - 7248,8 mln. USD. At the same time the share of foreign investments made 80% from the total volume of investments or 5797,3 mln. USD, native - 20% or 1451,5 mln. USD.
Last year more significant investments were fulfilled by 11 largest oil and gas companies year and the share of each reach 92,3% from the total volume of investments in oil and gas production complex of state (Look at table 2).
"KazMunaiGaz" (KMG) share at investments in oil and gas field of the republic in 2004 made 11,6% or 114,8 bn tenge (844,4 mln. USD). Taking into account that KMG has significant social burden the given figure is quite high.
Presently, total cost of portfolio of realized investment projects regarding exploration and development of fields makes more than 2.144 bn tenge and including below mentioned projects:
- 3-A Uzen field's rehabilitation project;
- "Zhambai South - South Zaburunye" areas' geology prospecting and development project;
- "Tyub-Karagan" area's geology prospecting and development project;
- "Kurmangazi" structure's geology prospecting and development project;
- "Atashskiy" area's geology prospecting project;
- "Pribrezhniy block C1", "Pribrezhniy block C2" and "Aral" areas' geology prospecting and development project;
- "Zhambil" area's geology prospecting and development project;
- Participation project in the North-Caspian project.
In 2005 an expected development of investment's financing makes more than 160 bn tenge. 52 of which aimed to prospecting and production.
Besides, at present, KMG Investment Commission 16 perspective investment projects are accepted for consideration. 1 of them considers the development of onshore field, 8 projects regard geology prospecting and development the structures on the Caspian shelf.
Total cost of portfolio of investment projects accepted for consideration makes 26.698.599.000 USD. The major part make the expenditures to 8 geology prospecting and development projects of KSCS fields (22.645.000 USD or 85,3%) which planned for 20-30 years. Taking into account that there are not still defined the terms of financing on major projects (TES project not elaborated or not completed, not defined the partners, not formulated working programs, etc), at the given stage the correlation of own and loan financing on projects definition is impossible.
It is necessary to note that considered portfolio of investment intention projects makes by about 70% from the total portfolio of KMG investment projects. It proves about big capital capacity of the perspective projects regarding exploration and development of fields in the KSCS.
How is there realized the strategy program of national Caspian sector, which problems did you have to face under its implementation and how are they solved?
In accordance to State Program on KSCS development KMG fulfills prospecting and estimation operations at contract areas and also the operation connected with preparation of new areas for further concluding of contracts regarding bowel using.
In 2003-2004, there are conducted seismic surveys 2D at Zhambai in 641 km. In result of received new data, there are discovered perspective structures Edil, Kosarna and Karabulak. The construction of the first prospecting wells is planned to 2007.
Regarding the areas C1 and C2 then there are being fulfilled seismic data with taking into account new data in adjacent territories.
In 2004, there were implemented detail seismic prospecting operations 2D at Tyub-Karagan and Atash in 675 km. and 1057 km. respectively, and the drilling of the first prospecting well at Tyub-Karagan has already completed.
In accordance to Protocol dated May 13, 2002 to an Agreement between RF and RK about discrimination of the Caspian depth in purpose of sovereign rights' fulfillment regarding bowels using dated July 6, 1998 Kurmangazi, Khvalinskoye and Central projects are realized.
In July 6, 2005 PSA contract was signed regarding Kurmangazi project between the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan (on the one hand) and "Offshore Oil Company "KazMunaiTeniz" and "RN-Kazakhstan" there is planned the drilling of two prospecting wells next year".
Presently, Ministry of Energy and mineral Resources of the Republic of Kazakhstan and Oman Oil Company have negotiation regarding Zhemchuzhina on the terms of PSA.
Contract's project for prospecting and production regarding "N" area (Nursultan, Ulitau, Rakushechnoye sea and others) is considered by working group of Competent body.
There are begun direct negotiation of the Competent body with KMG on contracts regarding bowels using on Zhambil, Abai, Isatai and Darkhan.
Beginning from 2006 an advance plan of offshore oil projects realization in KSCS supposing the drilling of several prospecting wells a year.
One of the problems that can be influenced to realization of stated plans is a deficit of drilling units in the Caspian.
Caspian Sea is close water pool and its north part is freezing in winter. Besides the water systems of the Russian Federation have limits on transportation of the largest units. In this connection the drilling unit's fast mobilizing is difficult.
Therefore, there is considered the matter of self-lifting drilling unit's construction for operation in the Caspian.
How are there being solved the matters of joint using export powers with one of the largest oil exporters in the world - Russia? Is it possible the OPEC analogue in the Caspian for solving of appearing such kind of problems (Kazakhstan demand about increasing of CPC and Russian powers - initial using Atyrau-Samara route)?
There exists close economy relations between Kazakhstan and Russia for a long time and our countries are interested in continuation of further cooperation enhances. In the sphere of FEC Russia is strategy partner of Kazakhstan and we understand that our mutual relations in issues of hydrocarbon transportation have great meaning not only for development of our energy fields but also for strengthening of energy safety of our states, including the satisfaction of interests existed and potential consumption of our hydrocarbon raw materials.
There were concluded several agreements between Kazakhstan and Russia and one of the main directions of cooperation is a sphere of FEC. We are sure that such kind of agreement base is able to provide the decision of all necessary issues that can be appeared during mutual relation in energy sphere.
One of the documents that regulate the matters of transportation is an agreement about oil transit that Kazakhstan and Russia signed in summer of 2002. The agreement guarantees to Kazakhstan the possibility of oil transit fulfillment in the direction of Atyrau-Samara totally no less than 15 mln. tons a year and in the direction of Makhachkala-Novorossiysk - no less than 2,5 mln. tons a year. At the same time, the planned volumes of Kazakhstan's oil transit via Russian system of pipelines are being stipulated in annual protocols to the agreement. Let's note that at present Atyrau-Samara direction loaded stable and we jointly with Russia study the opportunity of stated route capacity's increasing up to 20-25 mln. tons a year.
Concerning the expansion of CPC oil pipeline's project then it is one of important directions of cooperation between Kazakhstan and Russia. The necessity of CPC capacity's expansion defined by planned increasing of oil production volumes at Tengiz and Karachaganak. All shareholders including Kazakhstan and Russia support the expansion of the project and we do not see any problem in development of stated project. CPC shareholders achieved agreements almost in all points of the project, and presently, there are carried out an additional processing and arrangement of separate points.
Does Kazakhstan export its final petroleum products and does it plan to increase the export article?
KMG plans annually supply for processing to domestic market of the republic 2.200.000 tons of oil till 2010.
Main part of processed petroleum products is used in domestic market and only 1/3 of volume (764-720.000 tons) of petroleum products is planned to supply to export abroad of the republic.
Major export goods - oil fuel, stove oil, coke and not significant volume of diesel fuel (up to 44.000 tons a year).
Does multi-variants of export pipeline for Kazakhstan as an instrument for control of tariff rates or necessary providing of transport demands for its branch?
I'll state that we consider this matter larger and from the other point of view. Multi-variants or multi-vector approach in planning of export routes create for Kazakhstan the possibility of market's diversification where its product is sold, and the possibility of flexibility showing regarding optimal loading, maximal effectiveness of oil and gas transport systems' using and creation of profitability rate terms for Kazakh oil and gas exporters.
It is not a secret that geography location of our country difficult to call as acceptable - Kazakhstan has not direct access to Deepwater Sea ports and we fulfill oil and gas transit mainly via territories of other states. We closely cooperate with Russia and so, Kazakhstan supplies its oil and gas products mainly via the Russian pipeline systems. Presently we conduct negotiation, which will allow fulfil the transportation of our oil through Baku-Tbilisi-Ceyhan including the realization of Kazakhstan-Chinese project. We are interested in development of equal partnership relations with neighbour nations and at the same time we strive to get conditions allowed not creation the dependence from any direction that in result can be influenced negatively to both suppliers and consumers of our production.
As it has already been mentioned the effectiveness of transportation systems' using - one of corner stones of political multi-vector. Great example can be stated Kazakhstan-China oil pipeline project realized in Kazakhstan. Since commissioning of Atasu-Alashankou oil pipeline that is one of stages of above stated Kazakhstan-Chinese pipeline there will be possible to fulfill pipeline oil supplies from Kumkol group of fields located far from export exits to perspective Chinese market.
Generally, we can say that multi-vector of export directions for us is a diversification of selling markets and planning export opportunities with taking into account the volume of oil and gas production, including in a cut of regions and there is a sureness that these directions will be demanded.
How has Kazakhstan's export directions been developed, and which of them are main and why?
At present time, Kazakhstan actively develops some projects regarding export directions with the goal of effective routes' creation for Kazakhstan hydrocarbon. There is conducted the operation over the project of CPC pipeline's expansion through Russia and studied the matter of Atyrau-Samara oil pipeline's capacity for supporting of existed transport system and development of tradition transit directions.
Within the frame of connection to new export systems there are carried out the works on creation of conditions for Kazakhstan's oil transportation via the Caspian Sea to Baku for its further entering into Baku-Tbilisi-Ceyhan oil pipeline. We jointly with Azerbaijan side and investors prepared the project of existed agreement, which is supposed to sign till the end of 2005.
We are also interested in development of new markets aimed for Kazakhstan hydrocarbon selling. There was started last year the project for Atasu-Alashankou project's construction that is one of stages of Kazakhstan-China oil pipeline project. Chinese side expressed its interesting in receiving oil and gas from Kazakhstan. We are going to get access to Chinese market demonstrating high speed of growth of energy resources' consumption and presently, is one of the most perspectives in the world.
The completion of Atasu-Alashankou oil pipeline construction is supposed till the end of 2005 for beginning of large-scale oil export to China.
Besides, we research the opportunities of Iranian pipeline direction's realization in the long-term perspective.
All of these directions are aimed to known selling markets, have its resources base, its rates conditions. As it has already been stated the given approach explained by policy of multi-vector development of export directions supporting by Kazakhstan.
How is there being developed the branch, what about presence perspectives of multi-variants Kazakhstan's gas export?
Today as more perspective directions of Kazakhstan's gas transportation there are considered two directions. First of all, this is the Western direction where Kazakhstan's gas can be supplied via Russia through Gazprom system, and also via Caspian to Turkey.
For increasing of Kazakhstan's gas export volumes in the North-Western direction is necessary the expansion of capacity of main gas line "Central Asia - Center" for providing of the Caspian gas and increasing of Karachaganak gas loading into "Orenburg-Novopskov" and "Soyuz" gas lines. "Central Asia - Center" gas line is the largest on capacity of gas transportation direction through which there is fulfilled an international transit of Turkmenistan and Uzbekistan gas via Kazakhstan. Within the frame of reconstruction program regarding gas line systems there is considered the easy increasing of stated gas line's capacity almost for twice from existed 55 to 100 bcm a year.
Gas providing opportunity for export via Turkey can be considered after realization of Baku-Tbilisi-Erzurum gas line project which construction is being conducted.
As a other perspective direction is considered the East route through which Kazakhstan, Turkmenistan and Uzbekistan's gas is possible to supply to China.
Chinese side declared about its demands in Kazakhstan's gas and showed the serious interest to project of gas supplying from Kazakhstan. As it is aware, China has great economy growth and therefore this project is represented actual for us.
Within the frame of gas supplying possibilities to China there was offered some variants of gas providing from Kazakhstan for new gas line connecting western and eastern Chinese region. Presently, there are conducted works mutually with Chinese side on advance study of variants regarding Kazakhstan-China pipeline construction.
Concerning the matters of gas production development then presently, Kazakhstan's gas production continue its growth. It happens due to increasing of oil production volume that accompanied with associated gas growth. According to forecast concerning gas production, there is planned to reach the level more than 50 bcm by 2010 and 80 bcm by 2015.
It is necessary to note that the important project for us regarding own gas production development is experience-industrial development of Amangeldi field. Total field's reserves make approximately 22,5 bcm. Complete Amangeldi gas field's launching will be in the nearest time which means the launching 17 wells, plant on preparation of gas and infrastructure units. After getting project capacity there is planned the production at the first stage 350 mln. cu.m. of gas annually.
How do estimate the level of mutual relations with your Caspian neighbors in oil and gas production field, which relations are more stable and perspective?
National Company "KazMunaiGaz" closely cooperates with SOCAR in particular on Baku-Tbilisi-Ceyhan (BTC) project. Four participants of the North-Caspian project (Kashagan) that are ENI, Total, INPEX and ConocoPhillips got 15% of participation in pipeline project BTC in 2005. "KazMunaiGaz" became as a participant of the North-Caspian project in 2005 is able to use BTC for transportation of its oil to international markets.
Presently, there are conducted the work by negotiation groups of "KazMunaiGaz" and SOCAR regarding preparation of Agreement between the Republic of Kazakhstan and the Republic of Azerbaijan on assistance and supporting of oil transportation via Caspian and Azerbaijan. Main positions of the project of stated agreement arranged by parties and juridical matters are being elaborated.
As it was mentioned previously, the close economy relations connect Kazakhstan and Russia and our states are interested in continuation and further enhance of cooperation. "KazMunaiGaz" fulfills in the Caspian the realization of some largest projects mutually with the Russian companies, including "Lukoil" - Khvalinskoye, Tyub-Karagan and Atash, and "Rosneft" - Kurmangazi.
What about main aspects of ecology composing the development of Kazakhstan's FEC and how are they being realized?
Any technological activity is a potential dangerous for person and environment. Taking it into account "KazMunaiGaz" provide with below-mentioned goals:
- Providing with absolute priority of operating in "KazMunaiGaz" workers' health and life save, it regards also the population located in the regions of company's industry activity, ecology aspects of industry over economy and any other aspects of processing;
- Minimization of Company's processing units' influencing to environment components;
- Rational natural resources using;
- Achieving and supporting of modern scientific-technical level of industry, ecology and working safety providing;
- Providing with conformity of plants' activity belonging to Company in the field of industry and ecology safety, including the protection of work meeting to international standards.
Taking above-mentioned, "KazMunaiGaz" main activity is creation the conditions for introduction of new modern technologies and technique improving industry and ecology safety and work protection.
"KazMunaiGaz" goal - becoming as recognized leader in the field of environmental safety, achieving that the system of protection will meet to all international standards like ISO. Organization of such system will allow regularly keep under control the size of influence to environment, analyze the characteristics of ecological computability processing and reinstallation of processing processes with the aim of influence's minimization to environment.
Thanks for your interview.