December 21, 2011 / 9:05 AM / 7 years ago

UPDATE 2-Workers return to Kazakh oilfield under armed guard

* KMG EP says expects to produce 12.3 mln T of oil in 2011

* Says workers returning to “normal levels” at Uzen field

* Maersk Oil, operators in other regions not affected by violence

By Robin Paxton

ALMATY, Dec 21 (Reuters) - KazMunaiGas Exploration Production said on Wednesday it expects to meet its reduced oil production target for the year after police deployed armed security around the oilfield closest to the scene of Kazakhstan’s deadliest riots in decades.

The London-listed oil producer said its Uzenmunaigas operations in western Kazakhstan were unscathed by the violence in the nearby town of Zhanaozen, where a months-long protest by sacked oil workers erupted into riots on Dec. 16.

“The company expects to meet the previously announced annual oil production target of 12.3 million tonnes,” KMG EP said in a statement. “The number of oilfield workers returning to work is reaching normal levels as the police are establishing control.”

Officials say 15 people were killed in clashes between riot police and protesters in the oil-producing region of Mangistau, a rare outburst of violence in Kazakhstan that has shattered the Central Asian country’s image of stability.

The headquarters of Uzenmunaigas in central Zhanaozen were looted and burned down on Dec. 16. KMG EP said its unit had set up a temporary headquarters in a different building in the town.

The prosecutor-general’s office said in a statement all employees of Uzenmunaigas and Karazhanbasmunai had returned to work as of Dec. 21.

Kazakhstan holds about 3 percent of the world’s recoverable oil reserves. The No. 2 ex-Soviet oil producer after Russia, it has on average produced about 1.64 million barrels per day of crude oil this year, International Energy Agency data shows.

Production and exports have so far been largely unaffected by the violence, although supply worries were a contributory factor on Tuesday to the biggest daily percentage rise in oil prices since October.

Brent crude prices hovered around $107 a barrel on Wednesday.

Danish company Maersk Oil, which operates the Dunga field near the Mangistau regional capital of Aktau, said operations had not been affected and that all its staff were safe.

“We have advised the workers who are not currently on the field and our Aktau office workers to be vigilant and, if necessary, stay of the streets,” Maersk Oil said in a statement.

“We believe our conditions and compensation package is competitive in the country and we have open dialogue with workers should they be unsatisfied,” the company said, adding that it had not experienced any strikes at its field.

Production at the Dunga field is currently 7,500 barrels per day. Maersk Oil has launched a field development plan to raise output to about 30,000 barrels per day.

SAFETY FEARS

At KMG EP’s Uzenmunaigas field, many employees stayed at home after drivers - fearing for their safety - declined to transport workers in the immediate aftermath of the violence.

KMG EP said alternative transport had been arranged to deliver technical personnel to the field. The unit has maintained average daily output levels at the approximate level of previous days, although power cuts have disrupted production.

Workers at Uzenmunaigas and Karazhanbasmunai, a joint venture between KMG EP and Chinese state investment company CITIC, went on strike in May. Around a thousand workers from each company have continued their protests after being fired.

KMG EP has already reduced its output target for the year from a previous 13.5 million tonnes, mainly as a result of the labour dispute. The company says the strikes were illegal.

Vladimir Nesterov, oil analyst at Troika Dialog brokerage in Moscow, said the strikes would inevitably reflect on Kazakh oil exports, as KMG EP was among the country’s largest producers.

Official data show oil and gas condensate exports edged up 2.5 percent year-on-year to 57.8 million tonnes in the first 10 months of 2011. The Oil and Gas Ministry forecasts full-year exports of 72 million tonnes, rising to 110 million tonnes per year by 2020.

KMG EP has said its third-quarter 2011 exports declined by 37 percent year-on-year due to the strikes. Output at Uzenmunaigas alone in the first nine months of 2011 was 3.79 million tonnes, or 685,000 tonnes less than in the same period of 2010.

While the situation in Mangistau remains tense, unrest has not spread to other regions of Kazakhstan.

Kazakhstan’s largest oil producer, the Chevron-led Tengizchevroil joint venture, has experienced no disruption to production as a result of the disturbances. Its Tengiz field is located in a different region of western Kazakhstan, Atyrau.

“Everything is calm,” said Linsi Crain, Tengizchevroil’s deputy general manager for government and public affairs. The company produced 25.9 million tonnes of crude oil in 2010, about a third of the national total.

The second-biggest oil producer in Kazakhstan, the Karachaganak condensate field, is located even further away, close to the Russian border. It contributed about 18 percent of Kazakhstan’s oil and gas condensate production last year.

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