September 8, 2017 / 12:28 PM / 3 months ago

Kazakhstan seeks better offer from oil majors to end Karachaganak gas row

ASTANA (Reuters) - Kazakhstan wants oil majors led by Shell and ENI to improve their offer for ending a dispute over profit sharing in the Karachaganak gas project, Kazakh Energy Minister Kanat Bozumbayev said on Friday.

Bozumbayev also told Reuters output at the giant Kashagan oil field could reach 450,000 barrels per day (bpd) from 200,000 bpd in two years under an expansion project worth $2.0 billion, which is less than half its original cost estimate.

Kazakhstan filed a $1.6 billion claim against foreign firms developing the Karachaganak gas condensate field, one of the companies has said. The Energy Ministry has said the row was over calculations over each parties’ share in the field output.

A senior state oil firm executive told Reuters this week the group of foreign firms had offered to build a gas processing plant in Kazakhstan in exchange for settling the row.

Bozumbayev refused to disclose details of the consortium’s offer, but said Kazakhstan considered it insufficient.

“We have calculated the value of the offer to Kazakhstan and it does not meet our demands and we have already told that to consortium members,” he said in an interview.

“We have asked the consortium to offer something in addition,” Bozumbayev said, adding that moving ahead with a new gas processing plant required talks with Russia, which now processes some Kazakh gas.

He said Kazakhstan would stick to its commitments to supply natural gas to a plant in the Orenburg, Russia and which is operated by Gazprom, Russia’s biggest gas producer.

Eni and Shell each own 29.25 percent of the Karachaganak project in northwest Kazakhstan, which they jointly operate. Kazakhstan’s KazMunayGaz owns 10 percent, Chevron Corp has 18 percent and Lukoil owns 13.5 percent.

KASHAGAN

Regarding Kashagan, the minister said gas reinjection facilities were being tested to help lift output from the field, after its launch last year more than a decade late.

He said output would rise to 300,000-370,000 barrels per day (bpd) by the end of this year, and could climb to 450,000 bpd if plans for an expansion project proceeded.

The development consortium which includes Eni, Total, Shell and ExxonMobil is working on expansion plans to be presented next year. China’s CNPC and Japan’s Inpex are also shareholders.

Bozumbayev said the initial $4.7 billion cost of the expansion had been cut to $2.0 billion. “If Kazakhstan approves it, the project can be implemented very quickly,” he said.

With more output, Kashagan might need more shipping routes in addition to the CPC and Transneft pipelines that run through Russia.

Another possible route for oil from Kashagan would be the Baku-Tbilisi-Ceyhan (BTC) pipeline, which runs from Azerbaijan to Turkey via Georgia. Kashagan oil could be fed into BTC after being shipped across the Caspian Sea by tankers.

The minister said shipments to China were not yet possible, although he said that could change in future.

Writing by Olzhas Auyezov; Editing by Christian Lowe and Edmund Blair

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