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Oil Chronicles
January
Starting January 1st, the wholesale price for liquefied gas has increased. By order of the Minister of Energy from December 12, 2016 No. 527 the limit was adopted for wholesale price of liquefied petroleum gas on the domestic market of the Republic of Kazakhstan for the period from January 1 to March 31 of 2017, amounting to 28 thousand KZT per ton. This price does not include value added tax.
Starting January 1st,Kazakhstan has reduced oil production by 20 thousand barrels per day under the OPEC agreement, said the press-service of the Ministry of Energy. As known, the meeting of non-OPEC oil producers was held in Vienna on December 10, 2016 and attended by 12 countries. The meeting resulted in signing of the Oil Production Cut Agreement for total amount of 558 thous. barrels per day, starting from January 2017. Russia confirmed the agreement to cut oil production by 300 thous. barrels per day.
Prior to this, on November 30, OPEC summit was held in Vienna, where the cartel's member countries reached an agreement on the reduction of oil production by 1.2 mln barrels per day - down to 32.5 mln barrels, and defining quotas for the countries. Thus, the total production cut by OPEC and non-OPEC countries will amount in the current year to 1.758 mln barrels per day.
On January 8, the volume of safe production and exports of the Kashagan field has reached 1 million tons of crude oil and condensate. This was reported by the press-service of the Project’s operator - North Caspian Operating Company (NCOC). According to the information of the operator, currently the pace of production is growing up to 180 thous. barrels of oil per day. "After the start of re-injection of associated (sulfur) gas and optimization, it is expected to reach production level of 370 thous. barrels per day under Phase 1 of the Kashagan Project, NCOC explained. Production at Kashagan was launched in the fall of 2016. The field has reached the commercial production levels on November 1.
The Committee on Statisticsof the Ministry of National Economy said that Kazakhstan reduced oil production down to 65.577 mln tons in 2016, which is 1.4% lower compared to the previous year. Extraction of condensate during the reporting period decreased by 3.6%, down to 12.464 mln tons. In addition, during the reporting period, Kazakhstan produced 21.384 bln cubic meters of natural gas (a decline of 0.5%) and 24.945 bln cubic meters of associated gas.
January 13, Kazakhstan sent a first shipment of liquefied gas to China by rail, the press-service of KTZ - Freight transportation JSC reported. 18 oil-tank cars with liquefied hydrocarbon gas produced in Kazakhstan departed from Dostyk station to Chinese Kuytun. Transportation of the liquefied gas from Kazakhstan to China is carried out by rail for the first time. Prior to this, such goods were transported by road. With the increasing demand for natural gas in China, transportation of the liquefied gas via Dostyk-Kuytun route opens new opportunities to increase the supply of Kazakhstani hydrocarbons for export, as well as transit of similar fuel from Russia, noted in the press-release.
The Ministry of Energy announced the discovery of low-density oil and gas pool in Devonian sediments of Ansagan sub-salt raising. The field is located in Zhylyoi District of Atyrau Region. As noted, the identified oil and gas bearing horizons occur relatively deeper than at the Tengiz oilfield. “Possible reserves are estimated highly, and planned large scope of exploration works aimed at confirming the predicted hydrocarbon resources. Receiving high debits of low-density oil at Ansagan confirms a large resource potential of sub-salt sediments at great depths of mentioned territory” - stated in the announcement of the Ministry of Energy.
It is planned to conduct appraisal work at the Ansagan field to expand research work on the entire contract area with the formulation of exploration drilling on the prospective areas Maksat, Prorva Glubokaya and others, confirmed by detailed seismic studies.
According to the Ministry, on February 24, 2014 the contact was signed with Almex Plus LLP on subsoil use right to carry out exploration of raw hydrocarbons at the sub-salt sediments in Atyrau and Mangystau Regions, excluding over-salt structures and fields located at the area. The geological allotment area amounts to 1460.01 sq. km, depth of allotment - from the bottom of over-salt sediments to the surface of crystalline basement.
Within nine months, shareholders of the Karachaganak Petroleum Operating Consortium must come up with a proposal to the Government of Kazakhstan regarding a dispute about the unfair distribution of revenue from the sale of oil at the Karachaganak field, said Minister of Energy Kanat Bozumbayev. "We signed a memorandum with them at the end of December stating that we will continue our negotiations in the next nine months of 2017. They will give us concrete proposals", the Head of the Ministry explained. “We chose our arbiter, they chose theirs. No we need to choose a mutual one and approve that choice”, Kanat Bozumbayev said in a conversation with a journalist.
In March of 2006 it became known that Kazakhstan requests KPO consortium about 1.6 billion dollars from KPO Consortium because of the unfair, in their view, interpretation of the norms of Final Production Sharing Agreement (FPSA), as a result Kazakhstan loses a portion of the profits from the sale of oil at the Karachaganak field. Claimed amount was listed in the financial report of Russian LUKOIL, one of the participants of the PSA.
In June of 2016, the Financial Times, citing a source, reported that KPO has offered to pay about 300 million dollars to settle the dispute. Kazakhstan rejected the proposal. In November Kazakhstan submitted complain to the Commercial Arbitration Court, but simultaneously continued to negotiate with the Consortium.
From January 17, the powers of the Member of the Board of Directors of the National Company KazMunayGas Zhangaulov Erzhan Arystanbekovich were prematurely terminated. At a meeting of the Board of Directors of KMG it was decided to "elect Mukushov Ardak Zhumagulovich as a Member of the Board of NC KazMunayGas JSC for a term prescribed in general for the Board of Directors of NC KazMunayGas JSC.”
On January 23, Murat Zhurebekov was appointed for the position of Director General of PSA LLP -authorized body of the Republic of Kazakhstan regarding production sharing agreements for the North-Caspian and Karachaganak projects. He was born June 27, 1978, graduated from Aktobe State University named after K. Zhubanov, Kazakhstan Institute of Management, Economics and Strategic Research, obtained Master's Degree from University of Strathclyde (Scotland). Previously he worked as a Leading Expert on budget control of KazTransGaz JSC, economy and planning Manager of JSC "Intergas Central Asia", economy and planning Specialist in Agip KCO, Deputy Director of the Department of the North Caspian Project on the economics of KazMunayGas. Since 2001 - Department Director, Managing Director, Managing Director of economics, finance, budget and audit in PSA LLP. Kenzhebek Ibrashev held the position of Director General prior to Zhurebekov.
February
On February 8 the first LNG regazification station Turan opened in Astana. Global Gas Regazification, subsidiary of Global Gas Group, implements the project. The company has signed a contract with Gazprom Export on delivery of 5 thous. tons of small tonnage liquefied natural gas (LNG) by road from Russia. Shipping of the first LNG consignment from Ekaterinburg was made in late January of 2017. Under the current Memorandum by 2021 deliveries should reach 320 thous. tons. This volume is enough to cover part of Astana and the northern regions of Kazakhstan. The Nazarbayev University became the first consumer of natural gas in Astana. In the future, Kazakhstan does not rule out the possibility of replacing Russian gas for gas of domestic production.
At the offshoreKashagan field the phased commissioning of the drilled wells is being carried out, the journalist of KAZINFORM Agency reported. “On the Island A the total number of drilled wells is 8, on the Island D 12 wells are drilled, 20 wells overall. In addition, another 20 wells were drilled on the other artificial islands (EPC-2,3 and 4). Currently, operational wells mainly commissioned at the Island A. Recently the first operational well was commissioned at the Island D, in the near future it is planned to put into operation another one here. Overall, oil is produced from 10 wells. The rest can be commissioned once subsurface gas re-injection capacity is reached. Subsequent phases of development are currently in the planning stage", said the Managing Director of the North Caspian Operating Company B.V. Consortium Bruno Jardin.
1730 Kazakhstani companies have qualified to take part in the project of the future growth of production capacities of the Tengiz field, cost of which will amount to 36.8 billion dollars. In 2016, TCO partners announced the approval of a final decision on the financing of the Future Growth Project and the Wellhead Pressure Management Project (FGP-WPMP), which are the next step in the growth of production capacities of the Tengiz field. In order to substantially improve the efficiency and cost savings, construction of FGP-WPMP runs simultaneously.
Focusing on the successful implementation of the previous project of TCO to enhance production capacity, the new project aims to increase the production approximately by 12 million tons per year, or 260 thous. barrels per day, which is about 39 million tons per year or 850 thous. barrels per day. The bulk of FGP-WPMP equipment will be manufactured in Kazakhstan, South Korea and Italy, and after its assembly in modules will be sent to the Tengiz for the final assembly and installation.
The final cost of the Kashagan field development project is announced, development that began in the fall of 2016 in Kazakhstan’s sector of the Caspian Sea. “Today the amount of Investment in the North Caspian Project on development of the offshore Kashagan field is a little more than 55 bln dollars”, said the Managing Director of the North Caspian Operating Company B.V. Consortium Bruno Jardin
Previously different amounts of investment were called, which allegedly were put into development project of a giant Kashagan field, oil production starting date of which was postponed several times. The largest amount, which was called without reference to official sources, exceeded 130 bln dollars.
In the Ministry of Energychained by the Minister Kanat Bozumbayev the first round of negotiations was held with potential participants of the international project Eurasia: NC KazMunayGas JSC, ENI, Rosneft, CNPC, SOCAR, NEOS Geosolutions. The participants welcomed the long-term benefits of the Project and expressed the intention to conclude a memorandum of understanding, the purpose of which is to conduct the negotiations on the establishment of the Consortium and preparation of the contract for exploration. As previously reported, according to the Eurasia Project it is planned to conduct the research and the drilling of 15 km deep key-well in the center of the Pre-Caspian depression. The initial cost of the Project is 500 mln dollars. Implementation date is until 2020.
The research should cover the territory of Atyrau, West-Kazakhstan and Aktobe Regions, as well as the adjacent Russian regions - Astrakhan, Saratov, Volgograd and Orenburg.
Fluor Corporation announced that its joint venture, KPJV, has been elected by Tengizchevroil to implement the front-end engineering design (FEED) for the multi-phase oil project in Kazakhstan. As a core part of TCO’s investments, the Project aims at the introduction of the multi-phase oil production technology within the network of oil and gas units at the Tengiz and Korolevskoe fields to maintain high productivity of crude oil by reducing the pressure at the wellhead and improving its through capacity.
The Project also includes the modification or upgrading of certain engineering systems. "Fluor is pleased to be selected by TCO as the contractor for its most important operational project", said Al Collins, President of Energy & Chemicals - EAME Region.
The Project includes the front-end engineering design, design detailed elaboration and logistics. The Project Team will be based in Farnborough, in Fluor’s English Office, providing a close link with the future TCO’s wellhead pressure management project, which will be carried out by another team.
Accordingto the results of negotiations held in Astana between NC KazMunayGas and Gazprom PJSC volume of deliveries of Kazakhstani gas in 2017 was approved, which will be about 12.8 billion cubic meters. As noted in the press-release of KazTransGaz company, Gazprom PJSC and KazTransGaz JSC gas export volumes are increasing annually. For the domestic gas industry agreement on gas export to Russia in the volume of 12.8 bln is strategically significant. In order to implement previously reached intergovernmental agreements between Kazakhstan and Russia, as well as organization of cooperation, NC KazMunayGas and Gazprom PJSC traditionally hold joint consultations and identify key positions for long-term cooperation, noted in the press-release.
Two waysof privatization of Atyrau Refinery are considered, KazTAG correspondent reported. "We are currently considering two ways: privatization outside the perimeter of the IPO and privatization in the perimeter of the IPO. Modernization of the plant was carried out using a loan and the resulting debt must be serviced. It will be good if there is a private entity willing to undertake the debt", said the Chairman of the Board of Directors of Samruk-Kazyna JSC Umirzak Shukeyev during his visit to the Atyrau Refinery. According to him, if the privatization will take place outside the perimeter of the IPO, the fate of the plant will depend on whether NC KazMunayGas JSC will be able to service the debt.
“If the private entity comes to the plant, in the first place the question is rises for how much to sell the plant, - said Shukeyev. - It is believed that the plant must remain within the KMG, when the Company goes for IPO, then the plant should be privatized. This can increase the value of KazMunayGas.
Amendments are made to the Decree of the Government of the Republic of Kazakhstan dated December 12, 2014 "On determination of the single operator for the supply of petroleum products, according to which the sole operator for the supply of fuel oil and aviation fuel to the Armed Forces of the Republic of Kazakhstan, NSC Border Guard, National Guard, authorized body in the sphere of civil protection, the authorized body in the sphere of State material reserve determined to be KazMunayGas-Aero LLP.
Previously, the operator for the supply of fuel oil was KazMunayGas Refining and Marketing JSC.
On February 28 in the Port of Novorossiysk the first release of Kashagan oil to New Amorgos tanker took place, mixed with the light Siberian Light oil, intended for further export. Delivery of this shipment of oil started in January of 2017, and for the first time using a new route -through the Atyrau-Samara pipeline, belonging to KazTransOil JSC, while maintaining the quality of raw materials and further transport via the system of Transneft PJSC in the overall flow of sweet Siberian light oil to the port of Novorossiysk. Until that time, first batches of Kashagan oil were mixed with other varieties of Kazakhstani oil and transported through the Atyrau-Samara pipeline, which then were transported via the system of Transneft PJSC in the mix with the Russian Urals.
While the net back of the shipments in the stream of sweet Siberian light oil, in comparison with the Urals, substantially higher, which is significantly more profitable for domestic oil companies, and for Kazakhstan in general. In the future it is expected that using a new route, which allows to transport Kashagan oil saving the high-quality of raw materials, light oil from other Kazakhstani oil fields will be supplied.
Earlier release of Kashagan oil to the tanker in the port of Novorossiysk was planned for February 22-23, but was postponed due to the deteriorating weather conditions.
Western oilfield service companies in Kazakhstan will work with subsoil users only as the part of consortia with local companies, said the Minister of Energy Kanat Bozumbayev. “We said to our three major subsoil users, which are the operators at Tengiz, Kashagan and Karachaganak: Western companies are not going to be contractors anymore. Western companies can operate in our country, creating joint ventures and consortia with local businesses", - Bozumbayev said during the collegium of the Ministry of Energy. As he explained, Western companies will work directly with subsoil users only in exceptional cases, when there is not enough competence among local oilfield service companies and producers.
March
By the orderof the Minister of Energy dated March 1, 2017 No. 80 the cost is approved for 2017-2018 for transportation of the Russian oil in quantities of up to 10 million tons a year through the territory of the Republic of Kazakhstan to the People's Republic of China in the amount of 11.36 USD per 1 ton excluding VAT. The price includes transportation from the border of Russia and Kazakhstan in Priirtyshe to Atasu in Kazakhstan (the cost is 3.11 USD per 1 ton excluding VAT), and from Atasu to Alashankou in China (25.8 USD per 1 ton excluding VAT). The old price of transportation of the Russian oil stood at 9.8 USD per ton excluding VAT. Thus, increase amounted to about 16%.
At the Kashagan field, located in the Kazakhstani sector of the Caspian Sea, in the second decade of March, the second million tons of oil were produced, the correspondent of Kazinform Agency reports. “Currently, production has reached 180 thous. barrels per day. The first million tons of crude oil were produced in January of this year, the second on the eve of the Nauryz holiday», - said Director of Production Operations at North Caspian Operating Company B.V. Arjan van Dijk It is expected that during the peak field exploitation oil production could rise to 1.5 million barrels per day.
March 17 at www.gosreestr.kz electronic trading platform the bidding was held for 100% share of participation in the Charter capital of KazOilMash LLP, belonging to NC KazMunayGas JSC. The bidding had raising trend, the starting price - 450 thous. tenge. “As of December 31, 2015 the Charter capital of KazOilMash LLP was 200 thous. tenge”, - stated in evaluation report. The company was founded in 2011 and located in Mangystau Region. Under the Charter, KazOilMash LLP was to engage in the provision of services and the performance of works in the sphere of machines and oil equipment production.
Since its establishment and until December 31, 2016 KazOilMash LLP did not carry out any financial-economic activities. The only cash flow to KazOilMash LLP was a contribution to the Charter capital of the company came from the sole participant. As of December 31, the company has no assets, liabilities”, - stated in evaluation report. In 2015 loss of the company equaled 17 thous. tenge, in 2014 - 133 thous. tenge.
The bidding was declared void due to a lack of applications.
On March 31, Maksat Kabashev was assignedthe Chairman of the Board of Directors of the newly established national company in investment attraction Kazakh Invest, the press-service of the company reported.
50-year-old Kabashev from July 2015 to March 2017 served as the Vice President of the National Company Kazakhstan Temir Zholy. Prior to that, he was Chairman of the Board of Directors of Kazakhstan Stock Exchange JSC. Since February 2009 was the Chairman of the Board of Alliance Bank JSC.
In 2004-2009 he was Deputy Chairman of the Board of Directors of National Agency for Technological Development JSC, Managing Director and Deputy Chairman on investment of Sustainable Development Fund, headed Kazakhstan Investment Fund and Distressed Assets Fund.
Kazakh Invest national company is the authorized body in the field of attraction of investments into Kazakhstan, provides a full range of services to support investment projects from the idea to the implementation using the principle of "single window" and acts as a single coordination center for special economic zones of the country. According to the Government’s Decree, March 1, National Export and Investment Agency Kaznex Invest renamed into the National Company Kazakh Invest.
