Embassy of Kazakhstan

 
Kazakhstan
News Bulletin
Released by the Embassy of the Republic of Kazakhstan to the United States of America

Special Issue No 19, November 10, 2008

KAZAKHSTAN SIGNS AGREEMENT ON KASHAGAN, MOU ON “N” BLOCK AND HOSTS MAJOR INTERNATIONAL OIL AND GAS EXHIBITION

The 16th Kazakhstan International Oil & Gas Exhibition (KIOGE 2008) was held in Almaty on October 7-10, 2008. Representatives of more than 500 companies from around the world participated in the annual event: “KazMunaiGaz, JSC” (KMG) and its subsidiaries, Agip KCO, BG Kazakhstan, Cameroon, Chadbourne & Parker, China National Petroleum Corporation, Cross Caspian, DHL International Kazakhstan, GazProm, Gaz de France, Hydratight, Invensys, Karachaganak Petroleum Operating B.V., KazPetroMac, LUKOIL, McDermott Caspian Contractors, Mol Hungarian Oil & Gas Company Plc, National Oilwell Varco, PKN Orlen S.A., Polish Oil & Gas Company, Repsol, Schlumberger, StatoilHydro, TengizChevroil, Tethys Petroleum, TOTAL, Siemens, Worley Parsons, and many others. Government delegations from 32 countries participated in the KIOGE 2008 as special guests.

US corporate community was represented by Chevron, ConocoPhillips, ExxonMobil, Baker Hughes, ABS (American Bureau of Shipping), General Motors, Tenarys, Emerson and Weatherford.  
Atakent Exhibition Centre (total area - 25,000 square meters) hosted the event organized by «Iteca», Kazakhstan’s Exhibition Company and British «ITE Group, PLC» together with partners from Russia, Germany, Turkey and China.

KIOGE 2008 was sponsored by more than 30 companies, including leading Kazakh and international organizations and leading O&G companies successfully operating in the Caspian and Central Asia. The Chevron Corporation was the general sponsor of the event.

Since 1993, KIOGE, fully supported by the Kazakh government, has been a forum to discuss, present and promote O&G industry development in Kazakhstan and the Caspian Region. Another important role of the Exhibition is to provide a ground for annual dialog between experts, analysts, top managers and government officials.

According to the Global Association of the Exhibition Industry, in 15 years KIOGE has become one of the world’s most reputable international forums for companies engaged in mining, hydrocarbons transportation and O&G infrastructure projects. Today, KIOGE is the largest exhibition and conference event on O&G industry in Kazakhstan and the Caspian.

“Oil & Gas” conference held within the framework of the exhibition in the “Intercontinental Almaty–Ankara” Hotel attracted Kazakh and foreign high level energy officials and top managers, including Mr. Sauat Mynbayev, Minister of Energy and Mineral Resources of Kazakhstan, Mr. Kairgeldy Kabyldin, the President of «KazMunaiGaz, JSC», Mr. Vadim Gustov, Chairman of Russia’s Federation Council Committee on CIS Affairs, Mr. Craig Jones, Director for Energy of UK’s Department of Trade and Industry, Mr. James Johnson, Chevron’s Managing Director. Senior representatives of more than 40 international oil and gas companies presented their reports.

The growing international importance of KIOGE was reconfirmed by the participation of US officials. Address by the US State Department Coordinator for Eurasian Energy Diplomacy, Ambassador Steven Mann, was one of the principal points on the conference’s agenda. Talking about Kazakhstan’s energy potential, Ambassador Mann referred to the country as one of the “world leaders in energy resources”.
Principal workshops of the conference included «Kazakhstan’s role in the global oil market», «Exploration and production in Kazakhstan: global operators and global projects», «Infrastructure development: current situation and opportunities», «Investments, legislation and taxation opportunities», «Geopolitics as a key element of O&G industry strategic development», «Kazakhstan’s service market: global solutions for sustainable development»; «Regional development: cooperation in the region and beyond»; «Transportation of Kazakh oil and gas: reliable routes».
 
According to Minister Mynbayev, “the issues raised at the forum covered today’s achievements and potential developments of the oil and gas industry in Kazakhstan and provided an important impetus to its further development”.

High-profile projects in Kazakhstan’s energy sector were among the most important issues covered by the forum.

Discussions on Kashagan project were of particular interest. The conference participants noted that Kashagan was a momentous project not only for Kazakhstan’s energy sector, but for the entire world. While giving his assessment on the negotiations between Kazakhstan and Agip KCO, operating company for Kashagan, Ambassador Mann said: “… I am sure a compromise will be found in the nearest future”.

Compromise was reached shortly after the conference. Kazakhstan’s Ministry of Energy and Mineral Resources and KMG signed the final agreement with all co-venturers in the international Consortium (Eni, ExxonMobil, Shell, Total, ConocoPhilips and INPEX) on the ways of Kashagan’s further development in Astana, on October 31, 2008.

Under this agreement, KMG acquires a major participation level in the project going from 8.33% to 16.81%. Now the co-venturers’ interests in the North Caspian Sea PSA (production sharing agreement, NCSPSA) are as follows: Eni - 16.81%; ExxonMobil - 16.81%; KMG - 16.81%; Shell - 16.81%; Total - 16.81%, ConocoPhilips - 8.40% and INPEX - 7.56%.

Given the size and complexity of the Kashagan project and other NCSPSA developments, the Kazakh government and Agip KCO have agreed to consolidate their efforts and resources and implement the project with the following division of responsibilities: Exxon Mobil - offshore drilling; Shell  - offshore development (except drilling); Eni and Agip KCO – onshore development; ConocoPhilips - audit.  

KMG will take on an increasing role in the project and will be involved in each area of its development.

According to the agreement reached in Astana, a new joint operating company for Kashagan project will be established to include all the co-venturers in the NCSPSA Consortium. This joint operating company, named North Caspian Operating Company (NCOC) BV, will take over the responsibilities which are currently with Agip KCO, the sole operator of the NCSPSA.

As finally agreed, commercial oil production at Kashagan should be started no later than December 31, 2013. But the target date for non-commercial oil production is December 1, 2012.

75,000 barrels a day are expected to be extracted at the beginning of oil production with following increase up to 370,000 barrels a day. 2-3 years later the 3rd tranche of oil production increase is expected – up to 450,000 barrels a day. By the end of the next decade Kashagan oil production is expected to reach 1.5 million barrels a day.  

The agreement on “N” Block, recently reached, is another important step forward in the development of mutually beneficial cooperation between Kazakhstan and foreign energy corporations. On October 6, 2008, KMG, ConocoPhillips and Mubadala Development Company, PJSC (Mubadala) announced the signing of a Memorandum of Understanding (MOU) to negotiate terms for the exploration and development of the “N” Block.

The parties have to negotiate until December 31, 2008 the definitive agreements for the assignment by KMG of a 49-percent interest in the subsoil use contract to be shared equally between ConocoPhillips and Mubadala. KMG will remain the majority partner in the venture.

"KazMunayGaz” looks forward to a speedy conclusion to the negotiation and a successful, long-term relationship with both ConocoPhillips and Mubadala. Cooperation with these companies would allow for the attraction of new technologies relating to the exploration and production of oil and gas on the Caspian shelf," Mr. Kairgeldy Kabyldin, the KMG’s President said.

The MOU was signed by Mr. Kabyldin, Mr Mulva and Mr. Al Mubarak, Mubadala’s CEO, and was witnessed by Mr. Sayat Mynbayev, the Minister of Energy and Mineral Resources of Kazakhstan.
The “N” Block is located 30 kilometers southwest offshore of Aktau, Kazakhstan’s port in the Caspian Sea. The Block covers approximately 8,100 square kilometers and is considered highly prospective for both oil and gas.
             

News Bulletin of the Embassy of the Republic of Kazakhstan
Contact person: Zhanbolat Ussenov
Tel.: 202-232-5488 ext 104; Fax: 202-232-5845
E-mail:zhan@kazakhembus.com
 Web-site: www.kazakhembus.com