Kazakhstan Chamber of Commerce in the USA

KazCham



The Caspian corridor 0

Posted on April 25, 2010 by KazCham

AFTER SO MANY years of dependence on foreign  ! goodwill for the export of its oil, gas and mineral: the Kazakh government is insisting on a control stake in the new Kazakhstan Caspian Transport System (KCTS). This is designed to carry export pipelines south to a new port at Kuryk, south of Aktau, entirely through Kazakh territory.

New high-capacity pipelines within this corridq will run south for hundreds of kilometres from tilt giant, city-sized processing plant for Kashagan oil gas at Eskene, 30km north of the oil capital Atyrau, to a new port at Kuryk. From there oil and gas will be transported across the Caspian Sea to Baku. The new trunk pipelines running down the corridor will also be linked up to the many smaller fields being  developed either side of the route.

The oil companies, which are expected to foot  most of the bill for this multi-billion dollar project,  however, are still smarting from their loss of control  over the CPC pipeline through Russia, which they also financed and initially operated. As the main financiers and big future users of the KCTS, the international oil companies want to ensure that they retain as much  influence as possible over future managements.

A conclusion to months of hard bargaining between -government and the oil companies had not been  reached at time of writing, but a compromise deal is  expected shortly.

The main purpose of the KCTS is to ensure that  western Kazakhstan has the export capacity to cope  with the expected doubling of oil and gas production  when the Kashagan field comes on stream in four  years’ time. It will ensure that rising oil and gas  production from the country’s three biggest fields  – Kashagan, Karachaganak and Tengiz – as well as  dozens of smaller fields in western Kazakhstan will  flow down pipes, ports and railways under Kazakh  jurisdiction and not require transit payments to  foreign governments.

The KCTS will constitute a major strategic  resource for Kazakhstan, which used to be totally  dependent on transit through Russia to reach export  markets but is now rapidly developing into a major  transit country in its own right, with high-capacity  pipelines running 3,000km east to China and hopes  of developing further routes south through Iran –  international politics permitting.

The new corridor will not only carry Kazakh oil  and gas to Kuryk. It is also expected to accommodate  up to 30 billion cubic metres a year of gas flowing  north from Turkmenistan to Russia. But building  this northbound pipeline is conditional on  implementation of an agreement signed in 2007  between Russia, Kazakhstan and Turkmenistan.  This was to enable Russia to raise gas imports from  Central Asia. But Moscow seems to be reviewing this  agreement in the light of a sharp decline in demand  for gas from Gazprom’s recession-hit domestic and  European consumers.

On past performance, the end result of current  negotiations between the Kazakh government and  oil companies over how the KCTS corridor is to be  managed is likely to be a compromise that leaves both sides reasonably satisfied. The expected benefits from  the new corridor are, after all, huge for all concerned.

From the Eskene processing plant, equivalent  in size to the city of Amsterdam, the corridor will  terminate at Kuryk, a sheltered, relatively deep-water  site chosen for the large new oil and gas export  facility. From there a fleet of oil tankers will ferry oil  some 700km across the Caspian Sea to new importing h facilities south of Baku, the capital of Azerbaijans

At some point in the future, gas may also be  transported under the Caspian in pipelines and  President Nazarbayev has also expressed his interest  in a possible liquefied natural gas (LNG) facility to  freeze natural gas and transport it in special LNG  ships across the Caspian to a de-freezing plant on the  Azeri shores.

Eskene, which is some 35km north of Atyrau,  will process oil from the offshore Kashagan field,  and three other smaller fields in the concession are  currently being developed by Exxon-Mobil.

The complex will start operating when the first  oil comes from Kashagan around the fourth quarter  of 2012. Production will then build up rapidly as  Kashagan alone is expected to produce some  1.5 million barrels a day before the end of the next  decade. The hot, corrosive oil which forces its way  to the surface from the Skm-deep deposits needs to  be stripped of deadly hydrogen sulphide and other  poisonous gases as well as foul-smelling mercaptans  and other pollutantss

These involuntary by-products of making the oil  and gas safe for transport will be used as feedstock for a proposed $6.5 billion petrochemical plant, which  the government is discussing with deep-pocketed  investors from the Gulf States.

Invest in Kazakhstan An official publication of the Government of the Republic of Kazakhstan, 2009. Pages: 52-53.



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