Kazakhstan Chamber of Commerce in the USA

KazCham



The Caspian basin’s biggest gas condensate field pauses for breath 0

Posted on March 10, 2010 by KazCham

KARACHAGANAK, ONE OF the world’s largest gas  condensate fields, with estimated reserves of more  than 1.2 billion tonnes of oil and condensate, was  discovered and initially operated in Soviet times, as  was Tengiz some 650km to the west. But coping with h the complexity and high pressures of both fields  was way beyond the technical and organisational  capabilities of the Soviet oil and gas industry.

Repairing the legacy of leaking pipes, abandoned  equipment and ecological devastation was one of the first tasks facing UK-based BG Group and Italy’s ENI,  the operators of the Karachaganak field, who brought Texaco (now absorbed into Chevron) and Russia’s  Lukoil into their consortium, before signing a 40-year production-sharing agreement with the government  in 1997.

Over the intervening 12 years, Karachaganak, like  Tengiz, has changed out of recognition to become  one of the most modern and productive oilfields in  the world. It delivered around 12 billion cubic metres (bcm) of gas last year, more than six times the Soviet  peak level, and around 230,000 barrels a day of oil  and condensate. But after more than a decade of  heavy investment, the consortium operating the field has decided to take a breather and see how the global economy develops before pushing ahead with stage  three of the field’s developments

The initial $1 billion rehabilitation programme  got underway in 2000 after BG and ENI set up the  Karachaganak Petroleum Operating consortium  (KPO), in which the joint operators held 32.5 per cent each, while Chevron-Texaco took a 20 per cent stake  and Lukoil the remaining 15 per cent.

KPO remains the only one of the three Caspian  mega-project consortia to be entirely foreign-owned.  But the combination of a 65 per cent majority  holding in the hands of the joint operators, and  supportive minority stakeholders, appears to  have contributed to the smooth running of what  has become one of the most successful foreign  investments in the country.

Prior to the onset of the global crisis, KPO was  bracing itself for a government-backed bid by the  state energy corporation KMG for a minority stake  in the project, along the lines of KMG’s stakes in the TengizChevroil and Kashagan Consortia.

But faced with a severe banking and construction ^ sector crisis, and a collapsing oil price, the  government appears to have quietly backed away  from a policy that threatened to load KMG with  another heavy investment commitment it would  struggle to deliver. KPO also argued against the risk  of unsettling a proven successful operation, which  was generating tax revenues and creating skilled jobs for thousands of Kazakh citizens in an otherwise  backwater region of the country close to the  Russian border.

Important as its Kazakh operations are to BG,  senior management also indicated that developing  its deep offshore gas fields south of Brazil’s Rio de  Janeiro, and producing methane gas from coal in  Australia, were actually more attractive investment  propositions than producing more gas in landlocked  Kazakhstan in the global scheme of things.

BG alone claims to have invested $2.5 billion  in Karachaganak over the last eight years when  production of high-value gas condensate and gas  for sale to Russia’s Gazprom has risen on average by 18 per cent a year since 1998 to around 136,000 barrels of  oil equivalent a day. Export volumes of condensate are  expected to rise to 10.3 million tonnes a year after a  fourth ‘stabilisation train’ is completed by 2010.

Development is continuing at Karachaganak,  where up to 20 wells are being drilled in the first  stage of phase three of the field’s development.  This will improve oil recovery by increasing both  gas production for sale and re-injection. But the  consortium has called a halt for the time being on  the fuller implementation of stage three, which  entails construction of a $1.5 billion gas refinery and  development of gas sales to the domestic market and  possibly to China, as well as the traditional sales to  Russia’s Gazprom via Orenburg.

Successful completion of both the initial  rehabilitation of the existing field and the $5 billion  second stage has raised volumes and stabilised the  long-term production profile, thanks to powerful  sour-gas re-injection compressors and complex  gas treatment equipment the size of a small city.  Investment to date ensures efficient long-term  exploitation of the unique l,450m-deep column  of gas underground and the 200m-thick rim of oil  beneath it. Together the reservoirs hold an estimated -» l,200bcm of gas and more than 1 billion tonnes of gas condensate and oil.

At present, Karachaganak sends the bulk of its  gas to Gazprom’s processing plant at Orenburg, just  across the Russian frontier. This continues a practice  that began in Soviet times when Karachaganak was  essentially a subsidiary of the Orenburg complex,  with which it shares the same geological structure.  But in order to get a better return than what  would come from merely selling gas to the Russian  monopoly purchaser, KPO has built a 125mw gas-fired power station to satisfy Karachaganak’s own power  needs and a 165km pipeline to supply gas to the  nearest Kazakh town of Uralsk.

This helps to improve relations with the local  community and conforms with the government’s  overall strategy of reducing dependence on imported  gas. Since Soviet days, Kazakhstan has imported  gas from Russia to supply northern Kazakhstan,  and from Uzbekistan to supply gas to the populous  southern cities of Almaty and Shymkent, as well as to Kyrgyzstan and Tajikistan.

Within a few months, southern Kazakhstan will  be able to tap into the lObcm of gas being carried  from Turkmenistan and Uzbekistan across more  than 1,000km of southern Kazakhstan to the Chinese h border, 200km east of Almaty. The capacity of this  new southern export route to the east will triple to  30bcm in a few years. The route will also completely  transform the domestic gas supply situation for  southern Kazakhstan and open up a bottomless  market in China, ending Gazprom’s former  monopoly-buyer advantages.

Once growth returns to the global economy, KPO is  expected to give the green light to full implementation of stage three of Karachaganak. But in the meantime,  both shareholders and the government benefit from  this breathing space, as it allows shareholders to get  a return on their investment to date and boosts tax  revenue for the government.

Invest in Kazakhstan An official publication of the Government of the Republic of Kazakhstan, 2009. Pages: 40-41.

Chamber of Commerce and Industry of the Republic of Kazakhstan in the USA 9

Posted on January 05, 2010 by Sergey Sek

We are proud to announce the opening of an official representative office of the Chamber of Commerce and Industry of the Republic of Kazakhstan in the USA (“KazCham”).

Chambers of commerce have traditionally been the associations of enterprises engaged in trade, manufacturing and services. The predecessors of the medieval guild houses were merchants and artisans. The overall objective of the chambers around the world – protecting the interests of business and promoting their development.

Kazakhstan Chamber of Commerce and Industry (“Chamber”) was established in 1959 by decree of the Council of Ministers of the Kazakh Soviet Republic.

The Chamber represents interests of the Kazakhstani business community and provides a set of essential business services. The Chamber serves as the social and economic partner for small and medium-sized businesses in the dialogue with government, big business, as well as partners in foreign trade activities. The Chamber has signed over 70 cooperation agreements with foreign countries: Italy, UAE, Russian Federation, India, Turkey, Jordan, Syria, South Africa, Egypt, etc.

Each year, the Chamber, which has 16 regional chambers, provides 70 thousand services. Included are a number of expert and inspection services, consultations on foreign trade activities, assessment services for the customs value of goods, confirmation of documents on foreign trade transactions, the consideration of disputes arising between the partners.

When conducting business forums in Kazakhstan and abroad, visiting foreign markets as part of trade missions is a proven and cost-effective way to grow your business. A business visit, professionally planned and managed by Chamber specialists, allows one to achieve results much more efficiently than a few self-organized trips.

The practice shows that the majority of business contacts, organized and implemented by the Chamber, are effective.

Membership in the Chamber is voluntary.

After decades of hard work, the Chamber gained tremendous experience and serves for the benefits of your business.

In 2009 the Chamber of Commerce of the Republic of Kazakhstan celebrates its 50th anniversary.



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