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ConocoPhillips might exit the Kashagan project: Oil Minister

02 october 2012, 18:03
0
Kashagan oil field. ©REUTERS
Kashagan oil field. ©REUTERS
ConocoPhillips, a shareholder of the Kashagan oilfield consortium may exit the project, Newskaz.ru reports, citing Kazakhstan’s Oil and Gas Minister Sauat Mynbayev as saying October 2 on the sidelines of the KazEnergy Oil Conference held in Astana.

“They have an intention of selling their stake (…) The Government enjoys the preemptive right to purchase. Then all the consortium member companies do have such a right. Each of the above mentioned may exercise the right (…) We don’t know anything yet”, Mr. Mynbayev said.

The Minister elaborated that “no official announcements have been made”. “ConocoPhillips just informed that they might sell their share. That’s all we know. That’s the company’s right to (…)”, he said.

When asked if any of the member companies want to purchase the stake, he answered that “there have been such intentions (…) However, such a decision depends on long-term plans. I cannot provide any comments”, adding that “the intention to sell is just at the speculations stage.

The Minister said that should ConocoPhillips exit the project, the Product Sharing Agreement will remain unchanged. “Only the stakes may change hands, but contract obligations of both the government and the consortium should remain unchanged”, the Minister commented.

The Kashagan field, named after a 19th century Kazakh poet from Mangistau, is located in the Kazakhstan sector of the Caspian Sea and extends over a surface area of approximately 75 kilometers by 45 kilometers. The reservoir lies some 4,200 meters below the shallow waters of the northern part of the Caspian Sea and is highly pressured (770 bar of initial pressure). The crude oil that it contains has high ‘sour gas’ content.

The development of Kashagan, in the harsh offshore environment of the northern part of the Caspian Sea, represents a unique combination of technical and supply chain complexity. The combined safety, engineering, logistical and environmental challenges make it one of the largest and most complex industrial projects currently being developed anywhere in the world.

According to Kazakhstan geologists, geological reserves of Kashagan are estimated at 4.8 billion tons of oil. According to the project’s operator, the oilfield’s reserves are estimated at 38 billion barrels, with 10 billion barrels being recoverable. Besides, natural gas reserves are estimated at over 1 trillion cubic meters. The consortium developing the field comprises Eni, Shell, ExxonMobil, Total and KazMunaiGaz (all with a 16.81% stake) as well as ConocoPhillips (8.4%) and Japan's Inpex (7.56%).

Tengrinews.kz reported late May that Kazakhstan and NCOC companies had signed an agreement to start commercial production at the giant Kashagan oilfield in the period from December 2012 to June 2013.

In particular, the sides agreed to finance KazMunaiGas’ share of investments in 2012-2013 out of the consortium’s funds; to sign an agreement between KazTransGas and the participating companies on sales of Kashagan gas to make sure 83% of the gas is supplied to the internal market before 2041.

According to KMG, the Company plans to invest $8 billion into the project before 2014, with the total of investments into a range of projects standing at $20 billion.

Earlier Tengrinews.kz reported that KazMunaiGas National Oil and Gas Company would obtain a loan of $4 billion out of the National Oil Fund to finance the Kashagan oilfield development project.

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