Zhambai project in Kazakhstan with Lukoil participation likely to be shut down

October 27. Interfax. ASTANA

Zhambai project in Kazakhstan with Lukoil participation likely to be shut downThe Zhambai project in the Kazakh sector of the Caspian Sea is scheduled to be shut down, a source close to the project told Interfax.

Investors are closing the project because the geological exploration period was not extended, and the Production Sharing Agreement (PSA) has expired, the source said.

The government offered to sign a new PSA with the participants, but the conditions it offered differed from those of the previous PSA, so the investors declined, he said.

The main reason for the project’s closure is the lack of the necessary drilling equipment. “The chances of the project being shut down are very high. The biggest problem is that there are no drilling rigs, and the likelihood that they will appear is very small,” the source said.

The partners will have to pay a fine for shutting down the project, in accordance with minimal financing obligations proportional to the share of financing provided by other participants, he said.

The Zhambai project comprises the Zhambai Yuzhny and Yuzhnoye Zaburunye sea blocks, located in the shallow-water zone of the Kazakh sector of the Caspian Sea. The project’s participants include KazMunayGaz (50%), Repsol (25%), Lukoil Overseas (12.5%) and Sinopec (12.5%). The Zhambai PSA was signed in December 2001.

In the spring of 2011, the participants in the project wanted to extend the geological exploration period at the Zhambai Yuzhny-Yuzhnoe Zaburunye hydrocarbon block due to force majeure. The main problem was that the water is so shallow at Zhambai that none of the drilling rigs available in the Caspian region can be used there. The only platform that meets the rigorous safety and environmental protection requirements is Sunkar, which is continuously engaged in the Kashagan project. Another rig, Lotos, has drilled a number of wells in conditions similar to those at Zhambai, but it would need a radical overhaul in order to meet the requirements for drilling in an environmentally sensitive region. Construction of the first exploration wells with a planned depth of 1,850 meters was scheduled to begin in 2010. There is not a clear picture of the resource base in the section: in addition to the lack of adequate seismic data, the entire northeastern portion of the Caspian Sea is poorly explored. Moreover, operations can only be carried out for a few months a year, from July 15 to November 1.

It has been reported that with regard to the Atashsky and Tyub-Karagan projects in the Kazakh sector of the Caspian Sea, in which Lukoil is also participating, expectations were not met – well drilling turned out to be unproductive, and the projects have been shut down.