Gazprom plant risks loss of Kazakh gas-sources

Dec 28. Reuters. MOSCOW

* Sharp drop in condensate supplies from Karachaganak
* Feedstock crucial to plant’s ability to handle gas

Gazprom plant risks loss of Kazakh gas-sourcesRussian gas giant Gazprom may be forced to halt its Orenburg gas-processing plant due to a sharp reduction in supply of a key feedstock from the giant Karachaganak field across the border in Kazakhstan, industry sources said on Wednesday.

The operators of the Karachaganak field, in which the Kazakh government recently agreed to acquire a stake, have cut supplies of unstable gas condensate to the Orenburg plant by more than 90 percent in the last few months of the year, the sources said.

The Orenburg plant requires a byproduct from condensate stabilisation to process the 8 billion cubic metres per year of gas from Karachaganak that it handles annually. The sharp drop in unstable gas condensate supply was first noted in September.

“Gazprom doesn’t need the condensate in itself, but the technological process of cleaning the gas relies on the products received via the processing of condensate,” one source told Reuters.

Gazprom and the Karachaganak Petroleum Operating Group, the consortium operating the field which is led by Britain’s BG Group and Italy’s Eni, declined to comment.

One source familiar with the situation, who declined to be identified, said Kazakhstan could be using the condensate supplies as a lever in negotiations over the amount of tariff-free feedstock to be supplied in 2012.

Although Russia and Kazakhstan, along with Belarus, are members of a three-way Customs Union, the countries continue to set levels annually for tariff-free energy supplies.

MINISTER: IT’S AN ISSUE BETWEEN FIRMS

Kazakhstan’s oil refineries have suffered from a deficit of Russian crude in the second half of this year, and the Central Asian state wants Moscow to return to previous crude supply levels of 7 million tonnes in 2012, the source said.

Asked about the reduction in unstable gas condensate supplies from Karachaganak, Kazakh Oil and Gas Minister Sauat Mynbayev said the operators of the field had launched their own complex for processing condensate.

“(Supplies) have not been reduced because of a disagreement, but because they have the possibility to process (condensate) themselves,” the minister said on the sidelines of a government meeting.

Asked when the issue would be resolved, he said: “It depends on the negotiating process between Russia and KPO. In principle, this is an issue between KPO and Orenburg.”

The first source said the Orenburg plant would be unable to continue processing gas from Kazakhstan without supplies of unstable gas condensate. Around five years would be needed to build the infrastructure to bring supplies from elsewhere.

In order to maintain stable operations, the Orenburg plant requires 1.5 million tonnes per year of gas condensate from Karachaganak. Kazakh supplies, at just over 1 million tonnes this year, have fallen short of the 1.6 million tonnes agreed.

Data from the Kazakh Oil and Gas Ministry shows supplies have fallen to zero in December from 25,000 tonnes in November and monthly levels of above 127,000 tonnes before May this year.

The Kazakh government agreed this month to acquire a 10 percent stake in the Karachaganak consortium, in which U.S. major Chevron and Russian oil firm LUKOIL are also shareholders.

The field produces nearly half of Kazakhstan’s gas and 18 percent of its liquid hydrocarbons. It produced 133.7 million barrels of oil equivalent in 2010.

http://uk.finance.yahoo.com/news/UPDATE-1-Gazprom-plant-risks-targetukfocus-1512344453.html?x=0

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