Kazakhstani Oil Ministry disagrees with NCOC’s Kashagan budget increase proposal

January 20. Interfax-Kazakhstan. Astana

Kazakhstani Oil Ministry disagrees with NCOC's Kashagan budget increase proposalThe Ministry of Oil and Gas of Kazakhstan is considering the proposal of North Caspian Operating Company (NCOC, North Caspian project operator) on the budget increase for the first phase of the Kashagan project, but does not agree with the proposed amount, the Minister of Oil and Gas Sauat Mynbayev told Interfax-Kazakhstan on Friday.

“Yes, we have received the proposal and are currently studying it. The amount involved is decent and we do not agree with it. In any case, we are discussing it now,” Mynabayev said.

“We are trying to negotiate a number of compensational measures in exchange for the budget increase,” he added.

“The budget has formally been increased by 7 billion tenge. Now the amount will be smaller, though I do not yet know by how much smaller. Our position is that it should be reduced,” the minister said.

The shareholders of NCOC are: Agip Caspian Sea B.V. (16.81%), KMG Kashagan B.V. (16.81%), ConocoPhillips North Caspian Ltd. (8.4%), ExxonMobil Kazakhstan Inc. (16.81%), Inpex North Caspian Sea Ltd. (7.56%), Shell Kazakhstan Development B.V. (16.81%) and Total EP Kazakhstan (16.81%).

Prior to January 2009, the Kashagan field was being developed by Agip KCO. Agip KCO is a subsidiary of Eni SpA, which operates on the basis of a production-sharing agreement for the Northern Caspian Sea concluded in 1997.

Commercial production at the Kashagan field is slated to commence in December 2012 – June 2013. During Phase I, oil production is expected to be about 370,000 barrels per day, and could reach 450,000 barrels.

Phase II entails boosting production 375,000 barrels per day for at least three years. Agip oversee offshore projects, Shell and Exxon manage onshore works and drilling.

In accordance with the project’s production sharing agreement, the company holds licenses for drilling operations at the Kashagan, Kalamkas, Aktoty and Kairan fields, which are comprised of 11 blocks covering a total area of 5,600 square kilometers.

NCOC estimates the recoverable oil reserves of Kashagan at 11 billion barrels and total in-place oil at 35 billion barrels.

The bulk of the work at the onshore and offshore facilities had been completed by the end of 2009, as agreed with the Kazakh government, with a view to starting production at Kashagan at the end of 2012.

Kashagan is considered the biggest oil field in the world discovered in the last 30 years and the biggest offshore oilfield.