Kazakh law sets state control of new oil pipelines

June 14. Reuters. ASTANA

By Raushan Nurshayeva

* Kazakhstan pins ambitious hopes on Kashagan field
* Kashagan-linked pipeline to be built in line with new law

Kazakh law sets state control of new oil pipelinesKazakhstan will control no less than 51 percent of new oil and gas trunk pipelines under a bill approved by the Kazakh legislature on Thursday, as the country becomes a major producer of crude oil and develops its export infrastructure.

“The bill establishes the priority right of the state to take part in any new trunk pipeline being built,” said the document adopted by the upper Senate chamber.

The bill went to President Nursultan Nazarbayev, who is widely expected to sign it, the last step for it to become law.

“The state must have at least 51 percent in any new pipelines,” Kazakh Oil and Gas Minister Sauat Mynbayev told reporters after passage of the bill.

A more assertive Kazakhstan, Central Asia’s largest economy and second only to Russia among ex-Soviet oil producers, plans to raise oil output by 60 percent by the end of the decade from 80 million tonnes in 2011, mostly due to development of the 9 billion barrel Kashagan field in the Caspian Sea.

The first phase of production at Kashagan, the world’s biggest oil discovery in 40 years, is scheduled to begin by the end of 2012 or early 2013, with output expected initially at around 370,000 barrels per day and rising to 450,000 bpd.

Mynbayev said the bill aims to affect, in particular, a new pipeline that is planned to be built from Kashagan.

The new pipeline, Yeskene-Kuryk, would run from Kashagan to the Caspian Sea port of Kuryk. Then the crude would be shipped by tankers to Azerbaijan to feed the BP-led Baku-Tbilisi-Ceyhan pipeline running to Turkey via ex-Soviet Georgia.

“If we talk about the second phase of implementing the Kashagan project … it goes without saying that the Yeskene-Kuryk pipeline would be built already in line with the new law,” Mynbayev said.

The second phase of Kashagan’s development envisages output growth to up to 1 million bpd and the third phase to reach a maximum level of 1.5 million bpd. The government has not yet announced its final approved deadlines and budgets for the second and third phases.

Kazakh state oil and gas company KazMunaiGas said on its website that the maximum capacity of the Yeskene-Kuryk pipeline, which can be used by other oil producers, would eventually reach 56 million tonnes of crude a year. It gave no time frame for the construction or other details.

KazMunaiGas entered the Kashagan project as a shareholder in 2005 and later doubled its stake to 16.81 percent.

Similar stakes in the North Caspian Operating Company (NCOC) are held by Eni, ExxonMobil, Royal Dutch Shell and French energy company Total. ConocoPhillips owns 8.40 percent, and Japan’s Inpex 7.56 percent.