Kazakhstan says Karachaganak third stage on hold indefinitely

April 29. Reuters. ASTANA/ALMATY

By Raushan Nurshayeva and Mariya Gordeyeva

* No reason given for delay of $14.5 bln third stage
* Gas reinjection seen boosting field’s production
* Kazakhs control project costs

Kazakhstan says Karachaganak third stage on hold indefinitelyKazakhstan, partner and main financial controller in a consortium developing the Karachaganak oil and gas condensate field, put the $14.5 billion third stage of the project on hold indefinitely.

The consortium led by Italy’s Eni and Britain’s BG had originally planned to launch the third-stage development project in 2007, which would have allowed for the doubling or trebling of Karachaganak’s output by 2012.

But in autumn 2008 the consortium suspended the expansion project because of the global financial crisis and instead was dragged into a tax dispute with the Kazakh authorities.

This dispute was resolved in December 2011 when the Central Asian nation’s state-run company KazMunaiGas acquired a 10-percent stake in the project. Kazakhstan received the right to control the venture’s costs.

“As for the third stage, a decision has been taken quite recently together with the oil and gas ministry … that we are not going to launch it for the time being,” KazMunaiGas Chief Executive Officer Lyazzat Kiinov told a news conference broadcast live on Monday.

He gave no reason for the delay of the third stage. KazMunaiGas estimates put the cost of the third stage at $14.5 billion.

BG and Eni could not immediately be reached for comment.

Kiinov said Karachaganak was currently producing between 10 million and 12 million tonnes of liquid hydrocarbons per year and sending 7 bcm to 8 bcm of natural gas to Russia’s Orenburg for processing. Some of this is later re-exported to Kazakhstan for its domestic consumers.

“Today we have the following decision – those 8 billion cubic metres of gas sent for processing will continue flowing along the same route, and the remainder will be reinjected into the well,” he said.

“This technology (of gas reinjection), as experts have calculated, allows to extract an additional 100 tonnes of oil during the (remaining) period of the field’s development,” Kiinov said.

Gas can be re-injected into an oil reservoir to increase its pressure in order to maintain the desired production level.

Karachaganak’s production-sharing agreement is due to expire in 2038.

Last year Karachaganak Petroleum Operating company (KPO) nudged up its output to 139.5 million barrels of oil equivalent from 138.5 million in 2011.

After the deal on Kazakhstan’s purchase of the 10-percent Karachaganak stake was closed last June, BG and Eni each owned 29.25 percent in KPO, Chevron held 18 percent and Russia’s Lukoil 13.6 percent.