KazMunaiGas Joins Shell In Kashagan Production Ops

July 23. Dow Jones

KazMunaiGas Joins Shell In Kashagan Production OpsKazakhstan state oil and gas company KazMunaiGas said Friday that it has signed an agreement to join a Royal Dutch Shell PLC (RDSA) subsidiary responsible for managing production at the giant Kashagan oil field in the Caspian Sea.

“As a result of signing this agreement, KMG and Shell have become official partners in managing production operations, which allows the partners to join their efforts for timely implementation of the project,” the Kazakh company said.

KazMunaiGas, or KMG, said it will be an equal partner with Shell in NC Production Operations Company. “Presently, NCPOC is actively involved in the implementation of the project,” it said.

Kashagan is being developed by the North Caspian Operating Company consortium, which is also developing the Kairan, Aktoty and Kalamkas oil fields, and will be Kazakhstan’s largest oil producer in the next few years.

The consortium is expected to start commercial production from 2012. Oil production will reach 1 million and 1.5 million barrels a day at the second and third phases respectively.

KMG, Shell, ExxonMobil (XOM), France’s Total S.A. (TOT) and Eni SpA (E) of Italy each own 16.81% in the consortium while ConocoPhillips (COP) and Japan’s Inpex Corp. (1605.TO) own 8.4% and 7.56% respectively.

Shell and KMG will assume the management of the production operations after the startup of Phase 1. Shell took up this role following the revision and adoption of a new operating model which stripped Eni of the status of the sole operator of the Kashagan project last year.

A dispute between Kazakhstan and the Kashagan consortium stemmed from repeated delays of the start of commercial production. KMG boosted its stake in the project as part of a compromise in the dispute.

Eni is currently in charge of the execution of the Experimental Program, Phase 1, of Kashagan development. During the second phase of the project, Eni will manage the onshore plant and ExxonMobil will be responsible for the drilling.