Kazakhstan's Oil: the Westerly Direction
The Current State of Mineral Deposits and Investments in the Oil and Gas Industry in West Kazakhstan
Elvira Dzhantureyeva, Ph.D. of Technical Sciences, Head of Subsoil Use Analysis Department, Kazgeoinform, the Committee of Geology and Subsoil Protection under the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan
Forming an efficient mechanism for the stimulation of the national oil and gas industry, in addition to measures for enhancing the efficiency of energy consumption, is becoming a pressing need for the Kazakh economy as it arrives at a new stage of sustainable development. In this context, it is critical to ensure that a business-friendly environment is in place to encourage exploration activities and the development of the high-flow-rate hydrocarbon deposits in the Kazakh sector of the Caspian Sea, as well as the western part of the country. This region is expected to supply Kazakhstan’s growing domestic demand for energy resources, and strengthen its position as an emerging exporter of oil and gas in the 21st century.
To date, hydrocarbon production in Kazakhstan relies on 213 separate sites, including 112 oil deposits, 35 oil and gas condensate deposits, 32 oil and gas deposits, 14 condensate deposits and 20 gas deposits. Of this figure, 179 deposits are scattered in the west: Atyrau Oblast (84), Mangistau Oblast (58), Aktyubinsk Oblast (29) and West Kazakhstan Oblast (8). 46% of the western sites are producing, 13% are being explored, and 41% are on stream whilst exploration work continues there.
The western region of Kazakhstan is estimated to possess over 90% of the country’s hydrocarbon reserves (A+B+C1 and C2 categories), including 13,466.9 million tonnes of geological oil reserves, 4,457.3 million tonnes of recoverable oil reserves and 1,322.6 billion cubic metres of free gas. The Atyrau Oblast accounts for 73% of the oil reserves and the West Kazakhstan Oblast for 62% of the free gas reserves (Chart 1). The latter also has 79% of the gas condensate reserves (865.4 million tonnes in geological and 330.5 million tonnes in recoverable reserves). Equally as important, the western region accounts for the lion’s share of undiscovered reserves that are estimated at 12-15 billion tonnes of oil and 7-8 trillion cubic metres of gas nationwide.
The pattern of distribution of recoverable reserves between mining companies was strongly affected by the discovery of the giant Kashagan deposit in the Caspian shelf by the investment consortium OKIOC. As a result, OKIOC (Kashagan) and Tengizchevroil (Tengiz and Korolevskoye), both from the Atyrau Oblast, came to own 69% of all West Kazakhstan hydrocarbon reserves. In Mangistau Oblast, the most important deposits are operated by Uzenmunaigaz (Uzen), Mangistaumunaigaz (Zhetybai and Kalamkas), Karazhanbasmunai (Karazhanbas), Nimir Petroleum and Texaco North Buzachi (North Buzachi). Other western Oblasts also appear to hold good potential. For example, in the West Kazakhstan Oblast, the Karachaganak Petroleum Operating B.V is developing the largest Kazakh gas condensate field, Karachaganak. In Aktyubinsk Oblast, CNCP Aktobemunaigaz (Zhanazhol and Kenkiyak), Kazakhoil Aktobe (Alibekmola), Embamunaigaz (Kenbai) and Kazakhturkmunai (East Akzhar) are developing a number of hydrocarbon deposits. These companies are also seeking to expand their core business to minerals other than hydrocarbons. The remaining oil companies account for as little as 6% of recoverable reserves in the western region (Chart 2).
The production of hydrocarbons is concentrated in large, well-studied sites, and shows a sustained increase year by year. In 2003, the region produced a total of 37.1 million tonnes of oil, 5 million tonnes of condensate and 6.6 billion cubic metres of gas. 16.1 million tonnes of oil was produced by companies from Atyrau Oblast, Tengizchevroil being the leader (79% of the Oblast output and more than one third of the region’s output). In Mangistau Oblast, oil production totalled 13.5 million tonnes, including 39% by Uzenmunaigaz, 36% by Mangistaumunaigaz and 14% by Karazhanbasmunai. In Aktyubinsk Oblast, CNPC Aktobemunaigaz accounted for 84% of the 5.6-million-tonne Oblast total. Similarly, 95% of the oil output in West Kazakhstan Oblast (1.9 million tonnes), was contributed by Karachaganak Petroleum Operating B.V. Notably, this company accounts for 89% and 84% of all region’s gas and gas condensate production, respectively.
The production forecast for 2005 is 41.7 million tonnes of oil and 7.6 billion cubic metres of gas. These figures are expected to increase to 115.4 million tonnes of oil and 21.4 billion cubic metres of gas by 2010 (Charts 3 and 4), and the export of hydrocarbons is expected to average at 85%.
At the end of 2003, investments in hydrocarbon production in the western region totalled $4.9 billion, which is equal to 72% of all investments in the Kazakh mining industry. The capital inflow increased by nearly five times compared with 1996. Whilst domestic investment activity slowed down somewhat over the discussed period, foreign investments were boosted by more than 12 times (Table 1) and totalled $4.3 billion in 2003, which is 90% of all investments in the western region. 93% of the capital was received by large companies (Chart 5).
98% of investments entered the hydrocarbons sector. 35% was received by Atyrau Oblast, 30% by Mangistau Oblast, 20% by West Kazakhstan Oblast and 15% by Aktyubinsk Oblast (Table 2). According to forecasts, investments in hydrocarbon production in the western region will amount to $5.1 billion in 2004 and $5.4 billion in 2005.
Compared with 1996, capital inflow in the Oblast increased tenfold, resulting in a total of $2.1 billion in 2003, which is 31% of all investments in the Kazakh mining sector. Investments in geological exploration and production increased by 7 and 13 times, respectively. This incredible growth was largely due to injections of foreign capital. For example, Tengizchevroil and Agip KCO (OKIOC) were responsible for 53% and 36% of the region’s investments in 2003, respectively. Some $20 million was allocated by oil companies to the social sector and mining infrastructure. Over 10,000 Kazakh nationals and foreigners were employed under mining contracts. The tax revenue, including royalties, amounted to $748.3 million, or 38% of the Oblast total.
In 2003 the Oblast received $724.3 million in investment (11% of all investments in the mining sector). Investments in mining tripled compared with 1996 (the fourfold increase in production investments was counterbalanced by a slight decrease in exploration investments). The shares of CNPC Aktobemunaigaz and Kazakhoil Aktobe were 78% and 11%, respectively. Allocations to the social sector and local infrastructure totalled about $10 million. Over 17,500 Kazakhstani nationals and foreigners were employed under mining contracts. Taxes totalled $136.6 million, including 39% in royalties.
West Kazakhstan Oblast.
In the last year, investments in the Oblast totalled $799.3 million (12% of all investments in the mining sector). On the whole, from 1996 to 2003, the investments increased by more than 15 times. It should be noted, however, that investments in geological exploration, although dramatically boosted since 2000, hardly exceed 4% of all the Oblast’s investments. 96% of the total investments was contributed by a single company, Karachaganak Petroleum Operating B.V. In 2003, allocations to the social sector and local infrastructure amounted to $18 million, and 2,400 jobs were created for locals and foreigners. The tax revenue was rather moderate ($38.3 million), because Karachaganak Petroleum, Mangistumunaigaz, CNPC Aktobemunaigaz and Karakudukmunai were reimbursed for VAT paid in 2001 ($98.7 million) and 2002 ($99.6 million). Royalties accounted for about 1% of all taxes collected.
In 2003 investments in the region totalled $1.265 billion (18% of all investments in the mining sector). Foreign investments increased by more than 15 times compared with 1996. Investments in geological exploration and production increased by 5 and 2.5 times, respectively. The shares of large investors, Mangistaumunaigaz, Uzenmunaigaz and Karazhanbasmunaigaz, were 48, 21 and 12% of the Oblast’s total, respectively. Social and infrastructure allocations amounted to about $13 million. Over 17,000 Kazakh nationals and foreigners were employed under mining contracts. The tax revenue totalled $313.4 million, including 21% in royalties.
The discovery of the offshore deposits Kashagan and Offshore Kalamkas and the onshore deposits Kondybai and Uaz (the Taisolgan block) warrants full-scale exploration work to be continued in West Kazakhstan. Other notable exploration results achieved recently included an increase in oil reserves in Tengiz, Akkingen, South Kozha, Kara-Arna and Kashagan. The hydrocarbon reserves of the South Alibek deposit have been estimated for the first time. The reserve estimates for South Karatyube have been approved. Test production has been completed, reserves estimates have been approved and commercial production has commenced at the Laktybai deposit. Preparations have been finished for the drilling of a new exploration well in the eastern portion of the Sinelnikovskoye deposit. At the Zhanazhol deposit, oil reserves have been upgraded from C1 to C and their estimates have been approved. In an effort to minimise the burning of gas, a new processing facility is being constructed at Zhanazhol with a design capacity of 2 million tonnes of oil and 1.4 billion cubic metres of gas per annum. The first phase of this facility is completed and the second phase is in progress. When the facility is brought on stream and its total capacity reaches 2.2 billion cubic metres annually, total utilisation of gas will be achieved irrespective of the future increase in oil production rates.
All the large deposits discovered are concentrated in the carbonate rocks of Nadvireisky, Vizeisky/Bashkirsky, Famensky/Turneisky and Devonian age (within external margins). The internal zone of the Caspian depression contains the Karachaganak and Chinarevskoye deposits and the Dolinskaya structure. The northern internal sidewall deepens abruptly southwards. For example, the promising Dolinskaya structure is estimated to have oil and gas bearing strata at depths below 6,500m, which is confirmed by findings from an ultra-deep well (7,007m). In the central part of the depression, the Chingiz oil deposit and the Port Arthur were discovered in over-salt sediments.
Also of interest are the results of surveys carried out in the Chinarevskoye and Karachaganak deposits, which enhance the understanding of their geological models and allow exploration well placement to be optimised. In this context, mention should be made of the Devon Study Project proposed by the Karachaganak Integrated Organisation, which is deemed to be of both academic and practical importance. As part of the project, a deep well be drilled in Karachaganak.
Much hope is also associated with the Caspian shelf. The current seismic studies indicate the presence of large oil and gas bearing structures there, and the Government programme of developing the Kazakh sector of the Caspian Sea treats this area as the main potential hydrocarbon production region.
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