New Kashagan operator will make on-the-spot decisions (+NCOC Statement)

By Saule Tasboulatova

“North Caspian Joint Venture” (NCJV) that will replace the current NCOC company (“North Caspian Operating Company”) becomes the new operator of the Kashagan North Caspian project.

To recall, North Caspian Consortium participants agreed to do transition to the unified consolidated joint company in May of this year.

NCOC press service then circulated press  release where it stated: “Transition of the Kashagan project from the development stage to production stage will give the opportunity of further integration and merging of its operator and agents activity for the purpose of preparation of the Consortium to further development of resources within the framework of NCPSA (North Caspian Project Sharing Agreement). In order to utilize this opportunity in the best way, Consortium participants agreed on gradual transition from current operational model to the unified consolidated joint company. The new structure will use in its activity the achievements of NCOC and its agents in the sphere of development, drilling and operation. The new company will work within the unified corporate control system that combined the existing tools and processes, developed by participants of the Consortium. It is proposed that the unified consolidated joint company will be called the North Caspian Operating Company (NCOC)”.

Our sources informed that the new name of the registered operator is NCJV. Its fundamental difference from the former operator (NCOC) will be the absence of agency companies that complicated and bought difficulty to the work because of its complicatred hierarchical system.

To recall, NCOC had four agency companies. The first agency company Agip KCO (Eni’s daughter” – Consortium’s shareholder) was responsible for implementation of Stage I - Experimental program, including drilling activities. Shell Development Kazakhstan (Shell’s subsidiary) – was responsible for planning and development of Stage II. ExxonMobil Kazakhstan Ink. (ExxonMobil’s subsidiary) was responsible for drilling operations during Stage II. KMG and Shell jointly were charged with production operation at all subsequent stages via Joint venture - NCPOC. But, as we know, the Italians didn't cope with Stage I. And now, most likely, all shareholders will need to correct their mistakes using their joint efforts.

Concerning the emergence of a new operator Uzakbai Karabalin, the then RoK Minister of oil and gas said: “The appearance of the new operator  connected with the fact that both contractors and us weren't really happy with the exiting system of organization.. It turned out to be more expensive than envisaged, and most importantly, the decision-making process and other moments of organizational planning was too long, because of its complex hierarchy. Now this system is simplified and the relationships have new option”.

During the briefing in May Karabalin said that all organizational issues regarding the creation of the new operator will be completed by September of the current year.

The new form of company is joint venture and as we reported earlier, the transition to new model will not bring changes neither to NCPSA nor to its property structure.

The managing director of NCJV will be Stephane de Mahieu, seconded from ExxonMobil company, who was appointed to the position in May of this year. The new company will consist of three departments: Phase-1 department, drilling and exploration departments. It also will be small in terms of its staff.

NCJV office will be based in Atyrau. The majority of its employees will move to Atyrau this fall. Firstly, it will be the administration staff, technical experts.

The compelled shutdown of oil production, as well as expenses connected with repair works on full replacement of oil and the gas pipeline, forced the management to sharp optimization and closing of many of its departments. The personnel will also be reduced by three-four times.

Thus, since 1998 NCJV is already the fourth consolidated operator of the North Caspian project.

P.S. NCOC press service responded to our article on the same day when it was published on azh.kz website and sent the “The statement for mass media” (full quote):

"NCJV is gradually transferring from current operational model to unified joint company. New company will be based on strong foundation laid by NCOC and its agents in the sphere of development, drilling and operations. As the result of planned transition to new model no changes are envisaged in Production Sharing Agreement and (or) NCJV property structure. The name of the new joint company will be announced after the completion of legal and coordination processes.

The company will not be called NCJV as it was recently mistakenly announced by some mass media”.

The Statement confirms the basic principles of transition to new management model that were published in Ak Zhaik newspaper article. Only the new name of the company operator is disproved. But it is worth reminding that in the article “Drills at the azure riviera” Zhakyp Marabaev, NCOC Deputy Managing Director, gave the following answer to our newspaper:

“If before it was a bond of “operator+agents companies”, now it will be “unified company with conditional name - NorthCaspianJointVenture (NCJV). But there will be no reapportionments/ redistribution of functions”.

We take it into consideration that “the company will not be called NCJV”. Bigger attention in the Statement requires the information that “legal and coordination processes" are not complete yet. Although it’s been half a year since they started.