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China to finance Kazakhstan’s share of investments into Kashagan

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Kazakhstan will be paying back to China for the latter’s investments into the giant Kashagan oilfiled. No further expansion of the China’s stake in the project is expected, the country’s Oil and Gas Vice Minister Bolat Akchulakov said in an exclusive interview for Astana TV Channel.

“Further increase of the Chinese investors’ stake in the project is not considered. There have been no such suggestions. The parties have agreed on China’s financing Kazakhstan’s investment obligations, with the money to be paid back out of future oil revenues. China will be financing Kazakhstan’s share of investments into the project, with the money to be paid back later on. What are the benefits of the solution? It is not a regular borrowing from a bank. The money will be paid back within a comfortable timeframe. That is why the solution is convenient and profitable for KazMunaiGas (…) Much will depend on what the second stage of the Kashagan project is like. We don’t know the concept of development yet (…) All the interested parties are preoccupied with launching the first stage. It’s too early to say how expensive the second stage will be and what it will be like. The companies involved are to submit a draft plan of development to the Oil and Gas Ministry. It hasn’t happened yet. And there are no estimates of how expensive the second stage might be”, the Vice Minister elaborated.

The other day Kazakhstan and China agreed on sales of a 8.4% stake in Kashagan to China’s CNPC. CNPC offered $5 billion for the stake.

September 11, Kashagan, tagged the most expensive energy project in the world, saw the start of oil production.

The Kashagan field, named after a 19th century Kazakh poet from Mangistau, is located in the Kazakhstan sector of the Caspian Sea and extends over a surface area of approximately 75 kilometers by 45 kilometers. The reservoir lies some 4,200 meters below the shallow waters of the northern part of the Caspian Sea and is highly pressured (770 bar of initial pressure). The crude oil that it contains has high ‘sour gas’ content.

The development of Kashagan, in the harsh offshore environment of the northern part of the Caspian Sea, represents a unique combination of technical and supply chain complexity. The combined safety, engineering, logistical and environmental challenges make it one of the largest and most complex industrial projects currently being developed anywhere in the world.

According to Kazakhstan geologists, geological reserves of Kashagan are estimated at 4.8 billion tons of oil. According to the project’s operator, the oilfield’s reserves are estimated at 38 billion barrels, with 10 billion barrels being recoverable. Besides, natural gas reserves are estimated at over 1 trillion cubic meters. The consortium developing the field comprises Eni, Shell, ExxonMobil, Total and KazMunaiGaz (all with a 16.81% stake) as well as ConocoPhillips (8.4%) and Japan's Inpex (7.56%).

NCOC, a consortium developing the giant Kashagan oilfield, plans to produce 75 000 barrels of oil per day at the initial production stage, reported mid-May 2012, citing NCOC Vice Managing Director Zhakyp Marabayev as saying on the sidelines of a CIS summit on oil and gas.

According to him, plans are there to bring the production figure up to 350 000 barrels a day or even up to 450 000 barrels a day at the first stage of the oilfield development.

“The current facilities enable to produce up to 350 000 barrels a day (…) Should the gas injection capacities be expanded, we could produce up to 450 000 barrels a day”, he said at that time.

Tengri News

September 12 2013, 15:17

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