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World Oil Price Of $40/bl Makes KazMunaiGas Brown-Fields Unprofitable

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Image 0When the world price of oil fell below $40/bl, the brown-fields owned by KazMunayGas (KMG) ceased to pay off, as reported by Gleb Luxembourg, the KMG deputy chairman for prospective production development. “With oil prices reaching the mark of $40/bl, the brown-fields are no longer profitable. However, no one says that we will close them, because when the price of a barrel goes up to $50, these fields will already reach the level of profitability," he stressed.

“As for the new deposits that have not yet reached the peak of operating costs, they have very good flow rates and do pay off. It's a balance. It depends only on the company what portfolio of projects it will have in terms of the ratio of new and old fields," he said.

Worth adding, due to the current situation in the oil market, KazMunayGas is undergoing a restructuring as part of a program implemented by Samruk-Kazyna. The purpose of the program is to introduce structural reforms in the company and to simplify business processes in order to improve performance of KazMunaiGas Group.

Deputy Chairman of the KMG Board said, “At present, KazMunaiGas has a resource base of over one billion tons at its disposal. A substantial portion of deposits owned by KMG are classified as “mature" (or “brownfields"), where production volumes are reduced. At this stage of exploitation, there always arise questions regarding the optimization of capital investments and operating costs, the use of efficient secondary methods aimed at increasing oil recovery."

According to him, if the world price of oil drops to $20 per barrel, it will be necessary to revise the plan of reorganization measures.

December 25 2015, 15:43

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