ROSNEFT EXPANDING ITS ROLE IN KAZAKHSTAN

The chairman of Russia’s state oil company Rosneft, Sergei Bogdanchikov, has completed a round of discussions in Kazakhstan with Kazakhstan’s Prime Minister Daniyal Akhmetov, Energy and Mineral Resources Minister Baktykozha Izmukhambetov, and the KazMunayGaz state oil and gas company management. During the concluding news conference Bogdanchikov told the press that Rosneft is set for a significant expansion of its role in Kazakhstan’s oil extraction and transportation. Before outlining those intentions, Bogdanchikov claimed that Rosneft now holds first place among oil companies worldwide regarding estimated oil reserves. The only certainty about this claim is that Rosneft’s assets grew spectacularly as a result of the destruction of the Yukos company by the Russian state.

Kurmangazy Field: Rosneft and KazMunayGaz have decided to form a common management structure for their joint venture at the offshore oilfield Kurmangazy and start drilling this spring the first of two exploratory wells. Kurmangazy’s recoverable reserves are estimated at 900 million to 1 billion tons of oil. The production sharing agreement, signed in July 2005, envisages total investments of $23 billion for a 55-year period, including 10 years for exploration and 45 years for extraction.

The KazMunayTeniz offshore oil company — a division of KazMunayGaz — holds a 50% stake in the project; Rosneft, 25%; and another Russian state company, Zarubezhneft (specializing in offshore drilling) the remaining 25%. The field is situated at a shallow depth in the northern part of Kazakhstan’s Caspian sector. Bilateral agreements on seabed delimitation in 1998 and 2002 placed Kurmangazy under Kazakhstan’s jurisdiction. However, Kazakhstan had to agree that the field would be turned into a parity joint venture with Russia and that Kurmangazy’s output would have to be exported via Russia (as opposed to a trans-Caspian westbound route).

Imashev Field: The sides have initiated discussions on joint development of the Imashev offshore field. The field holds estimated reserves of 130 billion cubic meters of gas and 21 million tons of condensate, adding up to some 200 million tons of oil equivalent, and with a high sulfur concentration of at least 20%. Under a border delimitation agreement signed in 2005, Imashev is to be developed as a parity venture. At least two issues remain to be resolved: first, which Russian company (or companies) will be designated to hold Russia’s 50% stake; and, second, where to separate the sulfur content from the field’s mix of hydrocarbons.

Atasu-Alashankou Pipeline: Rosneft expresses “serious interest” in delivering oil to China through the Atasu-Alashankou pipeline. Apparently, the Russian company intends to match the Kazakh oil volumes that are slated for delivery to China through that line. Commissioned in December 2005 and financed entirely by China, the 990-kilometer pipeline is scheduled to start commercial operation this coming May. The initial throughput capacity of 10 million tons annually is slated to be expanded to 20 million tons annually from 2010 onward. Oilfields owned by China’s National Petroleum Corporation (CNPC) in Aktobe and Kumkol (western and central Kazakhstan, respectively) will feed the pipeline, but it may not be commercially profitable without additional volumes coming from Siberian oilfields.

Yuganskneftegaz, formerly the main production unit of Yukos, seized by Rosneft, is slated to supply most of the volumes Rosneft plans to pump through the Atasu-Alashankou pipeline. Rosneft seeks urgent clarification on three major issues: First, overhauling and expanding the capacity of the Omsk (Russia)-Pavlodar (Kazakhstan) pipeline and linking it with the Atasu-Alashankou line; second, determining the volumes and schedules of Rosneft’s oil deliveries to China; and, third, setting the transit charges for those deliveries on Kazakhstan’s territory. All this will require negotiations in several formats, including a quadripartite one among Rosneft, Russia’s state oil pipeline company Transneft, KazMunayGaz, and CNPC.

In a concurrent development, the government of Kazakhstan has confirmed the intentions of KazMunayGaz and Gazprom’s Orenburg gas processing plant (on Russian territory close to Kazakhstan) to sign in coming months a joint venture agreement. They envisage delivering 15 billion cubic meters of Kazakh gas annually (up from approximately 6 billion cubic meters annually at present) for processing at the Orenburg plant. The Karachaganak field in northwestern Kazakhstan will supply that volume. The field, among the world’s largest, is being developed by the Karachaganak Petroleum Operating in which Italy’s state company ENI and British Gas hold stakes of 32.5% each, ChevronTexaco 20%, and Russia’s Lukoil 15%. It seems an odd development to route gas to Russia at a time of looming problems with the supply of Western countries.

(Interfax, February 23, 24)