KazMunayTeniz: Сonquering the depths of the sea

Oil & Gas of Kazakhstan 4, 2011

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An increasingly complicated process of oil and gas production has become the worldwide trend in onshore and offshore projects development. Kenzhebek Ibrashev, General Director of JSC OOC KazMunayTeniz, tells about offshore projects implemented in Kazakhstan.

— Kenzhebek Niyazovich, KazMunaiTeniz operates in the most prospective direction — offshore oil and gas exploration and production. Could you please tell about major performance results of the company?

— You are right, an offshore exploration really becomes a more and more important direction as the latest survey results show that almost half of prospective hydrocarbon reserves in Kazakhstan is sea-related. KazMunayTeniz is the only Kazakhstani offshore oil and gas company and being a wholly-owned subsidiary of NC KazMunayGas, seeks to participate in all offshore oil and gas projects of the Kazakhstan Caspian sea Sector.

As for the main performance results of the company, I will certainly mention discovery of Khazar, Auezov and Tulpar fields at Pearls block.

As you know, an exploration well No1 drilled in 2007 has made for beginning of Khazar field and determined its high oil and gas bearing capacity. Operations resulted in penetrating 15 pay horizons in Middle Jurassic sediments. The 3D seismic survey, data processing and interpretation and laboratory studies have been carried out. Their results served as a basis for drilling two appraisal wells for commercial evaluation of Khazar field and first exploration wells at Auezov and Tulpar structures.

In addition, drilling of an exploration well at Tulpar structure in 2010 has produced some positive but less significant results. Oil pools of shallow thickness were found in Middle Jurassic sediments.

Currently, works are underway to specify structure and distribution of oil and gas pools for quantitative assessment of expected commercial reserves at Khazar and Auezov fields.

It is planned to drill exploration and appraisal wells at Naryn structure and Auezov field. Estimation of identified oil and gas pools, designing and field facilities construction for the forthcoming development of Khazar field had been started. Results of these works are expected by the end of 2011.

— What other projects your company deals with at present?

— To date, KazMunayTeniz runs oil operations on exploration and assessment on the contract areas Zhambai, Kurmangazy, Tyub-Karagan and Pearls located in the North Caspian Sea.

KazMunayTeniz acts as subsoil user in three projects, while in Zhambai project the company holds a 50% interest in LLP Zhambai.

In addition, oil operations are underway on a number of prospects such as Zhambyl, “N”, Satpaev. KazMunayTeniz manages these projects on behalf of and in the interests of NC KazMunayGas.

— Which of these shelf projects You consider the most promising?

— In our opinion, all projects have potential prospects. However, in terms of possibility of upcoming development the most promising is “Pearls” as its oil and gas-bearing potential has already been proven by Khazar and Auezov finds. For improvement of its economic indicators and increasing financial profit, the project participants (KazMunayTeniz, Shell EP Offshore Ventures Limited and Oman Pearls Company Limited) seek to bring it into development at an accelerated pace. First of all, it is planned to bring Khazar field in operation which is at the stage of selecting a concept of field facilities construction. At present, the project Partners are actively involved in selecting a concept of field construction in view of international practices (Shell experience) and the Russia's operating experience in similar projects in the North Caspian Sea.

I can also note the potential of a contract area “N” located at 30 km southwest of Aktau. This area is 8184 sq. km and considered promising for the presence of oil as well as gas reserves. It should be noted that by analogy with neighboring gas fields in the Russian Caspian Sea Sector, gas here most likely does not contain such aggressive impurities as hydrogen sulfide.

Participants of this project are KazMunayGas, ConocoPhillips and Mubadala Development Company. Drilling of the first exploration well resulted in finding hydrocarbon indications. A commercial value of this project will be determined based on findings of produced data analysis and upon completion of the exploration drilling program.

— Some exploration projects, for instance, Atash project, did not lead to expected results. What do you think was the reason for that?

— A determining criterion in selecting this structure for drilling was the presence of geostructural conditions for hydrocarbons accumulation and the Korchagin, Filanovski and Khvalynskoye finds in the Russian part of this region. However, results of exploration well drilling showed that Atash area has been developing in other geological conditions rather than the Russian finds region. Therefore, today the main reason for negative results of Atash-1 well drilling is that the basic sedimentary complex of the area, one can say “has not matured” for hydrocarbons formation.

— Do you think one can expect discovery of new large fields on the Caspian shelf?

— Before I answer this question, we have to first define the term “large fields”. According to classification of fields, a large field is the one that has recoverable reserves of 30 to 100 million tons.

Apparently, by large fields you mean fields like Kashagan, Tengiz and Karachaganak. Having reserves of over 300 million tons, these fall in the category of giant fields.

Geology scientists regularly analyze the oil and gas potential of the Kazakhstan Caspian Sea Sector and make multi-variant calculations of probable hydrocarbon resources. Based on the results of integral analysis of all materials, petroleum potential maps are produced and updated. The survey results show that the largest oil resources are concentrated in the northern part of the Caspian Sea, in the so-called Paleozoic carbonate massifs that include Kashagan, Kairan and Aktoty fields.

Total potential resources of Mesozoic sediments are smaller but they are commercially attractive in view of either absence or minimum content of corrosive substances in oil that makes it possible to bring discoveries into development faster.

The southern – Mangistau region of the Caspian Sea occupying about 2/3 of aquatic area of the Kazakhstan's sector, bears less hydrocarbons, but their volumes at individual sites are comparable to a number of large-scale fields in the North Caspian and sufficient for commercial production to be arranged. It is quite possible that these resources are underestimated as the territory is less studied compared to the northern part and the most portion of resources here accounts for gas similar to finds in the Russia's Caspian Sea Sector.

Near-term outlooks for finding hydrocarbons on the Mangistau aquatic area are attributed to such structures as Nursultan, Rakushechnaya, Sary-Arka, etc.

At large, according to the worldwide many years' statistics, it is uncommon to concurrently encounter group of giant and large hydrocarbon fields in one oil and gas bearing region.

Considering the unique find of Kashagan and large fields Kairan and Aktoty in the shelf part of the Caspian oil and gas basin, the next discoveries might be related primarily to large and medium pools in terms of their reserves.

— What are the volumes of the company's investments into geological exploration?

— KMG's expenses for geological explorations in the majority of projects are financed by strategic partners in each project. Exception is Kurmangazy project where 50% is financed by NC KazMunayGas being a sole shareholder of KMT.

Our company is comparably young from the viewpoint of oil and gas industry. Therefore, investments into geological exploration from the company's inception amount to about $310 million.

— Kenzhebek Niyazovich, how the issues of local content are addressed in offshore oil and gas projects where Kazakhstan does not have so much experience?

— Each contract contains obligatory requirements to increase Kazakhstan's content at oil and gas operations. In offshore projects Kazakhstan's content in purchases is basically represented in sphere of services.

These projects are complex from engineering viewpoint, as they require hi-tech equipment. Oil and gas companies mainly consume specific types of products developed and manufactured by latest technologies, most of which are is not made by Kazakhstan's industry. Primarily, these are pipe products, pumping equipment, instrumentation, chemical reagents, chemical and other oil-and-gas equipment.

However many Kazakhstan's manufacturers are already taking measures to reorient their production facilities in view of changing market conditions. It is essential that subsoil users' funds assigned for purchasing goods from domestic producers are used by them for development, introduction of new technologies, modernization, personnel professional development, certification of products and services. Only this way the Kazakhstan producers can make goods according to high world standards.

As for preparation of Kazakhstan's manpower for offshore oil and gas projects then this is an important aspect of our cooperation with western partners. From the outset of the Program for Kazakhstan Caspian Sea Sector development over 50 engineers had been assigned for training at the leading international oil and gas companies. To date, investments into Kazakhstan human resources education and training exceeded $18 million.

— A very important aspect in offshore operations is ensuring ecological safety. How does your company address this in its operations?

— The ecological system of the Caspian Sea is unique and at the same time quite vulnerable. Therefore, it is high-priority for the company to minimize environmental impact and ensure ecological and industrial safety of offshore oil operations.

Ecological and industrial risks could be lowered by means of high-quality designing and EIA, status checkup of contractors' vessels and equipment, application of modern technologies of drilling exploration wells to cause minimal impact on aquatic environment and bioresources, well-timed emergency and oil spill response activities, etc.

KazMunayTeniz, its subsidiaries and related organizations implement a zero discharge principle in the course of offshore operations, thereby excluding waste discharges to the sea.

At present, the government develops a new version of the National Oil Spill Response Plan where our company takes part along with foreign partners. We also participate in preparing a project to create an Association for oil spill response.

— An important component of companies' operations is solving social problems in the region of their activities. Tell us about your social projects.

— The company along with its partners has expended over $1.5 million for social projects in 2010. Basically, these funds were used for construction of a kindergarten in Akshukur village of Tyupkaragan district. In 2011, it is planned to finance construction of a medical center in Mangystau village of Munailinski district, Mangistau Oblast.