Page 4 - FSUOGM Week 39 2019

FSUOGM COMMENTARY FSUOGM
Profit dispute at Karachaganak continues on
Kazakhstan and the developers behind the Karachaganak project are still in arbitration, but the dispute has not held back fresh investments at the field
KAZAKHSTAN
WHAT:
Kazakhstan is reportedly seeking a further $1bn to settle a dispute
with Karachaganak’s investors.
WHY:
The Karachaganak consortium has
locked horns with the government on several occasions over the years.
WHAT NEXT:
Karachaganak’s
PSA is complex, and the disagreement is unlikely to discourage other investors from opportunites in Kazakhstan.
KAZAKHSTAN remains locked in arbitration with the Royal Dutch Shell and Eni-led consor- tium developing its giant Karachaganak gas field, Kazakh Energy Minister Kanat Bozumbayev told Reuters on September 26.
The Kazakh government sued the Karacha- ganak Petroleum Operating (KPO) consortium for $1.6bn in 2016, claiming it was not receiv- ing its fair share of profits from production. The two sides reported last year that a settlement was near, under which the investors would agree to pay Kazakhstan $1.1bn and revise the way prof- its were shared. KPO also pledged to provide a $1bn, 10-year loan to Kazakhstan to fund infra- structure projects. However, the deal was never finalised.
“The final [arbitration] hearings will take place in October. They will start next week,” Bozumbayev said. “Arbitrators usually take no more than half a year [to reach a verdict]. But maybe we will settle it before that.”
The government is seeking $1bn in addition to the settlement amount proposed last year, sources told Bloomberg on September 26.
Karachaganak, a Soviet-era discovery in
north-western Kazakhstan, is one of the Central Asian state’s biggest oil and gas projects. Eni and Shell each control 29.25% stakes in the project, while US major Chevron holds 18%, Russia’s Lukoil has 13.5% and Kazakhstan’s national oil company (NOC) KazMunayGas (KMG) owns 10%.
KPO has been embroiled in several disputes with the government over the years, including one in 2012 that led to KMG securing its stake in the project.
The current disagreement over profits has not held up new investments at Karachaganak, which are needed to maintain its output. KPO signed off on a $1.1bn de-bottlenecking project in September last year, boosting sour gas pro- cessing by 4bn cubic metres per year and ena- bling the recovery of an extra 10mn tonnes of liquid hydrocarbons during the field’s remaining operational life. The consortium also approved construction of a fourth injection compressor unit in May.
These upgrades should help stabilise pro- duction, which has been volatile in recent years. Output came to 403,300 barrels per day
P4
w w w . N E W S B A S E . c o m Week 39 02•October•2019