Page 5 - FSUOGM Week 39 2019

FSUOGM COMMENTARY FSUOGM
of liquids and 9.72 bcm of gas in the first half, compared with 425,500 bpd and 9.77 bcm a year earlier. Around 45% of gas is usually re-injected to maintain reservoir pressure, while the rest is sold to Russia.
Investment climate
While investor disputes can damage a coun- try’s reputation, the issues at Karachaganak are case-specific. The producing-sharing contract (PSC) governing the project is complex, making it difficult to determine profit shares over long period. Investors are likely to recognise this and not see the dispute as indicative of Kazakhstan’s broader business climate.
In fact, there have been a number of positive changes in the country’s oil and gas industry. Last year the government adopted a new subsoil code, which among other objectives aimed to slash red tape. It also amended tax rules, thereby making some challenging and offshore projects
more commercially viable.
One of Kazakhstan’s main priorities in the
oil industry is agreeing with the North Caspian Operating Co. (NCOC) consortium on a next step at the giant Kashagan field. Output at the Caspian Sea project currently averages 380,000 bpd, but the government is in talks with NCOC on a second-stage expansion. They are also dis- cussing prospects for development of some of its satellite fields.
Another key focus is kick-starting explo- ration at other offshore sites. Kazakhstan has brought on board Eni and Lukoil as investors at several blocks, and recently agreed on joint research with Norway’s Equinor. While Kazakh- stan’s Caspian zone offers potential prom- ise, much of its onshore oil basins have been extensively explored. Many fields currently in production were first brought on stream in the Soviet-era and 1990s and are now considered mature. ™
PIPELINES & TRANSPORT
Gazprom eyes LNG bunkering market
RUSSIA
Gazprom has opted in favour of a smaller-sized bunkering facility in Vladivostok instead of a larger export terminal.
RUSSIA’S Gazprom is set to join the burgeoning market for LNG bunkering, with plans to break ground next year on an LNG refuelling facility in the Far East.
The 1.5mn tonne per year (tpy) LNG plant will be built in Vladivostok at a cost of around $2bn, according to a Russian energy ministry presentation on September 24. It will fuel Russia’s growing fleet of LNG-powered vessels carrying oil and gas from the Arctic to the Asia-Pacific region.
Gas supplies for the facility will be delivered from Gazprom’s fields off the coast of Sakhalin Island using the Sakhalin-Khabarovsk-Vladiv- ostok (SKV) pipeline. The 1,800-km conduit, opened in 2011, is capable of flowing up to 5.5bn cubic metres per year of gas, but it has been underutilised because of limited local demand.
Gazprom has lagged behind its domestic rival Novatek in developing LNG, with its only pro- ject a 11mn tpy plant on Sakhalin Island that was launched in 2011. The company ditched plans to develop a larger a 5mn tpy export terminal in Vladivostok in favour of the smaller-sized refu- elling facility.
The global LNG bunkering market is growing rapidly, in large part as a result of tougher UN emissions limits for shipping set to be intro- duced next year. Russia is meanwhile expanding marine-based exports of oil and gas from the Arctic, with the bulk of these supplies heading to Asia. This is the rationale behind Gazprom’s choice of Vladivostok as a location for a refuel- ling hub.
Gazprom will need to ramp up production in
the Far East to provide gas for the facility. In June, it awarded an engineering, procurement and construction (EPC) contract to privately owned RusGazDobycha to complete development of the Kirinskoye gas field off Sakhalin. The project will bring its annual output to 5.5 bcm per year, from 700mn cubic metres at present.
Gazprom has also been discussing plans for over a decade to build a pipeline from Vladiv- ostok to supply 20 bcm per year of gas to North and South Korea. The scheme stalled amid heightened tensions over Pyongyang’s nuclear missile programme. But Gazprom continues to hold talks on the project with Korean partners. Early this year Gazprom hired RusGazDobyca to expand SKV’s capacity at a cost of more than $500mn. ™
Week 39 02•October•2019 w w w . N E W S B A S E . c o m P5