Page 16 - FSUOGM Week 50 2020

FSUOGM PERFORMANCE FSUOGM

Karachaganak partners finally settle

$1.3bn dispute with government

KAZAKHSTAN THE Karachaganak Petroleum Operating including one in 2012 that led to KMG obtaining
(KPO) consortium managing one of Kazakh- its stake in the project.
The dispute began back stan’s biggest oil and gas fields has paid $1.3bn The most recent dispute began in 2015, when
in 2015. finally to settle a long-running dispute with the the government sued KPO for $1.6bn, claiming
government over profit-sharing. The agreement it was not receiving its fair share of profits from
paves the way for the project’s investors to push production. The government took the case to a
ahead with a $1bn expansion project. Stockholm international arbitration tribunal.
The Kazakh Energy Ministry announced on The two sides reported in 2018 that a settlement
December 14 that in addition to the $1.3bn cash was near, but a deal was not finalised.
settlement, KPO had agreed to adjust the pro- The agreement this week is a “very positive
duction-sharing agreement (PSA) for the Kara- step” that ensures “fiscal certainty in Karacha-
chaganak field. This will earn the Kazakh state ganak,” Shell and Chevron said in statements
an extra $600mn in oil and gas sales by 2037, to Bloomberg. Kazakhstan’s energy ministry
assuming a $40-50 per barrel crude price. added that the partners could now push on with
Karachaganak is jointly operated by Royal an expansion project.
Dutch Shell and Italy’s Eni, each with 29.25% KPO signed off on a $1.1bn de-bottleneck-
shares, while its other investors include Chev- ing project in September 2018, boosting sour
ron, Russia’s Lukoil and state oil company gas processing by 4bn cubic metres per year and
KazMunayGas (KMG). The field delivered some enabling the recovery of an extra 10mn tonnes of
412,000 barrels of oil equivalent per day (boepd) liquid hydrocarbons during the field’s remaining
of oil and gas in the first half of the year, putting operational life. The consortium also approved
it in third place behind Tengiz and Kashagan in construction of a fourth injection compressor
terms of Kazakhstan’s biggest oil and gas projects. unit in May last year.
Karachaganak is also among the country's Most of Karachaganak's gas production is
oldest projects, having started flowing hydrocar- pumped via a 140-km pipeline for processing
bons in the early 1980s. But it was not until inter- in a plant in Orenburg, Russia, while the rest is
national majors took on the field in the late 1990s used for energy at the field or pumped back into
that it was transformed into one of the country’s reservoirs to maintain pressure. Its oil is deliv-
biggest oil and gas producers. ered via a 635-km pipeline that connects with the
Despite their success, however, Karacha- Caspian Pipeline Consortium (CPC) network,
ganak’s investors have been embroiled in several which then transports it to Russia's Black Sea
disputes with the government over the years, coast for export to markets. ™

P16 www. NEWSBASE .com Week 50 16•December•2020