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Petroleum industry

Karachaganak Gas Field Expansion: A Game-Changing Partnership for Kazakhstan

Strategic Insights

— 2 min read

The Karachaganak gas field, a massive natural gas reserve with significant oil deposits, is undergoing a major expansion, with production expected to reach 74,000 b/d of condensate and oil in the fourth quarter of 1998. The field's production capacity will be increased to over 160,000 b/d of oil and condensate and 9 BCM/year of natural gas by 2001, with plateau production from 2006 projected at 300,000 b/d of oil and condensate and over 15 BCM/year of gas. The partnership, led by British Gas, has secured a $8 billion final PSA, with development spending expected to reach $1.76 billion by 2001.

Key Takeaways:

  • The Karachaganak gas field is expected to produce 74,000 b/d of condensate and oil by the fourth quarter of 1998, with production capacity to be increased to 160,000 b/d of oil and condensate and 9 BCM/year of natural gas by 2001.
  • The final PSA for the field was signed on November 17, 1997, with British Gas, the operator, holding 32.5% stake, Agip 32.5%, Texaco 20%, LUKoil 15%, and KazakhOil 5%.
  • The partnership aims to develop a 6 million t/y condensate refinery and gas processing facility at Karachaganak, which will enable the partners to end their dependence on a Russian processing plant at Orenburg.
  • The development project is expected to cost $1.76 billion by 2001, with a further $4.06 billion to be spent between 2002 and 2006 to raise production to a level sustainable until 2036.
  • The failure of Gazprom to meet its share of development costs and charges for gas processing and transportation led to a delay in the project's implementation.
  • LUKoil joined the partnership in July 1997, replacing Gazprom, and a regular maintenance and development programme was launched in 1995, with investment over the first four years set at around $320 million.
  • The CPC project, which would have allowed exports through a pipeline to Russia's Black Sea port of Novorossiysk, is now delayed, due to increased costs and opposition from Russia to a trans-Caspian pipeline through Azerbaijan.

Statistics:

  • Total recoverable reserves of 18-20 TCF of natural gas and about 2.4 billion barrels of condensate and oil.
  • Estimated liquid reserves in place at 4.7 billion barrels of condensate and 1.4 billion barrels of oil.
  • Development spending expected to reach $1.76 billion by 2001.
  • Further $4.06 billion to be spent between 2002 and 2006 to raise production to a level sustainable until 2036.
  • Planned production capacity of over 160,000 b/d of oil and condensate and 9 BCM/year of natural gas by 2001.

Sources:

  • Oil & Gas Report, November 1997.
  • BG press release, November 17, 1997.
  • Agip press release, November 17, 1997.
  • Texaco press release, November 17, 1997.
  • LUKoil press release, July 1997.
  • KazakhOil press release, November 1997.
  • CIS Industrial Review, Vol. 10, Number 2.
  • Petroleum Economist, Vol. 63, Number 7.

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