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Kazakhstan Nears $1 bln Deal to Join Gas Project

Saturday 10 December 2011

ALMATY/DOHA (Reuters) - Kazakhstan and the owners of the Karachaganak oil and gas field expect next week to sign a deal to transfer a 10% stake in the project to the Central Asian state in return for $1 billion and the withdrawal of legal claims, two sources close to negotiations told Reuters.

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Aksai-CPC Pipeline: the pumping station Bolshoi Chagan.
In 1979, Kazakhstanʼs giant Karachaganak oil and gas condensate field was discovered and was being partially developed prior to the break up of the Soviet Union. The Karachaganak field in the north west of the country, located close to the Russian border, covers an area of over 500 km² and has reserves of over 1,200 million tonnes of oil and condensate and 1,350 billion m³ of gas making it one of the worldʼs largest hydrocarbon reserves. In order to stimulate the full development of the field, in 1997 a 40-year production sharing agreement covering the further development and exploitation of the field was signed between the Republic of Kazakhstan and Agip, BG International, Texaco and LUKoil. They came together to form the Karachaganak Integrated Organisation (KIO). KIO is responsible for the significant expansion of the production facilities, wells and other infrastructure to enable realisation of the fieldʼs full potential.

Consortium members BG Group, ENI, Chevron and LUKOIL will sell stakes on a pro-rata basis to allow the Kazakh state to enter the project, said one of the two sources and a third source close to the negotiations.

“Everything major that has been a bone of contention will go away,” one of the three sources said on Friday.

It is estimated that the Karachaganak field contains 1.236 billion tonnes of liquids and 1.371 trillion m³ of natural gas in place. Located in the Uralsk region of western Kazakhstan, it was discovered in 1979. Production began in 1984 under the operatorship of Karachaganakgazprom. Limited quantities of gas and condensate were exported to Russia via pipelines and to the processing facilities at Orenburg. On 3 October 2006 Kazakhstan and Russia signed an agreement to create a joint venture on the basis of Orenburg gas processing plant for processing gas from the Karachaganak field.

Overall, it is planned to recover about 300 million tons of liquid hydrocarbons and 800 billion m³ natural gas during the contract period. One current production issue facing the field is the increasing amount of gas of which a large amount is sour. As the export facilities of the project are not fully developed most of this gas is being recycled back into the reservoir until it can be exported profitably.

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