KMG Announces Delay Of Kashagan Phase 2 To 2018-19

KMG Announces Delay Of Kashagan Phase 2 To 2018-19

A spokeswoman for the Kazakh state wealth fund Samruk-Kazyna told Dow Jones on 12 August that KazMunaiGaz (KMG) CEO Kairgeldy Kabyldin informed the fund’s board of directors that the second phase of Kashagan production “has been postponed until 2018-19”. Samruk-Kazyna manages all state-owned enterprises and Mr Kabyldin sits ex officio on its Board of Directors. Mr Kabyldin was quoted earlier by Interfax as saying that “the group of six Kashagan participants on July 27 informed the [Kazakh] oil and gas minister that the time frame for Phase 2 at the Kashagan field was being put back to 2018-19.” As a consequence, Mr Kabyldin noted, the start-up of the planned Kazakhstan Caspian Transportation System (KCTS) would be correspondingly postponed. Kazakh Minister of Oil and Gas Suat Mynbayev told Novosti-Kazakhstan on 17 August that any decision over the postponement of Phase 2, which is not yet finalized, “is linked more than anything to costs. We don’t need to incur insane costs on the second phase. We want costs to be reasonable, and we have such authority over the contract.”

KCTS was intended to transport the bulk of Kashagan Phase 2 production in tankers across the Caspian Sea for delivery to the Baku-Tbilisi-Ceyhan (BTC) pipeline terminal for export, beginning in 2015-16. Mr Kabyldin did confirm that commercial production from Kashagan Phase 1 would start by late 2012 at an initial rate of 14mn tons/year (280,000 b/d). Output is expected to nearly double by 2014-15 to 23mn t/y (460,000 b/d). However, this is thought insufficient to justify construction of the planned $3bn pipeline from Kashagan to the KCTS oil terminal at the port of Kuryk. Consequently, the bulk of Kashagan production up to 2015 is most likely to be exported through the Transneft-controlled Tengiz-Novorossisk pipeline.

KPO Agrees To Conditionally Cede 10% Of Shares To Kazakh Government

The Karachaganak Petroleum Operating (KPO) consortium has agreed to cede 10% of the joint venture company equity to the Kazakh authorities in exchange for “abandoning the recently reintroduced oil export duty or dropping the cost overstatement lawsuit of more than $1bn”, Reuters reported on 13 August. If either of these conditions is met by Astana, said the report, “the companies would transfer 5% to the state” while the remaining 5% would have to be bought by Astana in cash. Since the beginning of the year KPO has faced total claims amounting to almost $2.5bn for alleged tax, environmental and visa violations, while the consortium has also filed a suit against Astana to recover more than $1bn in lost revenues due to the imposition of an export duty in 2008-09. KPO is led by Eni and BG Group, which both hold 32.5% stakes. Chevron and Lukoil respectively hold the remaining 20% and 15%

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