Oil of Mangistau: What Does the Current Year Have in Store?
By Natalya Butyrina
The year 2005 was a year of stable growth in oil and gas production for Mangistau. According to information released by the fuel and energy division of the regional department for entrepreneurship and industry, a total of over 17 million tonnes of oil and gas condensate was extracted in 2005, an 8.9 per cent rise on 2004. These figures can "embellish" any official report. However, this is in general, but in particular…
Analysts link the significant growth in hydrocarbon output in the region to both record high prices for oil and long-term strategies adopted by oil companies which have come to the region in earnest and for the long haul, determined to make profits.
Among extracting companies Mangistaumunaigaz and the Uzenmunaigaz production branch of the Exploration-Production KazMunaiGaz can be singled out – they accounted for 84 per cent of the total oil production last year – respectively over 5.6 million and 6.5 million tonnes. Is this the limit? Judging by the fact that out of 36 fields in its assets, Mangistaumunaigaz is developing only 15 – not at all. Discussing the potential of oil companies operating in the region at the moment, it should also be taken into account that world oil giants such as Russia's LUKoil, Anglo-Dutch Shell and others are represented in joint ventures (JV). The oil output of these JVs in the region is not that significant so far, but "it is not too late yet" – they are intensively involved in developing new fields and are investing vast funds in this. Judging by their activity, the results should be yielded soon.
An example is Romanian Tasbolat Oil Corporation, a subsidiary of Petrom. This company, which is developing the Tasbolat, Aktas and Turkmenoy fields, extracted 129,855 tonnes of oil and over 38m cubic metres of gas in 2005 (respectively 95,104 tonnes and 37.5m cubic metres in 2004). It turned to the EBRD to seek a loan to increase its output. Tasbolat Oil Corporation intends to spend this loan in 2006 on building a connecting gas pipeline and oil pipelines which will connect the fields with one another, restoring 21 old wells, drilling 19 new wells, completing the construction of roads linking the fields and expanding a network of water wells to inject water into oil wells to increase the reservoir pressure.
The Chinese-Russian Buzachi Operating, which is developing the North Buzachi oilfield, increased its oil output by 311,100 tonnes to 779,500 tonnes in 2005. This company is continuing to carry out 2D and 3D seismic survey in the field. In line with the technological project for developing it, the number of wells operated will grow to 480. By 2011, Buzachi Operating intends to reach a maximum annual output of 3.5 million tonnes of oil.
Output was increased by 30.6 per cent in the Karakuduk field, which is being developed by Karakudukmunai. It produced 503,800 tonnes of oil in 2005, up by 118,100 tonnes on 2004. The company is also increasing gas output – 47.5 million cubic metres in 2005 against 34.1 million cubic metres in 2004. The increase in production figures was thanks to applying the technology of hydraulic fracturing of the stratum, drilling new and horizontal wells, as well as other innovations such as injecting water into the stratum to maintain the reservoir pressure. The company invested about $40m in the Karakuduk field last year. This made it possible to drill new wells and build a gas pipeline to utilise gas. Some of these funds were spent on improving infrastructure in the field and maintaining existing facilities in good condition.
In 2006, Karakudukmunai intends to increase its annual oil output to 0.5 million tonnes, and this is almost a limit for this field. The company is currently operating 58 oil wells. In addition, a Polish-Kazakh drilling enterprise operating in the field is drilling 15-16 new wells a year.
The Karakuduk field, discovered in 1972, is located 365 km northeast of Aktau. It covers an area of 68.4 square km and its proven and estimated oil reserves are 63 million barrels or 8 million tonnes. In 1995, the Karakudukmunai joint-stock company received a 25-year licence, and started developing it in early 2000. In late 2005, Russia's LUKoil bought up 36 per cent in this project from Canada's Nelson Resources Ltd. It has quite recently bought up the share of the second investor in the project, the US Chaparral Resources, Inc. Thus, LUKoil Overseas Service Ltd. Kazakhstan is now the sole owner of Karakudukmunai.
The joint Kazakh-Moldovan enterprise Kazpolmunai also increased oil output. The JV increased output in the Borankol field by 25 per cent to 300,900 tonnes in 2005, up by 60,200 tonnes on 2004. However, Kazpolmunay's gas condensate output fell to 7,000 tonnes against 35,100 tonnes and natural gas output from 264.5 million cubic metres to 54.5 million cubic metres.
Kazpolmunai is operating 15 oil and nine gas wells. Its daily output is over 550 tonnes of oil and over 1 million cubic metres of gas. Oil is supplied to customers through the oil pipeline network owned by KazTransOil. Gas, after primary processing, goes into the Central Asia-Centre gas pipeline, and separated gas condensate is transported in tanks by rail.
Kazpolmunai launched an operation in Borankol in 1999, after receiving a licence to carry out operations to prospect and extract oil in May 1997. The field is to be developed over 25 years.
It should be noted that the Kazpolmunai owns 75 per cent in the Tolkynneftgaz limited liability partnership, which is developing the Tolkyn field. It produced 245,600 tonnes of gas condensate and 1,151.3 million cubic metres of natural gas in 2005, up by 18.8 and 22.4 per cent, respectively, on 2004. In addition, 7,400 tonnes of oil was extracted in the field last year (800 tonnes in 2004). The enterprise is currently operating six gas condensate wells. The daily output is over 650 tonnes of gas condensate and over 2.2 million cubic metres of natural gas.
Tolkynneftgaz launched operations in the Tolkyn field in 2000, after receiving a licence to carry out operations to prospect and extract oil in December 1997.
…and the Fly
Out of 14 oil and gas extracting companies operating in the region, five decreased production figures in 2005. Thus, the Karazhanbasmunay joint-stock company, which is the region's third biggest oil producer, extracted only 2.24 million tonnes of hydrocarbons in 2005, down by over 86,100 tonnes on the previous year.
Output was significantly decreased by Maersk Oil Kazakhstan GmbH, a subsidiary of MaerskOlie Gas As (Denmark). This enterprise produced only 57,400 tonnes of oil in the Dunga field against 92,500 tonnes in 2004. Thus, output fell by 38 per cent.
The KhazarMunai limited liability partnership, which is operating the North Pridorozhnoye field, cannot be happy about its results either. Its oil output stood at 20,872 tonnes in 2005, which is a 53.7-per-cent drop on 2004. Gas output fell significantly too – from 2.99 million cubic metres to 1,764,000 cubic metres.
For the KazakhTurkMunai liability limited partnership, in which 51 per cent is owned by the KazMunaiGaz national company and 49 per cent by the Turkish petroleum corporation (TPAO), 2005 was not altogether successful either. Developing the Southeast and Northeast Saztobe and West Yelemes fields, it produced only 130,900 tonnes of oil, down by 37,000 tonnes on the previous year. Its gas figures are better – 82,292,000 cubic metres against 46.73 million cubic metres in 2004.
A similar situation developed at the Arman joint venture, which is extracting oil in the eponymous field. It extracted about 179,300 tonnes of oil, which is less by 9,400 tonnes than in 2004. However, it increased concomitant gas output to 20.1 million cubic metres. in 2005 (against 19.2 million cubic metres in 2004). The company is currently working on preventing a drop in oil output, which has been falling by 15-20 per cent a year. The company intends to employ new technologies such as injecting water to maintain the reservoir pressure, acid treatment and drilling offshoots. The average daily output in the field is 4,300 barrels at the moment.
The Arman field is located 270 km away from Aktau. A 30-year licence to prospect and develop it was issued to Arman, which was set up as a Kazakh-US enterprise in 1994. Early on the ownership in the joint venture was divided fifty-fifty between Shell and Nelson Resources. At the moment, the field, the industrial development of which started in 1998, is at the third stage of development, which is characterised by falling annual oil production and increasing water content in the crude.
One of the reasons for the falling oil output of some of the oil companies, the Zapkaznedra Mangistau Regional department for geological and mining inspection said, is that over the past years in many fields the quality of the raw-materials base is constantly deteriorating because of the significant exhaustion of highly-productive deposits which have been in long use. In this connection, methods of bottom-hole zone treatment through reperforation, perforation and solvent treatment, which have already become traditional, as well as new methods of intensifying extraction and improving reservoir productivity, are being used in these fields.
Although not every company can boast about last year's results, we would like to hope that 2006 will be more successful for them, because the oil sector for Mangistau provides the lion's share of tax collections, multimillion spending on social programmes, the possibility of improving infrastructure in towns and districts – building gas-supply networks, repairing roads and water-supply networks, building housing and telephone networks in rural areas. In short, the stability of the sector ensures the stability of the region.
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