Kazakhstan seeks more than $140 billion from foreign investors

The Republic of Kazakhstan will need some $140 billion investment in exploration, appraisal, and development over the next 40 years, not even counting construction of a transportation infrastructure of pipelines, barges, and railroads, officials said Thursday at the Offshore Technology Conference in Houston.


HOUSTON, May 3 -- The Republic of Kazakhstan will need a $140 billion investment in exploration, appraisal, and development over the next 40 years, and that's not even counting construction of a transportation infrastructure of pipelines, barges, and railroads, officials said Thursday at the Offshore Technology Conference in Houston.

"Operating costs have been estimated at approximately $120 billion. All of these activities will require the support of the international oil and gas manufacturing and services sector, which spells opportunities for American and international companies," said Deputy Minister Nourlan D. Kapparov, of the Kazakhstan Ministry of Energy and Mineral Resources.

Kazakhstan's oil production has almost doubled to a projected 800,000 b/d this year from 400,000 b/d in 1994. With increasing production from the Tengiz and the Karachaganak fields and new exploration in Kazakhstan's sector of the Caspian Sea, total production could reach 5 million b/d by 2014, said Kapparov.

The Kashagan structure, where two discoveries have been drilled, is being evaluated. Its surface area totals 300,000 acres, or three times the size of the Tengiz field, Kapparov said.

"Recoverable reserves are estimated to be 20 billion bbl assuming primary depletion, or 27 billion bbl assuming gas injection. To put this in context, 20 billion bbl is about the amount of liquids recovered from the UK sector of the North Sea up to now," he said.

The appraisal program will include a 3D seismic program over the entire structure, to be shot in 2001-2002. First oil production is targeted for the end of 2005 and is expected to plateau around the end of 2014.

Moreover, Kapparov said, 32 large prospects have been identified in the northern, central, and southern areas of the Kazakhstan sector of the Caspian, with additional recoverable reserves estimated at more than 30 billion bbl. There are another 50 smaller prospects with estimated recoverable reserves of more than 7 billion bbl.

"Total recoverable reserves in the Kazakhstan sector of the Caspian sea could be more than 80 billion bbl, depending upon successful exploration and meeting the challenges that will come with development," said Kapparov.

Transportation of both oil and gas is among those challenges.

"I must say that it is interesting that there is so much interest in the direction of our next oil pipeline," Kapparov said. "It should be obvious from the projected recoverable reserves that even if only half of the necessary exploration programs are successful, we will still need multiple oil transportation systems in the future."

He said, "Solutions must also be found for gas disposal, environmental issues, and infrastructure development. We are also aware that regional political and economic stability must be maintained, and oil and gas prices must remain at reasonable levels in order for the republic to continue to receive the necessary foreign technical and financial investment."

The Kazakhstan government is developing "a proper legal regime" to govern its offshore operations, "based on the experience of other countries," Kapparov said.

Kazakhstan ranks with the Gulf of Mexico as the two hottest drilling areas in the world, said Robert L. Parker Sr., chairman of Parker Drilling Co., at that same breakfast meeting at OTC.

But Kazakhstan is also "the most dangerous place in the world to drill," with high pressures and 20%-30% hydrogen sulfide content, he said. "It's the No. 1 place you should not experiment in," said Parker.

Parker Drilling has drilled or serviced some 200 wells, both on land and offshore in the Caspian Sea, during the 8 years it has operated in Kazakhstan. Like other US companies working in that country, Parker had only praise for the Kazakhstan workforce. "These are intelligent, hardworking people. Their (rig) crews are every bit as good as ours," said Parker.

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