07-08-01 Vittorio Mincato, the CEO of Italy's ENI, told in Istanbul on August 6 that he believed Kashagan, an offshore field in Kazakhstan's section of the Caspian Sea, might begin yielding oil on a commercial basis in 2005. It is "feasible" to suggest that production might begin in 2005, he said. He was speaking shortly after an executive at the Offshore Kazakhstan International Operating Company (OKIOC), the consortium set up to explore and develop Kashagan, said that the field might start yielding oil in 2004, a year earlier than expected.
Mincato, who was in Istanbul to discuss the Blue Stream pipeline for Russian gas shipments to Turkey, did not comment further on the Kashagan project. He was speaking several days after Agip, the ENI subsidiary that is serving as operator of OKIOC, announced that it had selected a US-Turkish venture as the winner of a tender for the supply of drilling equipment. As the winner, Bechtel-Enka will build artificial islands that will be used as drilling platforms, Agip said. It stated that OKIOC would use the islands to sink exploratory wells. If these wells prove to contain commercial quantities of hydrocarbons, it added, OKIOC will also use them as development wells.

The OKIOC consortium was set up on the basis of a consortium established to survey the offshore deposits in the Kazakhstani sector of the Caspian Sea. This survey group, known as Kazakhstancaspiishelf or KCS, was split between Agip, British Gas (BG), British Petroleum (now BP) and its Norwegian partner Statoil, Mobil of the United States (now ExxonMobil), Shell and Total of France (now TotalFinaElf) as well as a Kazakhstani state company, also called KCS. OKIOC was given the right to select 12 of the fields surveyed by the KCS consortium before the rest of the blocks were offered to other investors. Kazakhstan then sold its interest in OKIOC to Phillips Petroleum of the United States and Inpex of Japan in September of 1998.
At present, TotalFinaElf holds a 14.28 % share in OKIOC, while BP holds 9.52 % and Statoil holds 4.76 %. The remaining equity in the consortium is split as follows: 14.3 % each to Agip, BG, ExxonMobil and Shell; and 7.1 % each to Inpex and Phillips. ENI, Agip's parent company, was appointed as the group's operator in February of this year. Members of OKIOC have recently decided to change the consortium's name to Agip Kazakhstan North Caspian Operating Company.

OKIOC has yet to release an official report on the results of test drilling at Kashagan and has declined to make an official estimate on the size of its concession. It has confirmed, though, that oil was discovered in the first two test wells completed at the field. (The group began work on its third test shaft in late May and expects to begin receiving data from the well this month.)
Meanwhile, other sources -- including OKIOC members and Kazakhstani government officials -- have given out figures ranging up to 50 bn barrels in total reserves (with recoverable reserves ranging from 10 % to 50 % of the total). Most industry experts believe that the Kashagan field contains somewhere between 5 bn tons and 12 bn tons in recoverable reserves.
Since the oil found at Kashagan does appear to contain high concentrations of sulphur and associated natural gas, development of the field is likely to be difficult. Nevertheless, Kazakhstani President Nursultan Nazarbayev has said that OKIOC's concession will probably hold enough oil to boost the Central Asian country's crude output up from the present level of 615,000 bpd to about 8 mm bpd, a figure comparable to that of Saudi Arabia. A number of analysts have downplayed the more optimistic reports about Kashagan, however, stressing that it is too early to assume the project will be lucrative.