Kazakhstan Minerals Corporation enters gas and oil business
Kazakhstan Minerals Corporation (KazMinCo) has announced its entry into the oil and gas business through the
acquisition of a 40 % equity interest in the Tasbulat Oil Corporation LLP (Tasbulat LLP). Tasbulat LLP is a
Kazakhstan registered limited liability partnership which holds a 100 % interest in the Tasbulat, Atkas and Turkmenoy
oilfields (Tasbulat Oilfields) located in the Mangystau oil province of Western Kazakhstan. The Tasbulat Oilfields
have an estimated in place oil reserve of 245 million barrels of which 72 mm barrels are classified as recoverable
reserves. KazMinCo's acquisition cost will be comprised of staged cash payments and 2 mm common shares of KazMinCo.
The transaction is subject to regulatory approval.
Tasbulat LLP was awarded the licences for the Tasbulat Oilfields in July 1997, following a competitive tender procedure. The main Tasbulat licence has a duration of 25 years for production and further exploration. The Atkas and Turkmenoy licences (34 % of the total reserves) have been issued as exclusive exploration licences for which the reserves have been proven and require to be formally approved by the State Committee of Reserves prior to the issue of a production licence to Tasbulat LLP. Contracts with the Government of Kazakhstan specifying fiscal conditions for production together with an agreed development plan for the Tasbulat field are close to finalisation.
KazMinCo's evaluation of the Tasbulat Oilfields was undertaken in conjunction with Exploration Consultants Ltd (ECL), an international oil industry consulting group with several years experience in Kazakhstan. ECL has been retained to advise KazMinCo on the proposed development alternatives for the Tasbulat Oilfields and on other potential acquisitions in the oil and gas sector. Tasbulat LLP is already in discussion with a number of oil companies regarding the operatorship of the Tasbulat Oilfields. Initial plans are to restore to production 10 shut-in wells and to install basic production facilities including a new seven km pipeline linking to an existing trunk line. ECL has reported that development drilling, and a workover and recompletion programme on an additional 20 shut-in wells could result in production rising from 700,000 barrels in year one (1,900 bpd) to over 5 mm barrels (14,000 bpd) in year three, peaking at over 9 mm barrels annually (25,000 bpd) in year five.
The Chairman of KazMinCo commented as follows: "We have had notable success in identifying and acquiring low cost mineral resources/reserves in Kazakhstan. However the world-wide down turn in investment sentiment for metals and mineral exploration and development has caused us to re-focus our investment in the natural resource sector in Kazakhstan. As an adjunct to our business review we have also reduced our overheads in Kazakhstan and in our UK offices. We have been investigating oil and gas investment opportunities in Kazakhstan for some time. Our existing management, infrastructure and in-country expertise means we are well positioned to expand into medium sized proven oilfields, as the Republic of Kazakhstan begins to exploit its immense oil and gas reserves. Our strategy is to focus on fields with existing infrastructure and known reserves which offer attractive returns and will result in added value for our shareholders.
In 1998 we will concentrate on our advanced mineral projects at feasibility. We remain confident that our aim of building a mining business in Kazakhstan from known resources is providing a firm foundation for future growth for our shareholders. Our oil and gas ventures should provide cash flow more rapidly than our mineral projects and creates a broadly based natural resource company focused on Kazakhstan.".