Kazakh government, investors express high hopes as OKIOC begins drilling

Oct 08, 1999 02:00 AM

11-08-99The Offshore Kazakhstan International Operating Company (OKIOC) held a ceremony to mark the start of test drilling at the Vostochny Kashagan site.
Kazakh Premier Nurlan Balgimbayev, who attended the ceremony, said that he had high hopes for the project. If all goes well, he said, OKIOC could turn Kazakhstan into a major centre of the world oil industry.
The consortium's General Manager Keith Dallard, also in attendance, told reporters that the group's work was of great importance for Kazakhstan. The $ 300 million worth of seismic work conducted by the group's predecessor -- the Kazakstancaspiishelf (KCS) consortium -- indicates that OKIOC's 6,000-square km concession may hold up to 4 billion metric tons of oil. However, the figure cannot be confirmed until the consortium completes its test drilling program.
Dallard said that OKIOC hoped to complete the first well within a few months, before its drilling site was iced over for the winter. Drilling results may be made available in about four months, he said. Dallard stressed that OKIOC would sink another exploratory well even if its first shaft turned up empty. Commercial production is not expected to begin until at least 2005.
The consortium is spudding its wildcat well at a site located off the Caspian coast, beneath water less than four meters deep. It is using a specially modified drilling barge, dubbed "Sunkar" by a Kazakh poet, that boasts ice-breakers, a helipad and living quarters as well as heavy equipment. OKIOC has already spent $ 170 million on its project, including $ 100 million for the overhaul of its drilling barge.
The group's production-sharing contract, signed in 1997, specifies that the Kazakh government will receive 80% of all profits from the project.
OKIOC was set up in 1997 on the basis of a consortium established to survey the offshore deposits in the Kazakh sector of the Caspian Sea. This survey group, known as Kazakstancaspiishelf or KCS, was originally split between Agip of Italy, British Gas, British Petroleum and its Norwegian partner Statoil, Mobil of the United States, Royal Dutch/Shell and Total of France as well as a Kazakh state company, also called KCS. OKIOC was given the right to select 12 of the fields surveyed by KCS before the rest of the blocks were offered to other investors.
In September of 1998, the Kazakh side sold its interest in OKIOC to Japan's Inpex, which served as the leader of a consortium of Japanese companies interested in the project, and Phillips Petroleum of the United States. Total retained its share after merging with Belgium's Petrofina, as did BP after its merger with Amoco of the United States.
Earlier this summer, BP-Amoco announced plans to sell its 9.5% stake in the consortium, saying the project did not fit in the company's upstream portfolio. However, BP-Amoco said two weeks ago that it had decided against selling as none of the potential buyers had offered enough. BP-Amoco has downplayed rumours that the Kazakh government had pushed the company to quit OKIOC, saying that it had tried to break with the consortium largely because its stake was so small.

Source: NewsBase
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