The North Caspian basin, or Pre-Caspian depression, and North Ustyurt basin seemed likely in 1999 to become important sources of oil and gas.
The North Caspian basin is famous for the landmark development project at supergiant Tengiz oil field. Both basins hold large numbers of projects with the capacity to expand production (Fig. 1).
Much of the attention to the Caspian Sea region was devoted to projects off Azerbaijan and Kazakhstan. Onshore projects in the North Caspian and North Ustyurt basins began slowly during the 1990s.
The year 2000 shaped up as a possible turning point at which companies would pull out the stops to begin producing oil in earnest, mainly due to commitments to construct major new liquids pipeline capacity out of the region.
Transportation, one of the region`s shortcomings, in 1999 was handled by rail tanker and to a lesser extent by a system of pipelines. Breakup of the former Soviet Union rendered the lines less than adequate for the individual needs of the new republics. Construction of two new pipelines was authorized as 1999 ended.
The Pre-Caspian depression covers 500,000 sq km with sediments about 20 km thick (Fig. 2). The basin covers the northernmost Caspian Sea and also extends beyond the Kazakh border into adjacent areas of Russia. Its largest known fields are Tengiz, Astrakhan, and Karachaganak.
The North Ustyurt basin, which includes the Buzachi arch, covers nearly 190,000 sq km (Fig. 3). It is almost entirely onshore, and its eastern half is in Uzbekistan. Important fields include Karazhanbas, North Buzachi, and Karaturun oil fields and Kalamkas gas-condensate field.
Joint ventures that included western companies of all sizes were carrying out numerous exploration and development projects in the two basins during 1998-99. What follows is a status report of a partial list of those projects.
North Caspian basin
Tengiz-Chevron
Chevron Corp. committed to spend more than $3 billion during 2000-2004 to expand production capacity at supergiant Tengiz field and adjacent Korolev field. The plan included drilling exploratory and development wells, upgrading existing processing facilities, and adding new processing units.
Tengiz production was expected to rise to 370,000 b/d in 2004 from 214,000 b/d in 1999, Chevron said. The 1999 output was 14% above the 1998 average. The company believed that 6-9 billion bbl would ultimately be produced from the field.
Tengiz represented the longest-term Pre-Caspian joint venture. Chevron placed the first well, No. 8, on production in May 1991 near the end of the Soviet regime.
Tengizchevroil, the entity in which Chevron holds a 45% interest, was formed in 1993 as a 40-year, $20-billion joint venture.
Including delays, Chevron marked the project`s second anniversary in mid-1995 with first phase completion. Tengizchevroil activated its $102 million demercaptanization plant to remove sulfur compounds from Tengiz crude prior to pipeline shipment. By that time the joint venture had reduced light mercaptans in crude to less than 5 ppm from 350 ppm and sold all crude oil it was permitted to export. It had also established pipeline contracts with 10 pipeline and terminal companies.
Tengizchevroil was shipping crude oil by existing pipeline, rail car, and barge. It broke ground in May 1999 for the 900-mile Caspian Pipeline Consortium pipeline from Tengiz field to the Black Sea.
Tengizchevroil and Schlumberger Geco-Prakla ran a 3D seismic survey that covered nearly 400 sq miles of the field in 1998-99. Chevron also drilled its first new well, the deepest to that date in the field.
Tengizchevroil previously disclosed the existence of four smaller structures on the concession.
Karachaganak-Agip-BG
ENI`s Agip SPA, British Gas PLC, Texaco, and Russia`s Lukoil were developing Karachaganak gas, condensate, and oil field along the border with Russia.
Agip and BG are co-operators of Karachaganak field, each with a 32.5% interest. Texaco holds 20% and Lukoil 15%.
Agip and BG signed initial protocols for this project in mid-1992. They envisioned a $6 billion outlay during 10 years to tap reserves then pegged at more than 20 tcf of gas and a combined 1.9-2 billion bbl of liquids.
The field covers 600 sq km and has pay zones at 3,600-5,100 m. Gross pay thicknesses are 1,350 m for gas and condensate and 200 m for oil.
The field was producing 450 MMcfd of gas and 85,000 b/d of liquids in mid-1992 through run-down and antiquated equipment. The hydrocarbons moved by pipeline to Orenburg, Russia, for treatment. Gas was then fed into the Soyuz pipeline for delivery to western Europe.
BG hoped to boost output to 2 bcfd and 200,000 b/d by drilling as many as 200 wells and using more-advanced technologies.
Akshabulak field group
Operating Akshabulak field was a joint venture formed by Gaz de France`s Erdol-Erdgas Gommern unit, RWE-DEA, World Bank-IFC, and Yuzhkazneftegaz.
Kazgermunai, the joint venture, began production from Akshabulak field in October 1999 after what RWE-DEA described as "several years of thorough preparation." Production for 1999 was to total 350,000-400,000 tonnes.
The companies launched a project in 1991 to develop the field, where exploration was already complete. Production was to have begun in mid-1997, with output reaching 1 million tonnes/year within 3 years and then declining gradually over 20 years.
The first oil was to be shipped 800 km east to the Shymkent refinery and then swapped for like volumes in western Kazakhstan. That oil would be shipped through Russia, Belarus, and Poland for refining in Germany.
The partners secured a $106.7 million loan for the project in late 1997. Reserves were placed at 110 million bbl, and full development was to cost $320 million.
Saigak field produces
Shell Temir Petroleum Development BV and Veba Oel Kasachstan GMBH produced the first oil from Saigak field in October 1999.
Oil was to be produced from the Saigak-2 well for 3 months to appraise the field`s reserves and determine reservoir characteristics.
Interests in the field on the Temir Block are Shell 60% and Veba 40%. The partners shipped the first oil to a terminal in nearby Shubarkuduk, 95 miles south of Aktobe. The first rail cars left Shubarkuduk Oct. 10 for export.
The companies expressed satisfaction at progressing from a standing start to oil sales in 2 years. They looked forward to reaching a decision on full field development early in 2000.
Saigak field was discovered in 1995, at which time Veba joined the venture. Shell became a participant in the 19,300-sq-km Temir license in August 1997. Shell Temir during the 1998-99 winter drilled and tested a highly successful appraisal well, Saigak-2, which provided a clear indication of the field`s potential.
KTT fields project
Ocelot International Ltd., Calgary, was developing eight oil, gas, and condensate fields in the northwestern North Caspian basin.
The company in late 1999 was refurbishing and modifying to western standards a Kazakh-owned rig for the drilling of the West Teplov-101 well, projected to 3,100 m.
The well was to be the first drilled on the Kamen-Teplov-Tokarev (KTT) project under a farmout from Snow Leopard Resources Inc. It was to use western technology to obtain good reservoir data to upgrade project economics and aid in preparation of the overall development plan.
The fields are Kamen (dry gas), Tokarev, Tsyganov, Ulyanov (gas and condensate), and Gremyachin, East Gremyachin, and West Teplov (oil, gas, and condensate).
Ocelot acquired the KTT project in October 1998. The eight previously discovered fields lie along an 85 km trend west of Uralsk and have combined proved undeveloped reserves of about 100 million bbl of oil equivalent.
After discovery of the first field in the area in 1972, the Soviets drilled 114 exploratory wells in a 425-sq-km area. Of those, 43 encountered significant hydrocarbons and provided extensive data for the reserves calculations.
All 114 wells were abandoned after drilling, and most cannot be re-entered, Ocelot said. The liquids contain mercaptans, and the gas is sour. Ocelot planned to sell initial produced liquids locally and flare the gas.
Ocelot would earn a 50% working interest in an existing joint venture under the farmout. Kazakhoil holds the other 50%.
Gustavson-Aktobe study
Kazakhoil let a 6-month, $427,000, World Bank-funded contract in September 1999 to Gustavson Associates Inc., Boulder, Colo., to study oil and gas fields near Aktobe.
Gustavson was to consider various options for financing field development that were to include debt financing or potential equity partners.
The fields, Alibekmola, Kozhasay, and Urikhtau, were discovered in the early to mid-1980s during the Soviet regime and were never developed. Reservoirs are Carboniferous to Permian in age and 2,800-4,500 m deep.
Kazakhoil was to monitor the progress of the study from its new ventures division, of which Kanatbek Zhumin was director and Isatay Birmanov was project director.
Other work Gustavson was conducting in Kazakhstan included hydrocarbon favorability studies, field development work for Stepnoi Leopard-a joint venture between Kazakhoil and a Canadian company-due diligence investigations, and equity sales analyses of most deals including Karachaganak.
North Ustyurt basin
North Buzachi field
Texaco Inc. bought a 65% stake in late 1998 in North Buzachi field from Nimir Petroleum Co. of Saudi Arabia. Nimir retained a 35% interest.
The undeveloped field 195 km north of Aktau has reserves of about 80 million tonnes of oil.
Texaco in late 1999 was setting up infrastructure, drilling its fourth appraisal well, and conducting long-term production tests. It was also working to secure export routes.
Karakuduk field progress
Chaparral Resources Inc., Houston, signed an agreement for a $24 million loan from Shell Capital Services Ltd. that was to enable Chaparral and its joint venture to develop 17,000-acre Karakuduk field in the Mangistau region. Shell Trading International Ltd. agreed to buy crude produced from the field by the joint venture, Karakuduk-Munay JSC (KKM).
Chaparral operates Karakuduk field with a 50% beneficial ownership interest in KKM. Kazakh investors, including Kazakhoil, hold the other 50%.
First sale of oil from the field occurred on Apr. 8, 1999, when about 95,000 bbl was sold on the international market. KKM said that by Jan. 31, 1999, it had produced about 110,000 bbl of crude from the field and was negotiating for its sale. First production occurred from Well 21 in January 1998. The field`s reserves were estimated conservatively at 127 million bbl.
Chikuduk field
American International Petroleum Corp., New York, holds 100% interest in License 1551 and 70% interest in License 953 in the North Ustyurt basin 80 miles southeast of Tengiz field.
The 264,000-acre License 1551 contains Shagyryl-Shomyshty field, with 1.39 tcf of gas in place. Reserves are 449 bcf technically proved recoverable and 514 bcf probable using a 70% recovery factor. The field was discovered by drilling during 1966-69.
AIPC hoped to drill multiple shallow Eocene gas wells in Shagyryl-Shomyshty field during 2000. The wells were to help define parameters of a final development plan.
Two shallow gas exploratory wells were to be drilled on adjacent 4.7-million-acre License 953, where the company defined 16 major structures with multiple target reservoirs.
APIC drilled a well to 663 m on the Chikuduk structure in November 1998. Upper Eocene held 14 m of gas pay with 74% gas saturation and 34% porosity. Independent consultants estimate the area holds 1.1 tcf of recoverable gas.
The company also planned to re-examine Jurassic oil potential on License 953. It was to focus on the 11,500-acre Begesh structure on the southwestern part of the block in light of Chaparral`s success and improved oil prices. Chaparral drilled a potentially commercial Jurassic oil well in Karakuduk field 70 miles southwest.
New pipeline projects
Caspian Pipeline Consortium
First pipelaying took place in November 1999 on CPC`s pipeline from western Kazakhstan to Novorossisk.
The Starstroi consortium, the pipelaying contractor, includes Kubanneftegasstroi (Krasnodar), Stavropoltruboprovodstroi (Stavropol), Bouygues Offshore (Paris), and Spie Capag (Paris).
About 90% of the overall scope of work was to be implemented by local construction organizations. The Starstroi contract included installation of 748 km of new pipe and refurbishment of 300 km of existing pipeline. New pipeline construction was divided into four spreads and was to be completed simultaneously by Starstroi`s four main Russian subcontractors. About 1,300 workers were involved on the Russian portion of the line.
The pipeline portion in Russia was expected to be completed in December 2000. First crude shipment was to occur on June 30, 2001. The initial construction phase of the CPC project was to be fully completed in October 2001 and allow transport of 28 million tonnes/year of oil.
The equity interest in the CPC: Russian Federation 24%, Republic of Kazakhstan 19%, Sultanate of Oman 7%, Chevron Caspian Pipeline Consortium Co. 15%, LUKARCO BV 12.5%, Rosneft-Shell Caspian Ventures Ltd. 7.5%, Mobil Caspian Pipeline Co. 7.5%, Agip International (NA) NV 2%, BG Overseas Holdings Ltd. 2%, Kazakstan Pipeline Ventures LLC 1.75%, and Oryx Caspian Pipeline LLC 1.75%.
Karachaganak field pipeline
The partners signed a memorandum of understanding in late 1999 with the Kazakh government for construction of a $280 million, 460-km, 7 million tonne/year oil and condensate pipeline from Bolshoy Chagan 190 km from Karachaganak field to Atyrau.
Atyrau was to host a connection with the CPC pipeline.
The line was to facilitate a production increase to 71 million bbl/year from 24 million bbl/year from Karachaganak.
Kazakhstan-China oil line
China National Petroleum Corp. in mid-1999 postponed plans to construct a crude oil pipeline from the Pre-Caspian depression to northwestern China.
CNPC cited insufficient reserves in fields in the Uzen and Aktiubinsk areas. It said projected commercial output for the 500,000 b/d pipeline would reach only a combined 152,000 b/d from the two fields.
The company was to invest $2.4 billion during 7 years on a 3,277-km pipeline from the two fields, possibly also linking with Tengiz field, to refineries in Xinjiang Uygur Autonomous Region. The line might also have transported to China oil produced in the South Torgay basin of central Kazakhstan.
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