9 Feb 2023 17:50

KazMunayGas, Lukoil sign agreements on Kalamkas-Sea, Khazar, Auezov development

ASTANA. Feb 9 (Interfax) - Kazakhstan's KazMunayGas (KMG) and Russian oil company Lukoil have signed a number of agreements in Astana on the project to develop the Kalamkas-Sea, Khazar, Auezov blocks in the Kazakh sector of the Caspian Sea, KMG's press office said in a statement.

The parties signed the participant agreement, the 50% stake sale and purchase agreement regarding in Kalamkas-Khazar Operating LLP's charter capital and the agreement on terms of financing the operator's activities by the participants, according to the press office.

The documents define the subsoil user rights and obligations within the framework of joint activities to develop the subsoil blocks. Thus, Lukoil became KMG's strategic partner for the development of these Caspian shelf blocks, the statement says.

The agreements will come into force after the completion of the sale and purchase agreement between KMG and Lukoil with the aim of securing equal stakes in the project operator, Kalamkas-Khazar Operating LLP, according to the press office.

KMG and Lukoil will receive a 50% stake each in the Kalamkas-Sea and Khazar project in the Kazakh sector of the Caspian Sea. "The stakes in the project will be distributed to KMG with 50% and Lukoil with 50%," KMG told Interfax earlier.

KMG said Kazakhstan's legislation described the offshore blocks as a complex project, which implies exports of hydrocarbons from the offshore block with an option to supply oil to the domestic market.

"The offshore block is located in Kazakhstan and, so the oil produced there will be marked as Kazakh-origin crude oil," the company said.

KMG said the project involved joint decision making regarding all production issues.

KMG said that it's too soon to discuss production projections at this stage until approval is received for the field development plan.

The Kalamkas-Sea, Khazar, and Auezov blocks are expected to engage mostly Kazakh companies and use Kazakh shipyards for infrastructure construction.

"Lukoil is developing similar offshore fields in the Russian sector of the Caspian Sea. KMG also has experience in developing offshore blocks being a party to the Kashagan project on the shelf of the Caspian Sea," the company said earlier.

KMG also said Kurnangazy Iskaziyev, its deputy CEO for exploration and production between February 2022 and January 2023, had been appointed head of Kalamkas-Khazar Operating LPP. He remains head of KMG's office in Aktau.

Kazakhstan's Energy Ministry and KazMunayGas earlier signed the first contract based on a new mechanism, a so-called improved model contract, for the production of hydrocarbons. The contract grants mineral rights to the Kalamkas-Sea/Khazar/Auezov block located in Kazakhstan's sector of the Caspian Sea.

The project provides for paying a signing bonus of $32 million, bringing $6 billion in direct investment and creating about 2,000 jobs in the initial phase of field infrastructure construction.

Earlier KMG and Lukoil discussed cooperation on offshore exploration in Kazakhstan's sector of the Caspian, including the implementation of joint projects Zhenis and Kalamkas-Sea/Khazar in November 2022. The companies signed an additional agreement on the commercial terms of joint implementation for the project in June 2022.

Kalamkas-Sea, Khazar and Auezov fields are located 60 km from shore at a depth of 7-9 meters. Production is expected to start in 2028 and total 3 million-4 million tonnes per year. The overall cost of developing the fields is estimated at about $5 billion.

Kalamkas-Sea, which was discovered in 2002, is located 120 km southwest of Kashagan and very close to the Khazar field. The combined recoverable reserves of the Kalamkas-Sea and Khazar fields are estimated at 67 million tonnes of oil and 9 billion cubic meters of gas.