11 Jul 2023 18:39

KazMunayGas and Lukoil to close Zhenis project in Caspian after unsuccessful drilling

ASTANA. July 11. (Interfax) - KazMunayGas and Lukoil will close the Zhenis project after drilling a '"dry" well at an offshore block in the Kazakhstan sector of the Caspian.

"We are closing the project and returning the contracted territory to the state," the KazMunayGas press service told Interfax.

"Unfortunately, the drilling of an exploration well at the Zhenis structure confirmed a lack of hydrocarbons in the trap area. A geological risk has materialized," KazMunayGas said earlier in a statement, which noted that the probability of success at the time of appraisal and the start of the project was 20%.

"In order to carry out geological exploration and clarify the site's prospects, the partner's investments (represented by Lukoil) were attracted through the mechanisms of carry financing. Carry financing implies a 100% investment by the partner participating in the project at the stage of geological exploration and compensation for these costs at the stage of future production. In the case of failure at the exploration stage, these costs are not reimbursed," KazMunayGas said.

At the same time, the Kazakh company noted that as a result of geological drilling, additional information was obtained on the structure of the subsoil, which is necessary for other projects.

The Zhenis structure is located on the site of the same name, which is located in the southern part of the Kazakh sector of the Caspian Sea. The water depth in the drilling area is about 98 m. The nearest distance to the shore is 50 km.

The project operator Zhenis Operating LLP is a 50/50 joint venture between KazMunayGas and Lukoil. The contract for the exploration and production of hydrocarbons was signed on April 1, 2019. The minimum commitment wss to drill one exploration well and conduct 3D seismic surveys, for which about $60 million would be allocated. The second stage of work was estimated at $210 million.