Lukoil and Kazmunaigas sign conditions for entering new projects in the Caspian Sea

Kazakh “Kazmunaigas” and Russian “Lukoil» signed a contract for the production of hydrocarbons in the Kazakh sector of the Caspian Sea. This was reported on February 6 by the press service of the Ministry of Energy of Kazakhstan.

The release clarifies that the Kazakh ministry was also a party to the signing. We are talking about “granting the right to subsoil use for the subsoil plot of Kalamkas-Sea, Khazar, Auezov.” The implementation of the project involves the payment of a “signature bonus” of $32 million, attraction of direct investments in the amount of more than $6 billion and the creation of about 2,000 jobs at the initial stage of the project.

“As a strategic partner of the national company in the field of hydrocarbons, <...> Lukoil company,” the Ministry of Energy said in a statement.

Vedomosti sent inquiries to Lukoil and Kazmunaigas.

Preliminary work on signing a contract for the development of the Kalamkas-Sea, Khazar and Auezov fields has been going on for several years. Lukoil signed a number of preliminary framework agreements to enter these projects back in 2021 and 2022. In particular, in November 2021, Vagit Alekperov, the largest shareholder of the company, who was then president of Lukoil, and Alik Aidarbayev, chairman of the board of Kazmunaigas (left his post in April 2022), signed an agreement “on the principles” of interaction on the Kalamkas- sea ​​and Khazar. In June 2022, the companies entered into an additional agreement on the commercial terms of its joint sale.

The Kalamkas-Sea, Khazar and Auezov fields are located in the Kazakh sector of the Caspian Sea at a distance of about 60 km from the coast. The total recoverable reserves of the Kalamkas-Sea and Khazar were previously estimated at 67 million tons of oil, 9 billion cubic meters of gas, data for Auezov – 10 million tons of oil and 3 billion cubic meters. m of gas.

The agreement was signed as part of a new legal mechanism launched in Kazakhstan on January 10, 2023 – an improved model contract (AMC), is specified in the release. It is intended “to increase competitiveness and create conditions for attracting additional investment” in the implementation of complex projects. This is the first such contract signed in Kazakhstan. Other nuances of the UMK are not given in the message of the Ministry of Energy of Kazakhstan.

Cooperation between Lukoil and Kazmunaigas is of a strategic nature due to the extensive interests of the Russian company in the Caspian. In 2019, Lukoil signed a contract for the exploration and production of hydrocarbons in the Zhenis block, receiving 50% in a joint venture with Kazmunaigas, and in the summer of 2021 signed an agreement to acquire 49.99% in the Al-Farabi joint project (formerly the block IP-2). Both sites are located in the Kazakhstani sector of the Caspian Sea in close proximity to the Tsentralnoye fields being developed jointly with Kazmunaigas (Lukoil andGazprom Neft” own 25% each) and Khvalynskoye (the share of Lukoil is 50%).

The expansion of international projects is also beneficial for Lukoil due to restrictions against the oil and gas sector of the Russian Federation, which were introduced by the USA, Great Britain, the countries of the European Union (EU) and a number of others in response to the NWO in Ukraine. In addition to the ban on the supply of critical equipment, the countries that joined the sanctions agreed to set a price ceiling for Russian oil and oil products.

Price restrictions are introduced simultaneously with the EU embargo on the supply of raw materials and processed products from the Russian Federation by sea. On December 5, 2022, the price ceiling for Russian oil at $60/bbl came into force, and the price ceiling for oil products came into effect on February 5, 2023 (for diesel – $100/bbl, for fuel oil – $45/bbl).

Lukoil’s interest in new projects on the shelf of the Caspian Sea, according to Finam analyst Sergei Kaufman, is primarily due to the fact that the company has extensive production experience in its northern part. In the same time “Lukoil“Due to sanctions, he is forced to sell part of his European assets (in January 2023, the company agreed to sell the ISAB refinery in Italy. – Vedomosti), and also cannot increase production within Russia, the analyst recalls. In such a situation, an attempt to participate more actively in international projects, according to the expert, is “a logical way to develop business.”

In 2021, Lukoil increased oil production by 1.4% to 81.1 million tons, of which 3.4 million tons fell on foreign projects (data for 2022 are not yet available). Thus, international projects, according to the company itself, account for about 4% of the oil produced.

Senior analyst “BCS The world of investment” Ronald Smith recalls that the Russian part of the Caspian Sea makes a significant contribution to the production of Lukoil, helping to compensate for the decline in production in Western Siberia.

Currently, Lukoil is the largest subsoil user in the Russian sector of the Caspian Sea (the largest fields are named after Filanovsky, named after Korchagin, named after Greifer). In early February 2023, Lukoil reported that the cumulative production in the Russian sector of the Caspian reached 50 million tons of liquid hydrocarbons, in general, the company discovered 11 fields in the Caspian.

“It is logical for the company to expand its capabilities in the region, building on the experience already accumulated,” Smith said. Vasily Tanurkov, director of the ACRA corporate ratings group, notes that the project is promising “taking into account the benefits provided by Kazakhstan for the development of complex fields, and the experience of Lukoil in developing projects on the Caspian shelf.”

Smith estimates that production from the Kalamkas-Sea and Khazar fields could be “100,000 bbl/d or more.” Kaufman recalls that representatives of Kazmunaigas have previously stated that production from these two fields will be about 4 million tons per year from 2028. Tankurkov agrees that peak production may be about 3-4 million tons per year by 2028. Experts did not give estimates of production at the Auezov field.

At the same time, analysts do not expect technological difficulties in the implementation of the project caused by anti-Russian sanctions. Smith notes that earlier the company’s floating jack-up rigs were used for drilling on the Caspian shelf. Eurasia Drilling – “Neptune”, “Mercury” and “Astra”. “Most of the components for the platforms are produced in the Russian Federation, the remaining equipment can be supplied through friendly countries such as China and India,” he said.

Smith adds that the company should have no problem marketing oil, which is “likely to be classified as Kazakh.”