Karachaganak | KazMunayGas Agreements | Caspian Pipeline Consortium (CPC) | Operations Map

Upstream and downstream co-operation agreements with KazMunayGas signed Agreement on the principle of the CPC pipeline expansion reached by CPC shareholders

BG Group has been active in Kazakhstan for over 17 years. It is joint operator of the giant Karachaganak gas condensate field, where it has a 40-year concession, and is a shareholder in the Caspian Pipeline Consortium (CPC). The CPC pipeline links reserves in western Kazakhstan to the Black Sea, providing access to world markets.

Key dates

1996
2% stake in restructured CPC acquired

1997
Karachaganak PSA signed

2001
CPC fully operational

2003
First liquids from new Karachaganak facilities

2004
Phase II Karachaganak development completed

First exports via Novorossiysk on the Black Sea

2006
Oil exports commenced via the Atyrau Samara pipeline

Karachaganak, discovered in 1979, is one of the world’s largest gas and condensate fields. Located in north-west Kazakhstan, it holds estimated hydrocarbons initially in place of 9 billion bbls of condensate and 48 tcf of gas, with estimated gross reserves of over 2.4 billion bbls of condensate and 16 tcf of gas.

Production from the Karachaganak field began in 1984. Since the signing of the Final Production Sharing Agreement (FPSA) in 1997, the Karachaganak partners have made substantial investment in wells, facilities and pipelines. In addition to its size, Karachaganak presents the operators with formidable challenges due to extreme climate swings (+/- 40 degrees centigrade) and the requirement to reinject high pressure sour gas. BG Group’s share of production from Karachaganak in 2008 was a record 39.8 mmboe.

The FPSA envisaged a phased development programme, of which Phase I and the initial investment for Phase II have been completed. Phase II, which came onstream in 2004, involved investment to enhance the existing facilities, construct new gas and liquids processing and gas injection facilities, work-over of more than 100 wells, construct a 120 MW power station and lay a new 650 kilometre pipeline to connect the field to the CPC pipeline at Atyrau.

Until 2004, virtually all production was sold into Russia, but now most liquids are exported to the west (currently around 70%), with some condensate and all raw gas continuing to be sold into Russia. Since 2004, condensate exports are mainly via the CPC pipeline and, since 2006, additional oil exports are routed via the Atyrau Samara pipeline leading into the Russian Transneft system, enabling sales to achieve international prices.

The Phase IIM drilling programme consisted of 16 production wells, the first of which came onstream in 2004. A fourth stabilisation train project, sanctioned in 2006, is due to be completed in 2010 and onstream in first quarter 2011. It includes 13 wells and is expected to increase western export volumes to more than 10mtpa and develop gross reserves of 300 mmboe.

In relation to the next phase of development, BG Group and its partners have initiated discussions with KazMunayGas on alternative phasing of the original project expenditure. This is to ensure that the full capital commitment is not made at the peak of the cost cycle. The first stage will involve a new drilling programme and is expected to increase gas injection and gas sales.

KAZMUNAYGAS AGREEMENTS	back to top

In December 2008, BG Group announced an agreement with JSC National Company KazMunayGas (KMG) and KMG subsidiary KazMunayGas Exploration and Production to co-operate in exploring a range of upstream opportunities. The agreement sets out the principles of a joint study of the hydrocarbon reserves potential of specific areas in Kazakhstan and other countries. The companies are working in partnership to identify opportunities across a range of potential oil and gas exploration and production projects. A joint team examines specifically targeted regions and recommends prospective acreage to partners for their consideration.

A second, downstream, co-operation agreement has been signed with KMG to examine ways to increase gas utilisation in Kazakhstan.Work is underway on a CNG pilot project in Almaty aimed at increasing gas usage and improving the environment by reducing vehicle emissions. Further work has commenced on gas industry regulation.

The CPC was formed to build a pipeline system to transport oil from western Kazakhstan to the Black Sea near Novorossiysk in Russia. The pipeline system, which commenced operations along its full length in 2001, consists of a new-build line, new marine terminal facilities near Novorossiysk and an upgraded pipeline. The system currently has a capacity of 33mtpa.

BG Group has a 2% equity share in the pipeline but is entitled to 2.75mtpa (55 000 bopd) of capacity (around 10% of the total) which is used to transport liquids from Karachaganak. Karachaganak, operating via the Karachaganak Petroleum Operating Company (KPO), began delivering liquids into CPC in 2004. In 2008, liquids from Karachaganak yielded 7.5 million tonnes gross (BG Group 2.5 million tonnes).

In December 2008, the CPC shareholders reached agreement on the principles of the CPC pipeline expansion, to increase its throughput capacity from its current 33mtpa to 67mtpa. The expansion project includes the addition of 10 pump stations in Russia and Kazakhstan, six crude oil storage tanks near Novorossiysk and a third single-point mooring at the CPC Marine Terminal. The shareholders are working towards sanctioning the expansion by the end of 2009. The expansion will be phased and its completion is expected to occur in 2013.