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BG Group has been active in Kazakhstan for 20 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.

Spotlight on Kazakhstan Facts figures and background on our operations in Kazakhstan Press release: 28 June 2012 Agreement on Karachaganak completed with Republic of Kazakhstan Binding settlement agreement resulting in KazMunaiGas joining the contractor group

Key dates

1997
Karachaganak FPSA 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

2008
Upstream and downstream cooperation agreements with KazMunayGas signed

2010
CPC expansion project sanctioned

2011
Start-up of the fourth liquids stabilisation train

Karachaganak

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 re-inject high pressure sour gas. BG Group’s share of production from Karachaganak in 2011 was 37.4 mmboe.

The FPSA envisaged a phased development programme. Phase 2, which came onstream in 2004, involved investment to enhance the existing facilities, construction of new gas and liquids processing and gas injection facilities, work-over of more than 100 wells, construction of a 120 MW power station and a new 650 kilometre pipeline to connect the field to the CPC pipeline at Atyrau.

Most of the liquids are exported to the west (87% in 2011), with some oil and all raw gas sold locally and into Russia. Since 2004, oil 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.

In 2011, a fourth liquids stabilisation train commenced operation. The project increases stabilisation capacity by 2.57 million tonnes a year (mtpa).

In June 2012, a settlement agreement between the Republic of Kazakshtan (the Republic) and the Karachaganak partners was completed. Under the terms of the agreement, which is effective from 28 June 2012, the Republic has acquired a 10% interest in the FPSA from the consortium for $2.0 billion cash and $1.0 billion non-cash consideration (pre-tax) including the final and irrevocable settlement of all cost recovery claims, with each of the contracting companies’ equity shares reducing proportionately. The Republic’s interest is now held by a subsidiary of the national oil company, KazMunaiGas (KMG). The consideration under the agreement also includes the allocation of an additional 2 mtpa capacity in the CPC export pipeline over the remaining life of the FPSA, bringing total capacity for the use of the Karachaganak project to 10 mtpa on completion of the CPC expansion project, expected in 2015.

BG Group and its partners are working with the Republic to define the next phase of development.

KazMunaiGas agreements

In 2008, BG Group announced an agreement with KMG and KMG subsidiary KazMunaiGas Exploration and Production (KMG EP) to cooperate in exploring a range of upstream opportunities. The agreement set out the principles of a joint study to identify potential opportunities in specific areas in Kazakhstan and other countries. In 2010, KMG EP acquired a 35% interest in the P1722 licence in the UK North Sea, which contains the White Bear prospect, the first official venture under this agreement. Drilling on the prospect began in May 2012.

A second, downstream, cooperation agreement was signed with KMG to examine ways to increase gas utilisation in Kazakhstan. As a follow through to this agreement, BG Group also signed a cooperation agreement with JSC KazTransGas (KTG) on implementation of a pilot project to convert vehicles in Almaty to compressed natural gas (CNG). The CNG pilot project is aimed at increasing gas usage and improving the environment by reducing vehicle emissions. BG Group in partnership with KTG opened the first CNG station in Almaty in 2010 and currently a fleet of 200 CNG buses operate in the Almaty city.

Caspian Pipeline Consortium (CPC)

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 1 500 kilometre length in 2001, consists of a new-build line, new marine terminal facilities near Novorossiysk and an upgraded pipeline. The system currently has a design capacity of 28.2 mtpa.

BG Group has a 2% equity share in the pipeline but is entitled to 2.75 mtpa (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 2011, 7.8 million tonnes of liquids from Karachaganak was transported via CPC (BG Group 2.1 million tonnes).

In 2010, the CPC shareholders sanctioned the CPC expansion project, which will more than double capacity in three phases, with completion expected in 2015. Total capacity will increase to 67 mtpa. Following expansion, BG Group’s entitlement will rise to 3.0 mtpa (60 000 bopd). BG Group and the Karachaganak partners also have the opportunity to capture capacity unused by other shareholders. 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.