Karachaganak | Caspian Pipeline Consortium (CPC) | Operations Map

BG Group has been active in Kazakhstan for over 15 years. It is joint operator of the giant Karachaganak gas condensate field in north-west Kazakhstan, 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
Acquired 2% stake in restructured Caspian Pipeline Consortium (CPC)

1997
Karachaganak and North Caspian PSAs 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

2005
Completed sale of interest in North Caspian Sea PSA

2006
Oil exports commenced via the Atyrau Samara pipeline

2007
Agreed terms of the Phase III Gas Sales Agreement with KazRosGaz

BG Kazakhstan, Karachaganak

The Karachaganak field, 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 (HIIP) of 9 billion bbls of condensate and 48 tcf of gas, with estimated gross reserves of over 2.4 billion bbls condensate and 16 tcf of gas.

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 2007 was a record 39.6 mmboe, an increase of 9% compared with 2006. In first quarter 2008, a further production record was reached, with BG Group’s share amounting to
11.3 mmboe.

Production from the Karachaganak field began in 1984 when Kazakhstan was still part of the Soviet Union. In 1995, a Production Sharing Principles Agreement (PSPA) was signed under which BG Group and Agip (now Eni) took over operatorship of the field in order to halt rapid production decline and to improve the safety and environmental performance of the facilities.

Texaco (now Chevron) acquired a 20% share in Karachaganak from BG Group and Agip in August 1997, and two months later LUKoil took the 15% share that was formerly held by Gazprom. In November 1997, the FPSA was signed (effective 27 January 1998), superseding the PSPA and providing for the full development of the field.

The FPSA envisaged a phased development programme, of which the first two phases have been completed. Phase II involved investment to enhance the existing facilities, construct new gas and liquids processing and gas injection facilities, work-over 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.

Phase II facilities came fully onstream in 2004. Historically, virtually all production was sold into Russia, but now most liquids are exported (currently around 70%), with some condensate and all raw sales gas continuing to be sold into Russia. Exports are mainly via the CPC pipeline and achieve international prices that are substantially higher than those secured in the Russian market. An additional oil export route, via the Atyrau Samara pipeline leading into the Russian Transneft system, subsequently became available, and oil exports through this route began in 2006, enabling additional sales at international prices.

The Phase IIM drilling programme, incorporating an additional 16 production wells, was sanctioned in 2005. A fourth stabilisation train project, sanctioned in 2006, has been expanded to include
13 additional wells and a rail export facility with an initial capacity of 3.8 mtpa. This is expected to increase Western export volumes to more than 10 mtpa and develop gross reserves of 250 mmboe. It is planned to be onstream in 2009. In 2006, pre-FEED work for the Phase III development of the Karachaganak field was completed. Further work is now underway, designed to increase liquids and gas production rates and to recover additional reserves. The multi-billion dollar Phase III development is expected to increase liquids sales to 16.5 mtpa and gas sales to 16 bcma.

In May 2007, BG Group and partners agreed the terms of the Phase III Karachaganak Gas Sales Agreement with KazRosGaz, a joint venture between Gazprom and KazMunaiGaz. The agreement sets out the commercial terms governing the sale of gas over a 15 year period.

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 first phase of the system, known as the Initial Construction Project (ICP), has a capacity of 28.2 mtpa (560 000 bopd), all of which has been allocated to CPC shareholders. However, CPC is able to accept more oil than initially expected (now in excess of 30 mtpa) as a result of improved operating efficiency.

Karachaganak, operating via the Karachaganak Petroleum Operating Company (KPO), began delivering liquids into CPC in 2004.

BG Group has a 2% equity share in the line but is entitled to 2.75 mtpa
(55 000 bopd) of CPC initial capacity (around 10% of the total) which, along with other Karachaganak partners’ entitlements, is being used to transport liquids from the Karachaganak field.

An expansion of the pipeline system to over 60 mtpa is the next step, and FEED and CPC shareholder discussions related to this are ongoing. The first phase of expansion will increase BG Group’s preferential capacity rights to
3 mtpa (60 000 bopd), and there is potential to increase the total gross capacity of the pipeline to some 67 mtpa (1.5 million bopd) over time. In 2007, liquids from Karachaganak yielded 7.6 million tonnes gross
(BG Group 2.5 million) at Novorossiysk. First quarter 2008 marked the successful KPO loading of the 300th tanker, with the loading of some
200 million barrels (gross) since exports commenced in 2004.