Kazakhstan to revise Kashagan PSA

energy

By SRI ⋅ July 24, 2008 ⋅

(SRI) - Kazakhstan will revise the Production Sharing Agreement with the consortium of oil companies developing the Kashagan field to reflect new arrangements reached last month, Kazakh Minister of Energy and Mineral Resources said on Wednesday.

In June, Kazakhstan and AgipKCO, the consortium, agreed to postpone commercial production until 2013 and mapped out a new royalties structure requiring the Kashagan partners to pay the government a percentage of output depending on the world price of crude oil.

Additionally, in January the oil companies have agreed to increase the share of KazMunaiGas, the Kazakh national oil company, in the project from 8.33% to 16.81% and change the operating structure of the company to include the five oil companies with the largest stakes in the project.

These agreements have been stipulated in signed Memorandums of Understanding but still need to be formally included in the PSA.

“Currently we are dealing with the paper work within the earlier reached agreements including a share acquisition. All the procedures must be completed by the middle of October this year,” Mynbayev said in an interview to the Vremya weekly.

The revision of the Kashagan PSA will conclude a row over delays and cost overruns in the development of the large offshore field. The standoff began in August 2007 when the government accused Kashagan shareholders of allowing costs to more than double to $136 billion from $57 billion, and repeatedly missing the original 2005 production target.

Under the PSA, the licensed area includes the three oil-bearing structures Kalamkas, Aktoty, Kairan in addition to Kashagan. The recoverable oil reserves are estimated at a minimum of 7-9 billion barrels and the total oil in-place at 38 billion barrels.

Today, Agip KCO is owned by Eni, Total, ExxonMobil, Royal Dutch/Shell which have 18.52% each, ConocoPhillips - 9.26%, Inpex and KazMunayGas - 8.33% each.