(SRI) – Russian oil and gas companies have begun to expand into Kazakhstan in late 1990s, as they started to implement strategic plans to grow production capacity beyond Russia’s borders.
Russian companies, most prominently LUKOil, Rosneft, and Gazprom, are participating or planning to take part in at least eighteen major oil and has projects. They include participation in two of Kazakhstan’s largest projects, Tengizchevroil and Karachaganak, in both of which Lukoil is a shareholder.
Rosneft and Lukoil have been active in exploration work on prospective areas Kurmangazy and Zhambai, which contain up to 1.8 billion and 6.5 billion crude oil equivalent, respectively. Gazprom and Lukoil also participate in the development of prospective primarily gas fields Khvalynskoye, Tsentralnoye, and Imashevskoye, which could contain up more than 450 billion cubic meters of natural gas and 230 million tons of liquid hydrocarbons.
Russian investments in Kazakhstan’s oil and gas sector have been estimated at $4.5 billion, including $1.3-1.4 in direct investment. Nonetheless, Russian activities have so far been relatively limited, especially compared to Chinese companies which had consistently increased their share in Kazakhstan’s oil and gas sector.
The prospects for increasing the share of Russian companies will depend largely on whether new offshore projects, including Kurmangazy, Khvalynskoye and Tsentralnoye, will indeed prove commercially viable. Should those fields, in which Russian companies hold significant interests, fulfill their promises, Russian companies’ share in Kazakhstan’s oil production could reportedly rise to 25 percent while its share in natural gas production could exceed 50 percent.
Their combined crude oil output could reach 6-7 million tons in 2010, 10.8 million tons in 2015, and 14-36 million tons in 2020, analysts expect. Meanwhile, their combined gas production could grow from about 3 billion cubic meters (bcm) in 2010 to 3-4.5 bcm in 2015 to 9-24 bcm in 2020.
However, Russian ambitions in Kazakhstan have been hampered by the global economic crisis which had led to postponement of investment and by the growing uncertainties about the once promising fields like Kurmangazy. Kazakhstan’s portion of the Caspian Sea, once heralded as one of the world’s most promising unexplored areas, has largely fallen short of expectations, easing enthusiasm of international oil companies to engage in difficult offshore projects.
Production agreements between Kazakh and Russian companies have so far reflected this uncertainty, as high-profile projects like Kurmangazy and Khvalynskoye have been put on hold and are not functioning as originally envisioned.
Last month, Lukoil started commercial production at the Korchagin deposit in Russia’s portion of the Caspian Sea. Russian leaders expressed hope that the launch of the country’s first major Caspian offshore energy development project will help revive the drive to develop deposits in the Russian and Kazakh sector of the Caspian Sea.