KMG ends hunt for partner at Abay block

06 July 2017, Week 26, Issue 938

Kazakhstan’s national oil company (NOC), KazMunaiGas (KMG), has ended its one month-long search for a partner at the Abay block in the Caspian Sea.


At the end of May, the state-owned producer invited international oil companies (IOCs) to bid for a minority stake in the shallow-water block, which lies around 65 km from the Kazakh coast. In a statement on June 28, the state-owned producer announced that the deadline for applications had passed. It did not say whether it had attracted any offers for the block, nor how long it would take to evaluate potential candidates.

According to Kazakh authorities, the Abay contract area could contain as much as 4.4 billion barrels of oil in reservoirs between 1,300 and 1,800 metres below the seabed. Water depths at the site are between 8 and 10 metres.

Norway’s Statoil signed a memorandum of understanding (MoU) on its participation at the block in 2005, and went on to strike a heads of agreement (HoA) with KMG for development work in 2011. Two years later, however, the Oslo-based producer withdrew from the project, allegedly after deeming it too risky a venture.

In a statement in May announcing a fresh search for a partner, KMG said it would accept offers from oil and gas companies in the Forbes’ 200 list of the world’s largest public entities, as well as their wholly owned subsidiaries, without pre-qualification. Other potential investors will need to have at least five years of prior experience working at Caspian exploration projects backed up by significant financial resources, the company said.

The Abay block is nearby to the Kalamkas deposit, which has been earmarked as the next development target of the consortium operating the Kashagan oilfield. The consortium includes Royal Dutch Shell (UK-Netherlands), ExxonMobil (US), Total (France), CNPC (China) and Inpex (Japan), alongside KMG.

Abay is also adjacent to the Satpayev block, which KMG is developing with India’s ONGC Videsh Ltd (OVL). Astana invited OVL to work at the Abay block in 2014, although a partnership was never finalised. The Indian company did not respond to a request byNewsBase Intelligence (NBI) to confirm whether it had made an offer for the Abay block last month.

OVL bought a 25% stake in Satpayev in 2011, paying US$80 million to KMG plus a US$13 million signing bonus to the Kazakh government. It originally had planned to drill two exploration wells at the site in 2014 and 2015, although delays in securing a platform meant this schedule was not kept. Work on the first well finally got under way in mid-2015, although results were not published. In its report for the 2016-2017 financial year, OVL said it intended to spud a second well at the site this month. It also noted that Astana had granted it a two-year extension on its licence for exploration work.


Joseph Murphy

Edited by

Joseph Murphy


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