Russia’s Lukoil has finalised a PSA to explore and develop the Zhenis block in the Kazakh zone of the Caspian Sea, clearing the way for work on the site to begin.
The private oil firm will operate the block in a 50:50 JV with Kazakhstan’s state-owned KazMunayGas (KMG). In a statement, KMG said the pair would be required to gather 3D seismic data and sink at least one exploration well.
Zhenis lies in waters 75-100 metres deep some 80 km from the coast, and is estimated by Kazakh authorities to contain up to 615 million toe of hydrocarbons. France’s Total struck a preliminary deal to explore the area in 2010, before deciding not to pursue the project.
Lukoil first voiced its interest in Zhenis in early 2018, citing recent improvements in Kazakhstan’s business climate. It signed an initial agreement with KMG on development in June that year, announcing it would invest US$270 million in exploration.
Lukoil estimated the cost of drilling a well and conducting seismic work at US$60 million. Pending results, the company said it would proceed to a US$210 million prospecting stage.
Lukoil is already heavily invested in Kazakhstan’s upstream sector. The operator holds shares in the onshore Karachaganak and Tengiz oil projects, as well as the smaller Kumkol field. Offshore, it operates the Khvalynskoye and Tsentralnoye deposits, which straddle Kazakh and Russian waters in the centre of the Caspian.
Kazakhstan has awarded dozens of contracts for offshore development over the years, but many of these projects have disappointed. But following reforms to taxation and subsoil law last year, interest in the area is growing.
Italy’s Eni is in talks with KMG to finalise a contract for the offshore Abay block, which contains an estimated 2.8 billion barrels in potential oil resources. The site borders another area known as Isatay, which Eni agreed to develop in 2017.