Kazakh offshore consortium announces oil discovery

July 25, 2000
Web posted at: 10:32 a.m. HKT (0232 GMT)

MOSCOW (Reuters) -- The nine-member OKIOC consortium announced on Monday it had struck oil at the Kashagan East well off Kazakhstan's Caspian coast, breaking its silence over what local officials have called one of the world's biggest fields.

The Offshore Kazakhstan International Operating Company said the full appraisal phase would probably last until late 2002, by which time the group could give a reliable estimate as to how much crude lay beneath its acreage of the shelf.

Expectations have been rising after Kazakhstan, desperate for a massive find to put it on the map as a major oil producer of the future, made a series of early announcements pegging oil and gas reserves at up to 50 billion barrels.

If correct, this would place the Kashagan structure second only to Saudi Arabia's onshore Ghawar field, with remaining reserves of 70 billion barrels while Saudi's Safaniya field, the world's largest offshore deposit, has 19 billion barrels.

OKIOC continued to urge caution on Monday. "We have drilled just one well in a big structure," said OKIOC spokesman Matthew Bateson by telephone from Almaty in Kazakhstan. "We have another well planned under the exploration programme and then plan to move to an appraisal programme."

Early results were "encouraging," however, both in terms of rate flows and the quality of the oil coming to the surface.

An OKIOC statement said the first well had tested at 600 cubic meters of oil per day and 200,000 cubic meters of gas per day. Oil gravity ranged between 42 and 44 degrees API, indicating "quite a light crude," Bateson said.

Drilling activities at Kashagan West, a second exploration location 40 km (25 miles) from Kashagan East, would begin in the fourth quarter of the year, OKIOC said.

Kashagan East lies 75 km (47 miles) southeast of Atyrau on the Kazakh coast and was drilled in just three meters (10 feet) of water to a total depth of nearly 5,200 meters (16,400 feet).

A major discovery could put the Caspian back on the map of Western oil companies, whose interest in the landlocked sea has flagged in recent years due to low oil prices, high transportation costs and legal disputes between littoral states.

Kazakhstan hopes OKIOC will catapult it up the league table of world oil producers and bring in revenue to fund its transition to a market economy.

A find even a fraction of the size estimated by hopeful Kazakh officials would also trigger an intense battle for influence over hydrocarbon exports from the vast former Soviet republic of 15 million people.

The United States wants Kazakhstan to pledge OKIOC oil to the planned oil pipeline from Baku in Azerbaijan to Turkey's Mediterranean oil outlet of Ceyhan, possibly via a new pipeline across the Caspian Sea.

Washington supports the Baku-Ceyhan route as it would reduce the influence of Russia and Iran over the strategic basin.

Tehran has made an aggressive play for OKIOC oil to run south via Iran, while Moscow is likely to try to secure any flow of offshore production across its territory.

OKIOC unites Philips Petroleum, BP Amoco, Agip, BG Plc, Royal Dutch/Shell, ExxonMobil, Totalfina, Statoil and Japan's Inpex.

Copyright 2000 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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Offshore Kazakhstan International Operating Company
Kazakhstan
CIA -- The World Factbook 1999 -- Kazakhstan

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