LUKOIL organized a visit to Karachaganak, a major oil and gas condensate field in Kazakhstan, on 27-29 August 2003 as part of the Company's program of field trips for investors.
Nearly sixty people participated in the two-day visit, including representatives of local and international investment companies and banks, senior management of LUKOIL, LUKOIL Overseas and the project operator, Karachaganak Integrated Company (KIO), as well as business and industry journalists.
Karachaganak project participants (BP Group, ENI-Agip, Chevron Texaco, LUKOIL) and KIO offered the visitors joint presentations on current and future stages of the project, as well as describing social and ecological programs.
- Andrei Kuzyaev emphasized that LUKOIL Overseas has shown annual production increases of 30% for the last three years, while maintaining operating costs at under $1.5 per barrel. Production increases from international projects are expected to be a quarter of total production increases by LUKOIL.
- After the presentations investors and analysts were given a tour of KIO production facilities, visited gas processing units (Unit 2 and Unit 3) and the Karachaganak Processing Complex, which was opened on 1 August 2003 by Nursultan Nazarbaev, President of Kazkhstan.
- On the following day the participants met with Krymbek Kusherbaev, Akim (Governor) of Western Kazakhstan Region (WKR), as well as representatives of the Kazakh government and the company KazMunaiGaz, to discuss investment potential and the investment climate in Kazakhstan and WKR.
Assessing results of the visit, Vagit Alekperov, President of LUKOIL, said: "We have once again confirmed our transparency for our numerous shareholders, stock-market participants and mass media. We have also demonstrated the Company's ability to participate in large international projects."
Karachaganak, a major oil and gas condensate field located close to the city of Aksaj in North-West Kazakhstan, was discovered in 1979.
Karachaganak Export Pipeline
- In accordance with a 1997 agreement, Karachaganak is being developed by KIO (Karachaganak Integrated Company). KIO is an international consortium, set up by BG Group (32.5%), Agip (32.5%), ChevronTexaco (20%), and LUKOIL (15%, bought from Gazprom in 1998). Proven reserves total 1.542 bln barrels of oil and gas condensate, and 10,547 bcf of natural gas.
- LUKOIL's share of oil and gas condensate production at the field in 2002 was 720 thousand tons, and its share of natural gas was 676 million cubic m. Field production is scheduled to increase by 1.4 times in the current year, when LUKOIL's production share will be over 1 million tons of oil and gas condensate and over 736 million cubic m of natural gas. Next year the project is expected to generate positive cash flow for the first time.
Karachaganak Production History
| 2001 | 2002 | LH 2003 | Change (1H 2002 to 1H 2003) | ||
|---|---|---|---|---|---|
| Production | thousand boe | 8495 | 10894 | 6205 | +17% |
| Revenues | $ thousand | 18124 | 48138 | 31162 | +67% |
| Operating Income | $ thousand | 3628 | 124111 | 10705 | +232% |
| EBITDA | $/boe | 0,78 | 2,62 | 3,30 | +84% |
| Operating costs | $/boe | 1,36 | 1,30 | 1,18 | -4,5% |
LUKOIL Overseas Karachaganak B.V. Financial and Operational Results
- The first, preparatory phase of Karachaganak field development (from 1995 to 1997) absorbed $160 million of investment. The second phase, from 1998 to 2003, will cost $3.5 billion and involves raising annual liquid hydrocarbon production to 7 million tons.
The Karachaganak Gas Processing Plant, designed for field condensate treatment, was opened on August 1st , 2003 as part of the second phase. A 650-km pipeline for transportation of liquid hydrocarbons from Karachaganak to Atyrau was launched on the same date. Karachaganak hydrocarbons will feed into facilities of the Caspian Pipeline Consortium (CPC) at Atyrau.
During the third phase, to 2008, gas condensate production will be increased to 12 million tons annually before full capacity is achieved in the fourth and final phase from 2009-2038.
3D Structural View from the East
Kazakhstan's government plans to raise $2 billion for development of the field between 2003 and 2008. A special working group led by Deputy Prime Minister Karim Masimov has already started to draft this plan. It should be implemented as part of the third phase and will involve construction of another gas processing plant as well as petrochemical enterprises. Foreign investors from KIO will provide 40 percent of the funds.
Development of the Karachaganak oil and gas condensate field is one of LUKOIL's priority international projects. The Company has already invested $1.5 billion in oil and gas projects in the Republic of Kazakhstan. Total investments by all the parties involved in Karachaganak have exceeded $4.3 billion since signing of the Karachaganak project production sharing agreement (PSA) in 1997. The PSA is anticipated to remain valid for 40 years.
- Renaissance Capital"LUKOIL Field Trip to Karachaganak"
- UFG "LUKOIL: Kazakhstan Field visit"
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* The above research reports could be received directly from the investment houses. LUKOIL does not vouch for the accuracy of the information or endorse the opinions contained in the analysts' reports.
