Companies from Kazakhstan and Italy may soon be conducting joint exploration of the Abay oil and gas block in Kazakhstan’s sector of the Caspian Sea. Earlier this week representatives signed a joint operating agreement (JOA) and negotiated a carry agreement (CA) for the purpose of investing in the upstream project.
Kazakhstan’s state-owned KazMunayGas and Eni Isatay, which is a subsidiary of the Italian energy giant Eni, are one step closer to drawing up a contract, as the companies await approval from the energy ministry in Astana. The parties to the agreement will negotiate the hydrocarbons exploration and production contract according to the Kazakh Subsoil and Subsoil Use Code.
Located 43 miles northwest of the Buzachi Peninsula, the Abay oil field lies at a depth of eight to 10 meters. Reserves are thought to be about 337 million tons, while the average depth of oil occurrence is 1,300 meters on the Cretaceous and 1,800 meters on the Jurassic deposits.
Meanwhile, the development of Abay was first negotiated with the Norwegian company Equinor in early 2013 (then called Statoil), but the company refused the project and handed it over to the Kazakhstani government despite serious preparatory groundwork already completed. The parties did not agree on exploration, 100 percent of the costs for which Equinor was to undertake.
Kazakhstan, in turn, offered for India to develop the Abay oil block, but could not reach a deal. Only in 2017, KazMunayGas resumed the search for a strategic partner for joint development of the Abay.
The project in Kazakhstan will not be a first for Eni, which has been involved in the country since 1992. The company has been responsible for exploration of the Karachaganak (29.25 percent) and Kashagan oil and gas fields, considered the world’s largest discovery in the last 30 years.
Eni holds a 16.81 percent interest in the North Caspian Sea Production Sharing Agreement that defines terms and conditions for the exploration and development of the giant Kashagan field. The sharing agreement expires by late 2041. Since 1992, Eni’s investments in Kazakhstan have exceeded $15 billion.
In 2017, Eni purchased a 50 percent stake for exploration and production activities in the Isatay block located in the Kazakhstani sector of the Caspian Sea. The block is estimated to have significant potential for hydrocarbon resources, which are geologically not complex and technologically developable within a short amount of time.
Officials in Eni believe the agreement expands the scope of Eni’s activities in Kazakhstan and consolidates the strategic alliance with its key partner KazMunayGas.
“The signature of this transaction marks the beginning of the operations of the new Joint Company, in which Eni will leverage its proprietary technologies, its leadership in exploration and its extensive experience in challenging technical and environmental areas such as the Caspian Basin,” the statement published to the company’s website reads.