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Russia, Kazakhstan Push For Hydrocarbon Expansion With Kurmangazy Project

By Azamat Batyrov December 9, 2018

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According to Kazakhstan’s energy ministry, $157 million has been spent since 2006 on exploration of the Kurmangazy field.

Russia and Kazakhstan are expanding the area open to oil and gas exploration in Kazakhstan’s Kurmangazy field, the oil and gas field located in Kazakhstan’s portion of the Caspian Sea, after Kazakhstan’s senate ratified a protocol that had been signed with Russia last November.

The protocol is meant to make slight changes to the existing agreement between the two neighboring nations, which was inked in 1998. Back then, officials in Moscow and Astana agreed on the delimitation of the northern Caspian seabed to exercise sovereign rights to subsoil use in Kurmangazy.

As part of the new agreement, Russia and Kazakhstan will increase the area of the field and extend the exploration period for another six years, with the possibility of a further extension up to four more years.

According to Kazakhstan’s energy ministry, $157 million has been spent since 2006 on exploration of the Kurmangazy field. Despite the high costs, Russia and Kazakhstan are not giving up hope. Located 75 miles west of the Buzachi Peninsula, the Kurmangazy oil field is considered the second largest oil deposit in Kazakhstan, behind Kashagan. Hydrocarbon reserves have not yet been discovered in Kurmangazy, but preliminary scientific forecasts put the possibility of striking oil there very high – reserves are thought to be about 2.8 billion tons. If the forecast proves to be true, both Russia and Kazakhstan will net a profit to the tune of about $50 billion.

Russia and Kazakhstan have been exploring Kurmangazy jointly via the jointly owned Kurmangazy Petroleum Company, established by RN-Exploration (Russia) and KazMunayTeniz (Kazakhstan) – both affiliates of their respective state-run oil giants – in which both parties have equal shares. Two exploratory wells have been drilled already, and seismic surveys and high-precision gravimetric and magnetometric studies have been performed.

“Unfortunately, these exploration wells turned out to be dry and did not yield results. Therefore, it was decided to increase the contract area for contractors of this project by more than 2000 meters,” Kanat Bozumbayev, Kazakhstan’s energy minister said on November 22, according to reports by Informburo.

Over the next six years, the two sides are planning to carry out further seismic exploration in the area. KazMunayGaz and Rosneft will allocate more than $30 million to do so, and if the parties decide to drill, then another $50 million will be spent.

The oil and gas industries are the main pillars for both Moscow and Astana, as both Russia and Kazakhstan are flush with hydrocarbon resources. The two post-Soviet countries have maintained strong partnerships in the energy sector through already existing close economic, technological and transportation initiatives.

Together with Rosneft, Russia’s energy giant Lukoil is engaged in joint exploration of Kazakhstan’s oil and gas fields, including Tengiz, which ranks as the world's deepest supergiant oil field. In addition, Kazakhstan, together with Gazprom – Russia’s giant gas company – is preparing the Tsentralnoye and Imashevskoye fields for commercial development.

Kazakhstan is also partnering with Russia and multinational oil and gas companies to create strategic reserves of hydrocarbons in the Pre-Caspian basin. In 2014, Presidents Vladimir Putin and Nursultan Nazarbayev launched a large-scale project dubbed “Eurasia,” which calls for joint drilling of an oil well at a depth of 9.3 miles. Through that initiative, the two sides are exploring the sub-sea terrain and land deposits.