On December 21, the Kazakh Energy Ministry, Kazakhstan’s state-run oil and gas firm KazMunayGas and the Italian energy major Eni SpA agreed to allocate to the latter 50% of the subsoil use rights in Isatay offshore oil block, located some 40km north of the Buzachi peninsula, in the Kazakhstan sector of the Caspian Sea. Finalization of the deal included the official launch of Isatay Operating Company, a 50-50 joint venture between Eni and KazMunayGas, which is going to serve as operator of the block.
Total perspective oil resources of Isatay are estimated at 468 million tons of category C3, and, according to Eni, they are considered ‘’geologically not complex and technologically developable in a short time’’. Isatay is deemed to be particularly sensitive regarding the ecological aspect of extraction, a fact that renders Eni’s established technologies and multiannual experience of prime importance for the block’s exploration.
The Italian majority private-owned giant is no newcomer to the Caspian state of energy affairs. Eni has a proven record of committed participation in hydrocarbon production in Kazakhstan since about the country’s declaration of independence, in the early nineties. In 1997, it was numbered among the consortium of Western companies that had concluded a deal with the Kazakh government to explore and develop the northern Caspian, resulting in the discovery of the immense Kashagan field, three years later. Eni also jointly operates with Royal Dutch Shell the Karachaganak oil and gas condensate field in northwest Kazakhstan, each holding a 29.25% of the project.
As for Isatay, it was first covered by a Memorandum of Understanding inked by Eni and KazMunayGas back in 2009. In 2014 the two partners agreed on the principal terms of cooperation for the block’s joint development, while in 2015 they set out the commercial terms of the transfer of 50% of the subsoil use rights to Eni. Final documents were after all signed in June 2017.
Eni’s newly officialized involvement in the Kazakh hydrocarbon exploration comes amid the recent revival of the long debatable Eurasia Project, targeting deep-water oil reserves in the Caspian Depression, for the purpose of which KazMunayGas, Rosneft, CNPC, SOCAR, NEOS GeoSolutions and Eni itself decided to team up in the summer. Furthermore, this development was followed by the adoption of Kazakhstan’s code ‘’On Subsoil and Subsoil Use’’, signed by the Kazakh President Nursultan Nazarbayev on December 27. The document stipulates the lifting of barriers to the subsoil user’s activity intending to encourage direct foreign investments in the sector. Introducing a simplified process of granting rights to subsoil use based on the ‘’first come, first served’’ model, the Code also promises stability guarantees for already existing contracts and provides for open access to geological information in digital format, as well as for the revision of the list of widespread mineral resources.
After the first oil from Tengiz field passed into the Caspian Pipeline Consortium, in 2001, Kazakhstan for the first time succeeded in getting integrated into the global oil industry. The country has ever since sought to draw attention to its subsoil business. However, the downward oscillation of oil prices during the past two years might minimize the margin of profit recovery for any leading oil company interested in supporting new Kazakh discoveries, thus making any future investment less viable. In the midst of a persisting, but always likely to be dashed, bullish sentiment in oil prices and rising environmental awareness that have left oil majors seriously pondering upon a shift from combustibles to renewables, Kazakhstan seems firmly determined to dig deep into its unexploited geological layers despite the evidently unfavorable international context.
Available online at: http://www.caspianpolicy.org/energy/caspian-energy-insight-january-3-2018/#6