Tengiz field companies launch $5 billion project to dig 66 gas wells

ASTANA – Sixty-six gas wells will be drilled at the Tengiz field as part of the $5 billion North East Ring Project (NERP), said Union of Kazakhstan Oilfield Service Companies Chair Rashid Zhaksylykov at an Oct. 10 press conference. Tengiz is Kazakhstan’s major oil and gas field operated by the Chevron-led joint venture Tengizchevroil.

Photo credit: reuters.com.

“It is important for participants of the industry to be involved in these projects,” said Zhaksylykov.

The country’s oil industry, he said, is rebounding.

“The oil and gas industry is active today. Positive changes in oil prices revived the industry. The Karachaganak expansion project was launched with a $5 billion budget. The Future Growth Project is underway with a budget totalling $37 billion. Development projects Khazar and Kalamkas-Sea [two smaller fields nearby Kashagan] field development projects will be launched in the Caspian Sea,” he said.

He reiterated the need to recruit more local specialists, similar to what Kazakh President Nursultan Nazarbayev voiced in his recent state-of-the-nation address.

“As you know, since the moment we joined the World Trade Organisation, our country could no longer demand from new oil production companies to purchase Kazakh products. Though at the same time we see how WTO founding country, the United States, takes contradictory actions in terms of WTO rules. In his state-of-the-nation address, President set a concrete goal to develop Kazakh content,” said Zhaksylykov.

The union is developing a programme with three major oil and gas operators, Tengizchevroil (TCO), Karachaganak Petroleum Operating and North Caspian Operating Company (NCOC), to increase the number of Kazakh specialists.

“It has been more than 20 years since Tengiz, Karagachanak, Kashagan projects were launched, where there is a very low share of Kazakh specialists at key positions. Foreigners head departments of procurement, engineering, construction, current projects and technical projects. They come for three or four years and go back, they do not know local market and therefore work mostly with foreign contractors,” said the union’s Project Manager Niyaz Zhumat.

Zhaksylykov believes the Kazakh oilfield service market is profitable for foreign companies. At present, more than 20 out of the 100 largest contracting companies operate in Kazakhstan.

The level of local oil field service companies, however, significantly improved.

“The new code on subsoil use identifies increasing the share of local content in oil projects among mandatory conditions stipulated in subsoil use contract. Local companies account for an average of 50 percent of the total volume of oil field services that are estimated at $8 billion per year,” he added.

To boost investments in the field, Kazakhstan will set up the Fund of Direct Investments, said Zhaksylykov.

“Today, we can see that banks are not able to ensure liquidity to oil service companies to replenish working capital. Some tenders amount to tens and hundreds of millions of dollars. It is not a secret that very few domestic companies possess free flowing working asset. And this measure should revive the sector of the economy,” he said.