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Kazakh offshore oil blocks’ winners may emerge soon

Filed on October 5, 2005

ALMATY — Kazakhstan said yesterday it will begin talks with oil majors on the new Caspian Sea offshore blocks next year, but industry sources said secret talks were already underway and winners could emerge very soon.

“We will begin first talks about the development of the landlocked Caspian Sea shelf next year,” Kazakhstan’s Energy Minister Vladimir Shkolnik told a news conference.

Kazakhstan, which already holds the largest oil reserves in the Caspian Sea, hopes to find more giant deposits in the area, which could help it become one of the world’s top 10 producers in the next decade.

The Central Asian state is set to triple output to over three million barrels per day by 2015 due to the huge offshore Kashagan block and two large onshore fields, Tengiz and Karachaganak.

Oil majors have been waiting to bid for new blocks for years, but the government has given very little away on its plans. It has repeatedly delayed the tenders, awaiting final changes to tax and oil legislation.

Yesterday, sources among oil majors said talks between them and the state had intensified, although the government was likely to keep things secret for a while.

“I can guarantee that there will be no big newspaper advert in which the government will call on oil majors to make their bids for block Z,” a source with an oil major told Reuters. “The reason for this is that talks are already going on but things are kept pretty secret. I would not expect any official announcement before the first winners are chosen sometime next year,” he added.

Another source said the tender documentation, which had been distributed by the government, was “fair” and extremely ”competitive” as the state had invited almost all global oil majors and state firms from India, China and Russia.

“It won’t be a sweetheart. Competition is already very tough. India, Norway - they all have recently signed memorandums or cooperation agreements and behind these documents you will find real negotiations about real blocks,” he said.

The Caspian Sea is believed to contain as much reserves as Alaska’s Prudhoe Bay. Kashagan alone ranks as one of the top three oil discoveries ever with potential reserves of more than 30 billion barrels.

Kashagan is developed by a group of foreign majors led by Italy’s ENI. The neighbouring field, Kurmangazy, led by Russian state oil firm Rosneft, could also contain up to 7 billion barrels in reserves.

Besides those two are huge unexplored waters of the stormy and freezing sea.

But some say exploration on Kashagan and Kurmangazy has helped teach more about neighbouring areas.





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