TBY talks to Mark Rollins, President of BG Kazakhstan, on creating synergies, new agreements between private companies and the government, and the future expansion of the country’s processing ability.
TBY What is the significance of the agreement between Kazakhstan and its various contracting companies in the oil and gas sector?
MARK ROLLINS In December 2011, the Karachaganak partners and the Republic of Kazakhstan reached an agreement that resolved a range of outstanding issues. This was a significant milestone in our relationship. The agreement opens the way for the next phase of Karachaganak’s development. We are currently working hard to identify and agree on an optimal development concept that will maximize the future benefits to all parties involved. The agreement also opens the way to the full entry of KazMunaiGas (KMG) into the Karachaganak consortium. We very much look forward to working closely with our new partner.
Less than 10% of Karachaganak’s immense resources have been produced to date. How would you assess current production levels and future expansion plans?
Even before next-phase development has begun, Karachaganak Petroleum Operating (KPO) has already set new liquid production and gas reinjection records so far this year. Short- to mid-term field development consists of a number of projects aimed at maximizing liquid production—notably the drilling of new oil wells and the debottlenecking of facilities. There is enormous potential in Karachaganak. We are still in the early planning stages to determine the concept, scope, and timing of its future development. The major challenge is in handling the gas as the gas-oil ratio changes with falling reservoir pressure. Future expansion will require the proper evaluation of the available options in the phasing of gas sales and gas injection facilities with the overall aim of increasing liquid production. Underlying this will be the drilling of new production and injection wells, as well as intra-field distribution infrastructure.
In which direction are you planning to take your strategy as Kazakhstan becomes more advanced in terms of its environmental and safety regulations?
Safety is of paramount importance for BG Group. All oil and gas operations carry inherent safety risks. At Karachaganak, this challenge is compounded by extreme temperature fluctuations, the high hydrogen sulfide content in the hydrocarbons we produce and process, and high-pressure sour gas injection. Our key priorities in Kazakhstan include the safe operation of Karachaganak and the wider use of new technologies in gas utilization and marketing. Since 1997, KPO has invested over $214 million in this area. Completed in 2010, the KPO Eco Centre ensures proper recycling, the treatment of drilling fluids, and the safe disposal of drilling waste in an environmentally friendly way. As for emissions, over the last three years total air emissions have decreased by about 20%. On the basis of the Gas Master Plan developed by BG Kazakhstan at the request of President Nazarbayev, we have introduced a natural gas vehicles pilot project in cooperation with KazTransGas and Almaty Akimat. As a result, 200 buses in Almaty now run on compressed natural gas, contributing to a cleaner environment in Kazakhstan’s largest city. We are looking at ways to bring this experience to other regions of Kazakhstan.
What synergies are you looking to create with the country’s local HR and services base to ensure that it caters to the needs of the leading international players like BG?
We support the country’s local content agenda. It is important to note that, while discussions about “local content” often focus on goods production, services are just as important. Oil services can play an important role in supporting economic modernization. As a joint operator of KPO, we have a strong record of supporting local content. In 2010, KPO signed supply contracts with Kazakhstani companies worth over half a billion dollars. In 2011, the local content of those contracts rose from $86 million in 2010 to $268 million. KPO is driving forward the employment of local citizens on the basis of a nationalization plan agreed with the government. So far, KPO has exceeded every target in advance of the agreed deadlines. Around 94% of KPO employees are now Kazakhstani citizens. KPO is now setting up the Aksai Industrial Park. This will encourage contractors to establish high-quality facilities and services to support technology transfer, the localization of production, and the creation of joint enterprises specializing in maintenance and repair. The foundation stone was laid in June 2011, and the park is currently under development. It will help create joint enterprises that specialize in maintenance and repair under field conditions.
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