Jan. 19, 2015


Christopher Hopkinson

Kazakhstan

Christopher Hopkinson

First Deputy Chairman, KazMunayGas (KMG)

"At the moment we are involved in a business transformation process."

BIO

Christopher Hopkinson has extensive experience in the oil and gas industry, and currently holds the position of First Deputy Chairman of the Management Board at KMG. Prior to joining KMG, he was the CEO of International Petroleum, the CEO of Imperial Energy, and Senior Vice-President North Africa of BG Group, TNK-BP, Yukos, and Lukoil. Earlier in his career he held various positions at Shell. He studied physics at the University of St Andrews.

Kazakhstan's economy is already feeling the heat from falling oil prices and reciprocal sanctions between the West and Russia. What is the position of KMG in this challenging environment?

At the moment we are involved in a business transformation process, which is the right way to go. The lower price of oil actually helps, because it gives more impetus to the transformation. In the past, when prices fell to $10 per barrel, companies all over the world were forced to make projects profitable at that price. It makes you think in a completely different way. From my point of view and that of KMG, the oil price coming down is difficult, but we are looking closely at where we can economize and where we can do things more efficiently, while at the same time maintaining our production levels. The business transformation focuses on the future, when the prices rise again and put us in a stronger position. At that point we will be more profitable and value driven, and more efficient. The current oil prices are not very pleasant, and we make sure that we are prepared in case they stay as they are or go even lower. We are ready to react quickly. At the same time we are maintaining our production levels as far as we can. But as one of the people who is driving these transformations within the company, I see it as an opportunity.

Production at the Kashagan oil field has been postponed until 2016. What is your strategy to ensure that the delays in oil production there will be compensated by corresponding increases from other major fields?

The delay in production at Kashagan is very unfortunate, and we continue working closely with our partners to make sure that we are sticking to our time schedule. Meanwhile, we are accelerating production at other projects. KMG is working closely with its partners through producing joint venture projects, namely the Tengiz and Karachaganak oil fields. And of course we have domestic production, which is mostly onshore. The majority of our own onshore fields are 40-60 years old, which is a late stage of development and, thus, it is a challenge to increase production from those fields. Having said that, there are many opportunities and we are working very closely with the regions to identify opportunities where we can increase production in a sustainable way. But in that follows best practices that we see in fields such as Samotlor in Russia, where they have gone through the process of increasing production through the use of best practices and appropriate technologies. Obviously, Kashagan was expected to be a huge chunk of production, and so it will be difficult to make up for that in less than two years. Our main task is to move toward value generation.

“At the moment we are involved in a business transformation process."

How is the company supporting the generation of specific knowledge and research in the energy sector?

We have a plan to set up our institute here in Astana, namely the Institute for Drilling, which will train technicians in field development, maximizing recovery, and opportunity identification. In the next few weeks a visualization and communication center will open, with an open-plan, collaborative, and integrated working space, where we will have about 150 institute employees. They will be able to use the latest technology as far as the visualization of our reservoirs goes, and enjoy quick turnaround on models. This will allow us to look ahead and predict the behavior of wells and new approaches that we are intending to implement. This will also give us direct communications with our institute in Aktau and Atyrau, as well as our laboratories, which are going to be fully integrated within one institute structure. We will be able to support our operating fields and our exploration projects—onshore and offshore—by using the latest IT and measurement technologies to speed up the decision-making process.

What are the main challenges associated with exploration in Kazakhstan?

The challenge is all about the environment. There are strict environmental controls on the Caspian Sea, and we have to contend with the winter period. KMG has to keep prices at a level that will allow us to develop what we find: it is expensive to ensure that a site will be environmentally secured, meaning that operations won't damage the fauna and flora of the Caspian Sea, and it has to be protected from massive ice flows during the winter period. There are many more opportunities in the Caspian area. On the onshore side, considering the landmass of Kazakhstan, only a very small percentage of the country is being explored.

How is KMG working to expand the oil transportation network and pipelines, and what projects are you currently developing and implementing?

Transportation is one of our main priorities. We already export the majority of production, so we want to make sure we have access to the right market. About one-third of the country's production will be exported by the Caspian Pipeline Consortium (CPC), reaching 67 million tons every year, 52.5% of which will come from Kazakhstan, while some will come through Russia into the same pipeline. We are commissioning new facilities. This project is ongoing, and the China pipeline is a huge highlight and, since 2004, we have been commissioning sections of this pipeline. In 2013 there were two new pumping sections.

Do you have any specific goals for the upcoming year?

I want to focus on our domestic production. Our domestic production established the global reputation of KMG. We are very keen to show that we are capable of a lot, that we are capable of managing our fields well, and that we can increase our efficiency and production in a value-generating way—that is what we are 100% responsible for. We have some of the best-trained and educated staff anywhere in the world.

© The Business Year - January 2015

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