Kazakhstan 2017 | ENERGY & MINING | INTERVIEW

TBY talks to Zhakyp Marabayev, Deputy Managing Director of North Caspian Operating Company (NCOC), on reopening the first wells at the Kashagan oil field and potential for further development.

Zhakyp Marabayev
In a career that has spanned more than three decades to date, Zhakyp Marabayev has worked at the heart of Kazakhstan’s rapidly developing oil and gas industry in a variety of increasingly senior roles. Holding a PhD in economics and a degree in mining engineering, and possessing substantial hands-on technical experience, he has advised, managed, and directed some of the country’s most challenging energy projects. Most recently, he has held the role of Deputy Managing Director of the vast Kashagan project, arguably the largest oil and gas development in the world at the present time.

How does NCOC overcome the challenges of a difficult year for global energy markets?

Last year was significant for our company. NCOC reopened the first wells at the Kashagan oil field in September, and the first batch of oil for export from Kashagan was dispatched in October. We reported this to President Nazarbayev on the eve of celebrating 25 years of Kazakhstan's independence and he thanked and congratulated NCOC on behalf of the nation. At the same time, the global energy markets face significant challenges that require the industry to improve the efficiency of operations. Therefore, one of our priority areas is the reduction of our current costs.

After years of delays and budget overruns, the Kashagan oil field has finally resumed its operations. What is the importance of Kashagan's re-launch for NCOC and its long-term impact on Kazakhstan's economy?

Kashagan will have a production life of decades and its shareholders are expected to contribute billions of dollars in direct revenue to Kazakhstan in terms of taxes and share of production. Development of the project has already contributed a great deal toward the development of the local and national economy of Kazakhstan, and in a sustainable manner. More than USD13.3 billion has been spent on payments to local suppliers since 2004. The consortium has a long-term local content development program in place aimed to further enhance opportunities for local suppliers and improve the skills of local personnel. Around 90% of staff and contractors within the North Caspian Sea Production Sharing Agreement (NCSPSA) are citizens of Kazakhstan. As Kazakhstan's largest direct foreign investment project, the North Caspian project has had a powerful multiplier effect on the economy, creating employment opportunities for Kazakhstani people and opportunities for local companies. Our most important contribution here is in Kazakhstan content. The North Caspian Project will serve as a reliable and long-term basis for developing state-of-the-art technologies and management methods in the country. A huge impetus will be given to economic diversification and industrial engineering, oil services, and construction industries development. Good conditions will be created for SMEs. Kashagan is not just one of the biggest oil and gas fields in the world, it is also one of the most challenging fields. It was these numerous challenges that pushed the boundaries of engineering and technology, setting new industry standards. All these obstacles were overcome by innovative technology and new approaches, which opened great development opportunities for Kazakhstan. At the same time, and throughout the development of the project, the consortium was committed to ensure the highest safety standards for the workforce, communities, and the environment.

What is the potential for new exploration projects and field discoveries in Kazakhstan, and what projects do you expect to be involved in over the next few years?

There are huge possibilities, even within the development of the North Caspian Project. We recently received approval from the government of Kazakhstan to start early engineering and design work toward a further expansion of Phase I production at the Kashagan field. This expansion project, called CC01, is an investment to increase production by 80,000bpd by installing additional raw gas compression and injection capacity offshore in the Caspian. The government's approval allows NCOC to undertake early engineering and design work in 2017, and to develop plans for further engineering and design work in 2018. The project, when completed, could grow the capacity of Phase I to a target level of 450,000bpd. NCOC has an opportunity to increase the capital effectiveness of our pre-invested assets, and we intend to do so with a relentless focus on cost reduction, applied at the earliest stages, through a disciplined value engineering process. NCOC is also studying the potential co-development of its Kalamkas Sea field and CMOC's nearby Khazar field. Together, these two fields have recoverable reserves of 67 million tons of oil and 9bcm of gas. We are confident we can find substantial cost savings through the joint development of these fields that will make their development economically viable, and if so, possibly also unlock the development of other fields in the mid-Caspian.