Kazakhs Undertake New Exploration Push

Copyright © 2021 Energy Intelligence Group

Kazakhstan is hoping to revive flagging investor interest in its untapped oil and gas wealth by holding a new electronic licensing round in late November, the third such event in less than a year (NC May6'21). At the same time, the Central Asian country's decision-makers are intensifying their focus on renewables, especially wind and solar, as international oil companies shy away from new exploration projects in this embryonic low-carbon era. Expectations for the new auction, to be held on Nov. 19 by the energy ministry, are not high. The first bidding round, which took place at the end of last year and resulted in the sale of eight blocks, raised close to $150 million. But the result was distorted by the fact that most the cash came from an obscure Dutch-registered entity, Winsple B.V., which has no visible track record in Kazakhstan or anywhere else. The second auction was a letdown, generating a mere $22 million with seven of the 15 blocks remaining unsold. The stark reality, according to multiple industry sources involved in the country, is that there is scant interest in these onshore exploration tracts among IOCs. “This is more of a public relations exercise to show that Kazakhstan is still on the map for oil and gas investors," an industry veteran based in Kazakhstan said. “These are very marginal areas, and even the Kazakhs aren’t getting excited about it." Offshore, progress is also slow in putting momentum behind new projects. Russia's Lukoil is making most of the running: in June, during the St. Petersburg Economic Forum, it signed a deal to acquire a 49.99% stake in the Al-Farabi Block in the North Caspian in a joint venture with state-owned Kazmunaigas (KMG). The acreage is next to the Zhenis Block, which is jointly operated by Lukoil and KMG in a 50-50 partnership. Eni Backs Renewables Italy's Eni also has an alliance with KMG to develop two adjacent blocks in the Caspian: Isatai and Abai. Whereas Lukoil can point to the Filanovskoye and Yu Korchagin project in the Russian sector of the sea as an example to follow, Eni has less fond memories of the giant Kashagan project, where it was operator of the Phase 1 development. The project, which now has a joint operatorship, has devoured some $60 billion in capital costs, which will take at least another decade to recover. In part because of such experiences, Eni has now switched its focus in Kazakhstan to renewables. where the risks of delays and cost overruns are much lower and the scope for expansion greater. At the end of July, the Italians signed agreements both with KMG and the Kazakh government to develop a range of renewables projects, including hydrogen and biofeedstocks (NC Jul.29'21). Eni CEO Claudio Descalzi said Eni and KMG share an interest in reducing their carbon footprints from upstream operations and would look at a range of projects across the country. Eni has already found a niche as a renewables developer in Kazakhstan. Last year it started operations at the Badamsha wind farm, which was built by its subsidiary Armwind in the norhwestern region of Aktobe, and is now in the process of doubling the capacity of the 48 megawatt plant. And in March, Armwind launched construction of a 50 MW photovoltaic plan in the southern region of Turkestan, which will see a reduction of around 1.2 million metric tons of carbon dioxide throughout its lifetime. Kazakhstan has set itself a target to obtain 50% of its electricity from renewable energy by 2050. In June, President Kassym-Zhomart Tokayev called for progress to be accelerated, referring to the "extremely small" percentage that renewables currently comprise in the overall energy mix. Paul Sampson, London

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