ATYRAU, Kazakhstan, Aug 14 (AFP)
Kazakhstan has started its search for Caspian Sea oil, but large-scale production and the riches that come with it are still some five years away, the manager of a western consortium said Friday.
�The current expectation is that we�ll be producing in the fall of 2004 or spring of 2005,� Keith Dallard, general manager of the Offshore Kazakhstan Operating Company (OKIOC), told AFP.
The OKIOC consortium sank the Central Asian republic�s first offshore exploratory drill this week in the hopes of tapping into what an optimistic Dallard said �could be one of the largest structures left in the world.�
The sheer size of Kashagan East, which lies offshore about 75 kilometers southeast of the Central Asian republic�s oil capital, Atyrau, will require many drilling sites to determine that hydrocarbons lie beneath the surface, Dallard said.
�That can�t happen overnight,� he added.
Dallard also said he expected to study Kashagan for two years before making a recommendation to investors on whether the site is commercially viable.
A shortage of export pipelines from the Caspian Sea region could also block the project�s progress by preventing the consortium from exporting in commercially viable quantities, he continued.
The results of the exploratory drilling at Kashagan East could be available as early as November.
Kazakh officials, including Prime Minister Nurlan Balgimbayev who attended a Thursday ceremony marking the start of drilling, are optimistic that significant amounts of oil will be discovered at the site.
The Kazakh government estimates that OKIOC�s 10 offshore blocks, which cover some 6,000 square kilometers (about 2,400 square miles) in the northern Caspian contain as much as four billion tons of oil.
While industry insiders say the government�s estimates are a bit too optimistic, Dallard is coy about just how much oil is in Kashagan.
�That�s an estimate,� Dallard said of the government�s statistics. �Only time will tell what the structure holds.�
But some observers believe Kashagan could kick-start oil production in the northern Caspian region by becoming �an engine room to major oil and gas infrastructure and pipelines. It is obviously key,� Dallard said.
For OKIOC�s shareholders, Kashagan must produce substantial results for oil export to be commercially viable.
Development costs for oil is significantly higher in the former Soviet Union at eight to 10 dollars a barrel due to the lack of infrastructure, said Per Einar Rettedal, chairman of OKIOC�s shareholders.
In the Middle East such costs are two to three dollars per barrel, he said.
�That makes a big difference for the oil companies,� he added.
Already one of OKIOC�s partners, BP/Amoco has balked at the risk and tried to sell its shares in the consortium.
But BP/Amaco did not receive an �attractive offer and the choice was quite simple for them to stay with OKIOC,� Rettedal said.
The consortium is comprised of Italy�s Agip, British Gas � an alliance between BP/Amoco and Statoil � Mobil, Royal/Dutch Shell and Totalfina.
Despite the risk, Kazakh officials are anticipating a big find to boost the resource-rich republic�s economy and OKIOC too is hoping for positive results as the exploration continues this fall.
�If we have disappointment, we along with the republic will be extremely saddened,� Dallard said.
All Over the Globe is published by IPA House.
© 1998 IPA House. All Rights Reserved.