Russian giant quits Kazakh offshore play

Russia’s Lukoil will exit an offshore exploration project in Kazakhstan’s sector of the Caspian Sea after a wildcat drilled in the Zhenis block earlier this year was dry.

The privately owned producer told project partner KazMunayGaz it is pulling out of their joint venture, named Zhenis Operating, Kazakh energy industry social network channel Energy Monitor said, quoting unnamed company sources.

Lukoil entered the Zhenis block in 2018 with hopes of making a commercial discovery on acreage that lies close to two prospective blocks in Russia’s sector of the Caspian Sea where it is also a partner.

The V-1 well on the Zhenis block had a target depth of 3300 metres in a large geological structure where potential for hydrocarbon accumulations in Triassic, Jurassic and Cretaceous-era layers had been identified in seismic surveys.

Lukoil and state-owned KazMunayGaz each have 50% stakes in Zhenis Operating, and Lukoil has made a commitment to finance all exploration costs until the project moves into the development phase.

Lukoil did not reply to an Upstream request for comment by publishing time.

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KazMunayGaz said in a statement that it estimated the chance of commercial discovery at just 20%. Data collected “from the wildcat has helped to clarify information on the structure of the subsoil within this sedimentary basin and to adjust the [KazMunayGaz] strategy for further geological exploration at other projects”, the company said.

The Zhenis block covers about 6800 square kilometres west of the Kazakh Caspian port of Aktau, in water depths between 75 and 150 metres.

Kazakh authorities have strong hopes for the acreage to contain commercial hydrocarbon resources, expecting to sign a development contract as early as in 2025, according to Energy Monitor.

Lukoil remains a 50% shareholder in two other Kazakh offshore exploration ventures with KazMunayGaz, aiming to assess hydrocarbon potential of the Al-Farabi and the Kalamkas-Khazar blocks.

It is also a long-term shareholder in three foreign-led oil and gas onshore developments in Kazakhstan — Tengiz, Karachaganak and Kumkol.

Lukoil also holds a minority stake in Caspian Pipeline Consortium, the operator of a key oil export pipeline from Kazakhstan, running across the south of Russia to a terminal on the Russian coast of the Black Sea.

Authorities in Astana are pleased to have Lukoil on board, as it is eager to replace Western oil majors which shunned investment in long-term and expensive Caspian offshore oil and gas developments as they refocused on renewable-energy projects elsewhere in the world.

France’s TotalEnergies was once a partner in the Zhenis acreage, but it exited in 2012, while British major Shell and North Caspian Operating Company — the operator of Kashagan offshore development in Kazakhstan — had previously considered investing in exploration and development of Kalamkas-Khazar blocks.