Thursday, 4 March 2010

The Importance of Kazakhstan Oil to South Korea

An interesting paper on the geo-politics of Kazakhstan and South Korea.

And a link to the 2008 Annual Report of the Turkish Petroleum Corporation

Some interesting quotes from the paper:

"The most dynamic driving force of the Kazakh economy is the exploitation of crude oil around the Caspian Sea. These areas are estimated to have the largest oil and gas reserves outside the Middle East. Major oil companies have already moved to gain exploitation rights in these resource rich areas."

"South Korea is actively investing in the exploitation of Kazakhstan’s energy resources. The Korea Oil Corporation, Samsung, LG, SK, and Daesung formed a consortium which has energetically sought to exploit oil fields in the Caspian Sea and on land. In 2004, then South Korean President Roh Moo-hyun visited Kazakhstan and negotiated a basic contract for the exploitation of oil fields in the Zambil Region. The Korea Oil Corporation, LG, SK, and Serim have taken the lead on this project and on projects in other regions of Kazakhstan. LG has secured 50 percent of the Egizkara Oil Field’s total shares (estimated reserves: 200 million barrels). In cooperation with Serim, KS Energy has also secured the exploitation of two oil fields in Kazakhstan and started drilling operations there. In 2006, the Korea Oil Corporation discovered a new oil field in the Bashenkol structure inside the ADA Block of Actobe. Although it is estimated to hold about 20 million barrels of oil by itself, the estimated reserves in three other promising oil fields puts the total volume of the block at about 170 million barrels."

"In order to attract foreign investment in the exploitation of crude oil, the Kazakh government set up Production Sharing Agreements (PSAs) which granted foreign companies intending to invest in any Kazakh oil field to receive certain tax breaks and investment incentives when seeking joint venture with any private Kazakh company. Over the last several years, these PSAs have fueled fierce competition among foreign energy companies to invest in several of Kazakh’s oil fields, including North Buzachi, Sazankurak, Saztobe, Chinarevskoye and Airankol, which are all currently in production. In addition, other oil fields in Alibekmola, Urikhtau, and Kozhasai are almost ready to produce crude oil. As a result of this heightened activity, the oil production of Kazakhstan is expected to increase steadily for the next 10 years."

These quotes  and the TPC Annual Report seem to support a number of interesting ideas:

a) That Roxi Petroleum's (AIM:RXP) BNG, Beibars and Ravninnoe blocks are in a very prospective area.

b) South Korea sees the strategic importance of investing in the oil industry in Kazakhstan.  Interestingly, one of the shareholders in ADA is Vertom (a company in which Kuat Oraziman, Executive director  of RXP has an interest) where LG and KNOC also have investments.  Of course, LG has just agreed to purchase a stake in the Galaz block.

c) KazTurkMunai is the operator of the existing NE Saztobe, SE Saztobe and West Yelemes fields on the BNG block.  These fields are excluded from Roxi Petroleum's contract, but indicate the prospectivity of the contract area.

Perhaps one of the Korean corporate giants will be the eventual purchaser of Roxi Petroleum assuming they are successful in proving up the BNG contract area.

Further background on KazMunaiGaz, the Kazakhstan state oil company, which has a controlling stake in KazTurkMunai: