Bloomberg News

BG to Halt Pumping at Kazakh Oil Field to Install Refining Unit

February 07, 2008

BG Group Plc (BG/), the U.K.'s third-largest natural-gas producer, will temporarily shut its Kazakh oil and gas field to install a new refining unit, which will allow the company to boost production from the deposit.

BG and its partners are building a fourth ``stabilization train'' at the Karachaganak field, Chief Executive Officer Frank Chapman said today. The project will increase annual export capacity to 10.3 million tons of oil and 9 billion cubic meters of gas after it starts in 2009.

The field will be partially shut this year ``to make way for the train tie-in'' with the local pipeline network, which supplies oil and gas from Karachaganak's wells, Chapman said today on a Webcast with analysts and investors in London.

BG, Italy's Eni SpA (ENI), the U.S.'s Chevron Corp. (CVX:US) and Russia's OAO Lukoil are developing the field. The partners will have to export the additional crude to Russia and to Black Sea ports by rail because Russia has blocked the expansion of the main export pipeline from Kazakhstan.

The group plans to sanction further development of the Karachaganak field, so-called Phase Three, later this year after reaching an agreement on gas sales with Russia's OAO Gazprom (GAZP) in 2007, according to Chapman. The venture has also secured export capacity to transport additional crude to world markets, while extra gas will be sold for refining in Russia.

``The project has been extended'' to produce liquefied petroleum gas, Chapman said. The venture will tap 2.4 billion barrels of oil equivalent of ``additional reserves'' and will begin production by 2012, he said. LPG is pumped together with natural gas.

Transport Options

The Karachaganak partners have secured about 7 million tons a year of capacity on the Chevron-operated pipeline that exports Kazakh crude to the Black Sea. The venture also has 3 million tons a year of capacity on the Atyrau-Samara pipeline, which supplies Kazakh oil to refineries in European Russia.

The partners plan to transport about 5.3 million tons of oil a year by rail for export to world markets, bringing the field's total ``liquid exports to Western markets'' to 15.3 million tons a year, Chapman said.

Kazakhstan, holder of the second-biggest gas reserves in the former Soviet Union, is evaluating separate plans to build a $1.5 billion gas refinery at the Karachaganak field to supply the domestic market, Uzakbai Karabalin, chief executive officer of state-run oil company KazMunaiGaz National Co., said today.

Karachaganak gas production is projected to jump to 38.6 billion cubic meters a year by 2013, from 14.2 billion in 2007, Karabalin said. Some of the fuel will be injected back into the deposit to boost crude output, which is expected to rise to 16.4 million tons by 2013 from 11.6 million tons in 2007, he said.

To contact the reporter on this story: Eduard Gismatullin in London at

To contact the editor responsible for this story: Daniel Tilles on

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