KAZAKHSTAN UNVEILS FIRST BID ROUND

Kazakhstan, seeking to boost outside investment in its petroleum industry, has unveiled details of its first competitive exploration licensing round.

The former Soviet republic, now a member of the Commonwealth of Independent States, is accepting bids for rights to explore for and develop hydrocarbons in three areas in the pre-Caspian depression of western Kazakhstan. Total combined hydrocarbon resources of the tracts are estimated at more than 35 tcf of natural gas and 4.56 billion bbl of oil and condensate.

Two of the areas offered-Kamenskiy and Chinariovskiy-are in West Kazakhstan oblast near Karachaganak oil and gas field on the northern flank of the depression. The third-Baiganinskiy-is in Kazakhstan's Aktiubinsk region on the pre-Caspian eastern flank near Tengiz field. The three areas combined cover more than 20,800 sq km.

Companies interested in competing for acreage offered in the tender must buy a package of technical data for each area on which they want to bid.

Exploration tender participants have until May 1, 1993, to submit bids. Kazakhstan will notify winning bidders July 1, 1993, and parties are to sign protocols of intent in the first half of that month.

Kazakhstan also has made available two areas in the central part of the republic to seismic surveys by foreign companies. Companies are invited to acquire seismic data covering the entire 70,000 sq km Teniz basin in Tselinograd oblast and on a 60,000 sq km tract in the northern part of Turgai basin, including Zhilanshik trough and part of the Mynbulak saddle.

About 20 wells have been drilled in the Teniz basin, and 865 line km of common depth point and 7,000 line km of analog reflection seismic data have been collected, but there is no estimate of the basin's postulated hydrocarbon resources. Postulated hydrocarbon resources of the Turgai area-which overlaps the common borders of Zhezkazgan, Turgay, and Aktiubinsk oblasts-are pegged at 1.96 tcf of gas.

BIDDING DETAILS

Companies interested in evaluating Kamenskiy and Chinariovskiy contract areas can obtain technical data packages from Simon Petroleum Technology Ltd. (SPT), Llandudno, Wales, for $70,000 and $100,000, respectively. Halliburton Geophysical Services Inc., Sugar Land, Tex., is selling packages of evaluation data covering Baiganinskiy contract area for $120,000.

Kazakhstan officials through June 15 will negotiate commercial terms and conditions of proposed projects with parties submitting bids by May 1. Offers-along with a nonrefundable bid fee-must be sent to the chairman of the organizing committee of Kazakhstan's Cabinet of Ministers in Alma Ata. Each company within a bidding group must pay the bid fee.

Kazakhstan officials have not finalized all terms and conditions of the exploration licenses, so each bid must include conditions of production sharing agreements in case of a commercial discovery. Among the terms and conditions proposed in their offers, bidders are to specify:

Minimum exploratory financial and work commitments, including amount of seismic data, number of wells, type of technology, and estimated expenditures.
Bid bonuses, lease rentals, and royalty and tax rates.
Projected oil volumes broken out by equivalent cost and profit.
The length and number of contract exploration and production periods and relinquishment mechanisms.
Ways of helping develop local social infrastructure.

Kazakhstan officials said winning bids likely would propose 4 year primary exploration phases - followed by 3 year and 2 year options-and production phases of 20-30 years.

Winning companies must buy a complete set of detailed geological and geophysical data on the respective exploration contract area. Hydrocarbon accumulations within areas offered that have been appraised or developed by Kazakh enterprises are not included in the licensing round.

Winners of exploration licenses must fund all seismic and other exploratory field work. Kazakhstan officials have not set minimum work requirements, but winning companies are to use state of the art technology and equipment.

For example, a seismic study for a given block is to include 2-D and 3-D coverage of the entire sedimentary cover. Contract area operators also will be expected to acquire vertical seismic profiles on all exploratory wells. In addition, new information developed and gathered by licensees-including seismic and well log data-must be passed on to Kazakhstan's geological archives.

GEOLOGICAL OVERVIEW

The pre-Caspian depression covers 500,000 sq km of low lying terrain within the Caspian Sea catchment area with as much as up to 20 km of Proterozoic-Cenozoic sediments at its center.

Lower Permian Kungurian salt separates the depression's sedimentary cover into presalt and postsalt sequences. Exploration and development of postsalt sediments of upper Permian to Quaternary age began more than 80 years ago. Petroleum potential of presalt middle Devonian to lower Permian systems has been assessed only since the early 1970s.

More detailed information presented on areas to be licensed included the following:

Petroleum exploration in the northern part of Kamenskiy contract area has resulted in discovery of several undeveloped presalt gas condensate fields -including Kamenskoe, Tokarevskoe, and Tsyganovskoe-that contain as much as 1% hydrogen sulfide. Productive source rocks are expected to be in upper Devonian, Carboniferous, and lower Permian sections. About 1,990 line km of seismic data has been acquired on northern Kamenskiy and 27 wells drilled.
Kamenskiy's postsalt section, thickest in the southern portion of the contract area, is unexplored. But Kazakhstan officials believe it has significant relatively sweet gas potential, based on discoveries in neighboring areas of several minor fields.
Chinariovskiy area has a commercial gas discovery in middle Devonian in Chinariovskiy field. Chinariovskiy Devonian sediments are believed to be prospective for oil as well because of productivity at Karachaganak field to the east. Kazakh enterprises have acquired 4,717 line km of seismic data in the area and drilled 20 wells. Chinariovskiy area's postsalt Mesozoic section is unexplored, but Mesozoic reservoirs defined within the pre-Caspian depression extends the contract area's prospectivity as deep as lower Cretaceous.
Baiganinskiy area is divided by a major fault into two structural areas. Lower Triassic, lower and middle Jurassic, and lower Cretaceous oil shows have been reported by wells drilled to salt domes and presalt plays on the western structure. Prospectivity of the eastern structure is associated with presalt oil shows in Devonian and lower Carboniferous because upper Devonian and middle Carboniferous sediments southwest of Baiganinskiy area contain Tengiz field.

More than 18 presalt prospects have been identified based on 4,700 line km of seismic data collected over Baiganinskiy contract area. Most of the area has not been drilled, but 10 wells drilled no deeper than middle Carboniferous on Sarykum, Kindykty, Karate, Sankubai, and other prospects recorded no commercial discoveries.

EXPANDING INFRASTRUCTURE

Kazakhstan officials said the country's petroleum industry-centered around Ural-Embensky oil region-is expanding rapidly.

Chevron Corp. and Tengizneftegaz production association signed a joint venture agreement to develop Tengiz and Korolev fields.

Also, a British Gas plc-Agip SpA combine earlier this year won the right to develop Karachaganak field. Remaining proved reserves in Tengiz are estimated at more than 5.3 billion bbl of oil and in Karachaganak more than 1.3 billion bbl, 45.5 bcf of gas, and 4.65 billion bbl of condensate.

In addition, Kazakhstan officials have identified another 60 oil and gas development, enhanced recovery, processing, refining, and transportation projects for which it is seeking foreign investors.