KMG EP to pursue Aral basin oil and gas exploration

By bne IntelliNews May 26, 2011

Clare Nuttall in Astana -

The Aral Sea basin is possibly the second most prospective area for oil and gas in Central Asia after the Caspian basin, according to Askar Balzhanov, general director and chairman of the management board of KazMunaiGas Exploration Production (KMG EP).

So far, drilling in the Aral region of Kazakhstan by KMG EP, the London-listed subsidiary of state-owned NC KazMunaiGas, hasn't yielded substantial results. "Two wells have been drilled since 2005 - the outcome wasn't negative, but it was hard to decipher because of big faults in the area," Balzhanov told journalists and analysts. "However, the Aral Sea area is promising for exploration and production."

Tethys Petroleum is already operating in the North Ustyurt basin to the west of the Aral Sea.

On the Uzbek side of the Aral basin, exploration work is more advanced. An international consortium comprising state-owned Uzbekneftefas, Russia's Lukoil, Malaysia's Petronas, Korean National Oil Consortium and China National Petroleum (CNPC) signed an agreement to explore and develop fields in the region in 2005. Five years later, in June 2010, the consortium announced it had discovered a gasfield at the West Aral structure.

Speaking at the KMG EP investor day on May 17, Balzhanov said that the firm was in talks with two companies involved on the Uzbek side, who "are possibly interested in the Kazakh side too. In the fullness of time, we expect to begin operations." Balzhanov did not name the companies.

The Aral Sea, which has dried up to a fraction of its original size as the rivers that feed it have been diverted for irrigation, is one of the world's worst ecological disasters. The sea's surface area fell from 68,000 square kilometres in the early 1960s to just 17,160 square kilometres by 2004, and split into two smaller seas. Efforts to revive the smaller Aral Sea, which is mainly located in Kazakhstan, by building a dam to stop waters from the Syr Darya river flowing into the larger Aral Sea have had some success.

Balzhanov acknowledged that the Aral region was "probably on a par with the Caspian in terms of environmental vulnerability" and said the company would "comply 100%" with any directives from the Ministry of Environmental Protection if it starts work there.

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