Kazakhstan Says Kashagan Reserves Have Been Under Estimated By Western Oil Groups

The Kazakhstan government said on yesterday that its offshore Kashagan oilfield was probably bigger than many western oil companies have previously estimated, with probable reserves reaching potentially twenty billion barrels.

Vladimir Shkolnik, the Kazakh energy minister, described last week's estimate by the Italian led consortium developing Kashagan, that 7-9bn barrels of oil could be extracted from the north Caspian field as “conservative”.

He told a conference on Kazakh energy in London that if Kashagan's probable reserves did reach twenty billion barrels, they would require export pipelines to Turkey and possibily also Iran. Kazakhstan would need to rely on more than the Russian pipeline and rail network to get future Kashagan output, together with current onshore production, to export markets, the minister said.

The most likely option was shipping oil west across the Caspian to the new pipeline from Baku in Azerbaijan to Ceyhan in Turkey, he said, but said a southern land route to Iran was also being studied.

The final go ahead for the $2.9bn Baku-Ceyhan pipeline is expected very shortly from a BP led consortium of oil companies, which has recently been joined by Eni, the Italian company which operates Kashagan, and TotalFinaElf, the French major which has a share in Kashagan.

Even though the project has been led by a UK company, Washington has championed the Baku-Ceyhan pipeline as giving Caspian oil producers more export choices and freeing them from having to ship oil via Russia or Iran.

As a result of official US government backing, the pipeline is expected to receive an unusually high proportion of funding from the World Bank and other official lenders.

The Kashagan discovery has whetted oil explorers' appetite for the north Caspian, even though it is a very sensitive environment to drill in because of its shallowness and marine life. Mr Shkolnik said on Thursday he was preparing an auction of other exploration licences, but would not say when it would take place.