Russian privately held oil producer Lukoil has signed an agreement with Kazakhstan’s state owned oil and gas holding KazMunaigas to create a joint venture that will explore and develop large offshore block Al-Farabi in the Kazakh sector of the Caspian Sea.
Lukoil will hold a 49.9% stake in the venture, Al-Farabi Operating, once the deal obtains the necessary regulatory approvals.
KazMunaigas will hold the remaining interest.
The Al-Farabi block, previously known under the abbreviation I-P-2, spans about 6000 square kilometres and is located between 100 kilometres and 130 kilometres from the Kazakh shore.
According to Lukoil, its key advantage is that it is free from ice in the winter period, thus potentially reducing investments into onsite infrastructure to protect against strong ice movements during winter.
For Lukoil, the deal is a further expansion into Caspian offshore developments following its advances in commercialising oil and gas reserves at several deposits in the Russian sector of the Caspian Sea.
Lukoil is currently the single largest oil producer in the Russian sector of the sea, with the company harbouring long-term plans to continue the development of untapped fields within its licence block there.
For KazMunaigas, the Al-Farabi project will become the first where the state company will hold a controlling interest.
KazMunaigas currently has a 16.9% stake in the Kashagan oil and gas development in the Kazakh sector of the Caspian Sea, with the project led by Western oil majors.
The Kazakh company is also hoping that Lukoil will opt to enter other large blocks in the Kazakh sector after Western majors have lost interest in them.
Speaking to Russian state news agency Tass, Lukoil chairman Vagit Alekperov said the company will continue to invest in oil and gas greenfields despite outside pressures to avoid such investments.
He also vowed that Lukoil would invest in reducing its carbon dioxide emissions at its developments as “the society requires it”.
“We will be a responsible producer of hydrocarbons operating in compliance with all environmental requirements,” he said.