Kazakhstan restores output at No.3 oil and gas field after Russian plant attack

Kazakhstan's No.3 oil producer, Karachaganak, is restoring production to normal levels after a vast Russian gas processing plant that was hitin a drone attack resumed operations,the Kazakh energy ministry said Oct.22.

The Shell and Eni-led Karachaganak Petroleum Operating consortium had announced Oct.20 a "controlled" reduction in output at the field,which is typically the third largest source of the country's flagship export crude grade, CPC Blend, with production around 230,0oo b/d of late. Production was thought to have dropped by about a third, according to comments earlier from Energy Minister Yerlan Akkenzhenov.

It followed an Oct. 19 drone attack on the gas processing plant in the Russian city of Orenburg, close to the countries' border, on which the field relies for sustaining operations.Karachaganak is one of the world's largest gas fields and also contains significant volumes of crude and natural gas liquids, with large amounts of gas routinely reinjected back into the field.

The Orenburg plant is some 50 years old and originally had a capacity to handle 40 Bcm of gas per year, although flows have dropped well below that level.

"The Orenburg gas processing plant has resumed reception of raw gas from the Kazakh field.As a result,the operator of the project is starting a planned restoration of production at Karachaganak to normal levels that prevailed before the Oct.19 incident," the Kazakh energy ministry said in a statement.

It went on to underline Kazakhstan's determination that state company KazMunayGaz take on construction of a proposed 4 Bcm gas plant that will handle part of the produced gas on Kazakh territory, instead of Orenburg. However, building a plant outside the control of the five-company consortium is seen as controversial, particularly given the valuable products it will produce such as propane and butane, industry insiders said earlier.

"The question of building a domestic gas processing plant at Karachaganak is a strategic priority. The decision has been taken that the project will be realized by KazMunayGaz. Currently, talks are underway with the participants in the Karachaganak project to agree on the technical parameters for connecting the future plant to the existing field infrastructure," the energy ministry said.

The Orenburg outage underlines Kazakhstan's reliance on its giant neighbor Russia for strategic parts of its oil and gas sector, also including the main crude export pipeline, the 1,50o km Caspian Pipeline Consortium route to Russia's Black Sea coast. A pumping station on the pipeline came under attack in the war between Russia and Ukraine in February, although flows were restored relatively quickly.

KazMunayGaz in its 2022 annual report voiced concern about the"unstable and limited intake" of gas at the aging Orenburg plant, and industry insiders have voiced concern about the state of the plant and a lack of visibility, although KazMunayGaz subsequently reported the situation had improved.

CPC Blend was last assessed by Platts at an 80-cent/barrel discount to Dated Brent on Oct.21.Platts is part of S&P Global Commodity Insights.