KazPetrol APG Utilisation Loan

Location:

Kazakhstan

Project number:

48161

Business sector:

Natural resources

Notice type:

Private

Environmental category:

B

Target board date:

14 Feb 2018

Status:

Concept Reviewed

PSD disclosed:

29 Dec 2017

Translated version of this PSD: Russian

Project Description

The provision of debt financing in form of a senior secured A/B loan for up to USD 80 million to Kyzylorda, Kazakhstan-based KazPetrol group LLP (the "Company"), an independent oil & gas exploration and production company, to finance the associated petroleum gas (APG) utilisation programme and balance sheet restructuring.
 

Project Objectives

The operation will finance the implementaion of the APG utilisation technology which will include the on-site power generation solutions.
 

Transition Impact

The Project will promote youth and gender inclusion in the remote region of Kyzylorda, where the Company is headquartered. It is expected to improve linkages between the industry and training/
educational institutions, and address skill mismatches through the development of standardised training for youth and the increased workforce diversity.
 

Client Information

KAZPETROL GROUP LLP
 
Incorporated in the Republic of Kazakhstan in 2005, the Company is a private operator with development rights to the onshore block in the Kyzylorda oblast.
 

EBRD Finance Summary

USD 80,000,000.00
Up to USD 80,000,000 subject to syndication
 

Total Project Cost

USD 100,000,000.00
 

Environmental and Social Summary

Categorised B (2014). Kazpetrol operates a series of five producing oil fields within Block XXIX-38 of the South Turgai Basin, Kyzlorda Oblast in central Kazakhstan. The risks associated with the existing oil field can be addressed through the application of standard management and mitigation measures.
The development of this Block started over ten years ago, while actual production started around 2011-2012. The fields that are part of this project include North Khairkeldy, Central Khairkeldy, South Khairkeldy, West Khairkeldy and the Taur fields. The appraisal of this project was accomplished through completion of the standard questionnaire by the Company and through the use of internal resources for a site visit to observe operations and to interview employees regarding practices and operations. An external consultant was retained to characterise and review the
situation in regards to associated gas and utilisation thereof.
 
Currently there are a total of 43 producing oil wells in the five fields, although only 14 of these are connected to one of the two Central Processing Facilities (CPF) located in the Taur and South
Khairheldy fields. Other wells produce into local holding/stabilisation tanks where the liquids are held until shipped via tanker truck to one of the CPFs. Gases associated with the produced liquids (including methane, propane and butane) in these "isolated" wells (not connected to a CPF) are vented directly to atmosphere from the stabilization tanks, representing a substantial emission to atmosphere. Total oil production for 2017 is estimated to be approximately 250,000 tonnes, with associated gas estimated to be about 8 million m3, of which only approximately 1/3 is used in the fields while the remainder is either directly vented (at the isolated wells) or flared (at the CPFs).
 
The focus of this project is to address the large volumes of associated gas which is either flared or vented. This will require the provision of multi-phase pumps, infield flow lines (connecting the "isolated" wells with the CPF, some additional equipment at the CPF (including storage tanks for stabilized oil) and additional electrical generators capable of using the associated gas. The project will neither require a significant increase in the existing workforce, nor will it require significant expansion of the existing CPF. The main use of energy in the fields is for the operation of oil production pumps and heating of the oil to prevent paraffin accumulation, although in the future more and more energy will be required for re-injection of produced water as the water cut increases. In addition to reduction of gas emissions, the project will avoid road transportation of produced oil and therefore lower the risk of accidental spillage and reduce energy requirements for transportation.Other aspects of the oil field are in line with the Performance Requirements and good international practice, including the fact that there are no discharges of fluids or solids related to the drilling or workover activities, top soil is stripped and preserved before drilling at all well pads, waste management is adequately controlled across all facilities. Existing corporate HR procedures are deemed to be significantly aligned to the PRs. As the fields mature, the water cut will increase, and the company plans to re-inject all produced water into formations that do not contain water suitable for drinking. Drinking water is shipped in to the field (bottled for drinking and bulk containers for cooking), and technical water is provided from the two wells completed in the Cenomanian aquifer.
 
The main risks associated with this project are related to the flaring and venting of associated gas, and this will be addressed through the specific investments on this project. The investments are designed to utilise at least 95 per cent of the associated gas.
 
The Environmental and Social Action Plan for this project contains the following main actions:
 
• Utilizations of at least 95 per cent of the associated gas
• Safe injection of produced water into isolated geological units
• Performance of annual biodiversity surveys to monitor conditions and verify no endangered
species in the site area
• Periodical review and upgrade of HR systems to ensure ongoing compliance with PRs
• Provision of an annual environmental and social report to EBRD, including an update of ESAP
actions.
 

Technical Cooperation

Technical Cooperation assignment is envisaged under the Integrated Approach to Economic Inclusion in Natural Resources and Power & Energy. TC funding for this operation will be sought
from the Inclusion Technical Assistance Framework with contribution to be made by the Company.
 

Company Contact Information

Erzhan Tazabekov
yt@kzpg.kz
+77242907178
+77172554245
http://www.kzpg.kz/
42 Zheltoksan Kyzylorda, 120014, Kazakhstan

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