KazPetrol APG Utilisation Loan

Location:

Kazakhstan

Project number:

48161

Business sector:

Natural resources

Notice type:

Private

Environmental category:

B

Target board date:

17 Oct 2018

Status:

Signed

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 42,000,000.00

Total Project Cost

USD 107,000,000.00

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 an existing oil field can be addressed through the application of standard management and mitigation measures.  Development of this Block started over ten years ago, with production in the fields beginning between 2011 and 2012.  The fields that are part of this project include North Khairkeldy, Central Kharkeldy, 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.

The site is located in the northeast portion of Kyzylorda Oblast of central Kazakhstan, approximately 150 km north of Kyzylorda and approximately 130 km northeast of the nearest approach of the Syr Darya River.  The site area is nearly devoid of topographic relief at an elevation of approximately 130m above sea level.  There is a slight regional topographic gradient towards the northwest, with the Tien Shan Mountains to the south and the Aral Sea approximately 400 km to the west.  The climate of the site area is cold desert, with hot dry summers and long cold winters.  Soils in the site area are alkaline silty loam, and vegetation is sparse and primarily composed of sage brush with some grasses.  The company retains local biodiversity specialists to complete surveys of the site area once per year, and according to the results of this monitoring there are no rare or endangered species recorded within the site boundaries.  The iconic Saiga antelope is noted regionally, although the closest known occurrence of Saiga is 100 km to the north of the site.  There are no protected areas within 100 km of the site, the nearest ones being in the Aral Sea and along the Syr Darya River.  Further, the only inhabitants within 100 km of the site are the shift workers living in the camps for the oil fields.

Currently there are over 60 producing oil wells in the fields, although only 26 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/stabilization 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 was approximately 200k tonnes, with associated gas estimated to be about 8.2 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 not require a significant increase in the existing workforce, nor will it require significant expansion to 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 reducing gas emissions, the project will avoid the 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 PRs 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; and 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 into the field (bottled for drinking and bulk containers for cooking), and technical water is provided from 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% of the associated gas.  The Environmental and Social Action Plan for this project contains the following main actions:

- Utilisation of at least 95% 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 soughtfrom 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

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Public Information Policy (PIP)

The PIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. Please visit the Public Information Policy page below to find out how to request a Public Sector Board Report.
Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.