Russia’s Lukoil Acquires 49.99 Percent Stake in Kazakhstani Offshore Block

Russia’s oil giant Lukoil signed last Friday a sales and purchase (SPA) agreement with Kazakhstan’s state-owned KazMunayGas (KMG) to acquire a 49.99 percent stake in the charter capital of Al-Farabi Operating LLP, a joint venture to develop an offshore block located in Kazakhstan’s portion of the Caspian Sea. 

Vagit Alekperov, Lukoil’s CEO, and Alik Aidarbayev, who chairs the management board at KMG, have inked the document as part of the St. Petersburg International Economic Forum. Officials from both sides are now one step closer to finalizing the deal, as Lukoil has revealed that it will join the project following satisfaction of a number of conditions precedent.

“The companies’ decision to join efforts in the development of the Al-Farabi block is another step in their continuous fruitful cooperation,” reads a statement issued by Lukoil.

The value of the deal, however, was not disclosed. KMG will reportedly hold 50.01 percent in the venture.

Al-Farabi, formerly known as “IP2,” is located 130 km (81 mi.) away from the Kazakhstan coastline. The water depth at the site ranges from 300 m to 400 m (328–437 yards). According to Lukoil’s data, recoverable resources at the Al-Farabi block are estimated at 15.1 million tons.

In 2019, KMG and Lukoil agreed on the basic conditions for implementing the Al-Farabi project and then awaited approval from Kazakhstan’s energy ministry. A year later, the companies signed an agreement that defined the rights and obligations of the two companies within the project.

Meanwhile, Al-Farabi is adjacent to the Zhenis field — another project that involves Lukoil and KMG.

An agreement to develop the Zhenis offshore block lying at a depth of 75 to 100 meters was signed on April 1, 2019. Zhenis Operating, a project operator, is a joint venture of Lukoil (50 percent) and KMG (50 percent). Recoverable resources in this area are estimated at 65.1 million tons. Reportedly, Lukoil was planning to invest about $350 million in exploration at the Zhenis block over 7-9 years.

Along with Zhenis and Al-Farabi, the companies also jointly explore the Tsentralnoye field, where Lukoil and Gazpromneft own 25 percent each, and the Khvalynskoye field, where Lukoil owns 50 percent. At the same time, Lukoil has shares in the Karachaganak (13.5 percent) and Kumkol (50 percent) fields.

Lukoil is a member of the Caspian Pipeline Consortium, through which the crude oil is transported.