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DE RUEHTA #2098 2970609
ZNR UUUUU ZZH
O 230609Z OCT 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3630
INFO RUCNCIS/CIS COLLECTIVE 0716
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UNCLAS ASTANA 002098 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
 
E.O. 12958: N/A 
TAGS: PGOV EPET EINV KZ
SUBJECT:  KAZAKHSTAN:  EXXONMOBIL EXCITED ABOUT NEW NORTH CASPIAN 
EXPLORATION OPPORTUNITY 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY.  On October 21, ExxonMobil Kazakhstan's New 
Business Development Manager Peter Claypool (protect) described to 
Energy Officer a promising onshore North Caspian development 
opportunity that ExxonMobil has pursued quietly but persistently for 
more than three years.  ExxonMobil is hopeful that the Government of 
Kazakhstan will conduct a tender in 2009 for exploration of the 
site.  END SUMMARY. 
 
PALEOZOIC ARCH INTRIGUES EXXONMOBIL 
 
¶3.  (SBU) Claypool told Energy Officer that the North Caspian 
Paleozoic Arch is an "intriguing geological structure" located 
approximately 6000 meters below the surface in Mangistau oblast, 
south of the Tengiz field.  Claypool believes there is a strong 
likelihood that the structure contains significant reserves of oil 
and gas in deep limestone strata, although appraising the field 
would be complicated by its depth and pressure, as well as by the 
presence of impermeable salt barriers that distort seismic testing 
(but which, conversely, can serve as useful hydrocarbon traps). 
According to Claypool, an assessment would require use of drilling 
technology, equipment, and expertise that national oil and gas 
company KazMunaiGas (KMG) currently does not possess.  "They can 
drill shallow subsurface wells," he said, "but not these deeper, 
more technically challenging wells." 
 
¶4.  (SBU) Claypool said that ExxonMobil has tried assiduously for 
three years to secure a technical services agreement with KMG that 
would enable them to carry out seismic and other diagnostic tests, 
but the Government of Kazakhstan has been slow to move forward, with 
its focus increasingly devoted to the complex and time-consuming 
Kashagan negotiations.  However, the government announced that the 
Kashagan negotiations will conclude by October 25, and recently 
awarded ConocoPhillips rights to negotiate a contract to explore the 
N Block, which signaled an end to the government's moratorium on new 
deals and raised hopes at ExxonMobil that the government will now 
move forward with other new exploration projects. 
 
¶5.  (SBU) Claypool told Energy Officer that KMG Exploration and 
Production signed a two-year agreement in May 2006 with ExxonMobil, 
designating the North Caspian Paleozoic Arch as an "area of mutual 
interest" (AMI) and agreeing in principle to cooperate on the 
exploration and production of oil and gas from the site.  The AMI 
agreement lapsed in April 2008, however, without a tender or 
contract award.  Nevertheless, in January 2008, Minister of Energy 
and Mineral Resources Sauat Mynbayev and KMG First Vice President 
Maksat Idenov sent a letter to ExxonMobil reiterating their interest 
in a partnership to explore the Paleozoic Arch together.  ExxonMobil 
is well aware that Kazakhstan's Subsoil Law gives KMG priority 
ownership rights to 51 percent of any new exploration and production 
project.  Nevertheless, the company remains eager to work with KMG 
on exploration of the site. 
 
¶6. (SBU) Claypool also informed Energy Officer that KMG has been 
pushing hard to work with ExxonMobil on an oilfield production 
project outside Kazakhstan in order to acquire greater technical 
expertise and project management experience, but ExxonMobil has 
demurred.  "We very rarely do joint production with another 
company," explained Claypool, "and even then, only if the partner is 
very experienced and has technology or expertise that complements 
our own.  KMG is just not there yet." 
 
HOAGLAND