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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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This Home Of Mega-Oil Finds Is Reforming

News this week that major energy reforms are coming. In one of the most intriguing exploration centers on the planet: Kazakhstan.

Kazakh president Nursultan Nazarbayev said he is disbanding the country's reigning energy authority--the Ministry of Oil and Gas.

In it's place, Nazarbayev will create a new and broader regulating body. One that combines the functions of the oil and gas ministry with other departments like industry and technology, environment and water resources.

The president made the sweeping move after declaring that Kazakhstan's energy sector is in "complete chaos".

Nazarbayev didn't elaborate on exactly what those difficulties might be. But analysts have noted that Kazakhstan's energy sector has been plagued by permitting delays--and regulatory uncertainty. The kind that has almost completely undermined some of the country's recent mega-projects.

One of the highest-profile hits has been the Kashagan oil project in the offshore Caspian Sea. Which is one of the largest oil finds over the last few decades, at an appraised recoverable resource of 11 billion barrels of crude.

But Kashagan today sits idle. A start-up of the field in September 2013 having been scuttled by leaking pipelines at the massive facility. And an attempted restart in October aborted after more leaks were discovered.

That's led to a complete shutdown of this massive field. With a re-start now targeted for 2016.

The reasons behind these problems could have a lot to do with Kazakhstan's patchy regulatory framework. With ownership of Kashagan having been shuffled several times between the government and project's developers--which include Italian multinational Eni, Shell, ExxonMobil, Total and China National Petroleum Corp.

Uncertainty over ownership (and operatorship) undoubtedly impacted Kashagan during construction. Which may be why the engineering work is turning out to be less than world-class.

We'll see if the new reforms really can streamline the environment for energy projects here. If so, there could be a lot of supply--and a lot of developers--who will benefit.

Here's to ending the chaos,

Dave Forest


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