Five foreign energy firms have agreed with the Kazakh government to hold exclusive talks on the Central Asian’s state’s long-mooted Eurasia Project, which aims to unlock untapped oil reserves in and around the Caspian Sea.

The Kazakh energy ministry announced on June 21 that a memorandum of understanding (MoU) had been signed by representatives of Kazakh state oil champion KazMunaiGas (KMG), Russia’s Rosneft, Azerbaijan’s SOCAR, Italy’s Eni, China’s China National Petroleum Corp. (CNPC) and US geological services group NEOS. The accord is aimed at paving the way for the creation of a consortium to explore deep-lying and complex sites in western Kazakhstan and in the Kazakh zone of the Caspian Sea.

“It is expected that the project will first provide a stable resource base for the oil and gas industry – a strategic reserve of hydrocarbons – and secondly avoid declining production, which may occur in 15 to 20 years,” the Kazakh Energy Ministry said in a statement last week. “And thirdly, [the project] will be the foundation of [Kazakhstan’s] energy security; a defence mechanism against possible economic shocks.”

The Eurasia Project is targeting geological layers in the Caspian Depression, an expanse of low-lying flatland stretching across Western Kazakhstan, the northern Caspian Sea and as far as Russia’s southern region of Kalmykia. Astana estimates that the area could contain up to 60 billion tonnes (428 billion barrels) in oil reserves.

The Eurasia Project was unveiled by the Kazakh government in November 2013, will consist of three exploration stages estimated to cost around US$500 million. The first stage will involve the review and processing of existing data on the Caspian Sea Basin, while the second will consist of a wide-ranging exploration programme. In the third stage, KMG and its partners will drill a super-deep offshore well to a depth of 14,000-15,000 metres.

Several companies had previously expressed in interest in the Eurasia Project but were not party to last week’s MoU. In April last year, representatives of US giant ExxonMobil, India’s ONGC, French Total and Russian independent LUKOIL attended a meeting organised by the Kazakh government to discuss the scheme. Astana had tried to draw in foreign expertise and capital by promising consortium members tax relief on production from new schemes under the Eurasia Project.

Many of the signatories of the MoU last week already operate in Kazakhstan. CNPC is one of the largest investors in the country’s oil industry, commanding stakes in a number of key upstream projects onshore as well as the Kashagan oilfield in the Caspian. Rosneft has interests in two exploration licences in the country: one in Western Kazakhstan and another offshore near Kashagan.

Italy’s Eni is involved in both the Karachaganak and Kashagan project consortia, alongside several other international investors. It also has rights to the offshore Isatay exploration block.

SOCAR does not have an upstream footprint in the country, although its involvement in the Eurasia project may be tied to Azerbaijan’s important role as a transit route for Kazakh crude bound for international markets. SOCAR is also looking to diversify its business amid declining production at its oilfields in Azerbaijan. NEOS is working with the Kazakh Energy Ministry as a geological consultant for the Eurasia Project.

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