Members of Parliament call on the government to terminate the contract with Buzachi Neft and return the field to the state.

In the Mangistau region emergency well No. 303 at the Karaturun Yuzhny field has been burning for the second month. The fire started on June 9 when a gas-water mixture was released during the lifting of the drilling tool and ignited. The operation was carried out by the Zaman Energo company. According to Buzachi Neft (a subsoil user that ordered drilling) the incident occurred due to a violation of the technological regulations committed during the construction of an exploratory well.

The field is exploratory and there is no production. From the first days of the accident specialists from Ak Beren (a professional paramilitary emergency service) have been dealing with the emergency. Rescuers tried several times to extinguish the fire but without success. The liquidation of the accident turned out to be difficult since the flowing gas is burning, the well is in gryphon formations and the gas broke out outside the drilled hole.

Buzachi Oil stated that it plans to complete all operations on the elimination of the accident in October this year. Two directional relief wells will be drilled which should help relieve pressure on the emergency well and will be cemented.

What is the damage?

The well has been burning for almost two months. The subsoil user notes that the norms of the maximum permissible concentration of harmful elements in the air in the sanitary protection zone do not exceed the permissible values. The company stated that this is because gas burned with a methane consists of 99% and burns completely without causing significant harm to the environment. The company concluded based on the air samples taken on June 9, June 23, July 14, and July 28. Measurements were made by the testing laboratory of the Ministry of Ecology of Natural Resources of the Republic of Kazakhstan, Department of Ecology of the Mangystau Region.

The Ministry of Energy and the regional department of ecology stated that environmental and other damage will be calculated after the liquidation of the accident.

The field is located 350 km from Aktau city and 70 km from the nearest village Shebir.

This week Bloomberg cited data from French geoanalytics company Kayrros SAS who reported that satellites had detected (nine times in a month) giant clouds of methane erupting from the site. According to experts the rate of emissions from the site is from 35 to 107 tons of methane per hour. If this is true, the methane has caused the same short-term damage to the climate as the annual emissions of about 800 thousand to 2.5 million cars in the United States.

Specialists from the Netherlands Institute for Space Research SRON that interpreted data from the Sentinel-5P satellite of the European Space Agency stated that the average rate of methane plumes was about 100 tons of methane per hour. However, the team detected around 1,200 methane plumes around the world this year and only 10% exceed 100 tons per hour.

Buzachi Oil told Bloomberg that satellite imagery likely demonstrates clouds of hot vapor with minimal traces of greenhouse gases. However, Kayrros disagreed with the subsoil user’s assessment.

Kayrros stated that it is highly unlikely that water vapor will be counted for methane in several of the images taken by the two hyperspectral satellites whose very high spectral resolution leaves no doubt about the nature of the observed gas.

According to Buzachi Neft the temperature is about 650 degrees Celsius at the epicenter of the fire and about 12,000 cubic meters per day of gas flared at the site.

Bloomberg notes that the methane is the main component of natural gas and has a devastating effect on the climate as its ability to warm more than 80 times comparing to carbon dioxide during first 20 years in the atmosphere.

As for material damage Buzachi Neft told NewsHub.kz that the liquidation works are currently in an active phase and it is still difficult to estimate the final amount of costs.

Who will pay?

The Ministry of Energy stated that all expenses for the liquidation of the accident will be handled by Buzachi Neft.

The subsoil user believes that the accident was caused by a violation of the technological regulations which occurred due to the human factor (by mistake or negligence of the drilling team of Zaman Energo LLP). The company reports that a special commission should find out the cause of the accident. Two representatives of Zaman Energo participate as observers but do not take any part in the liquidation of the accident. All work is carried out by Buzachi Oil and Caspian Drilling LTD.

On June 29, Member of Parliament Yedil Zhanbyrshin addressed a request to the Prime Minister and the country’s Prosecutor General. According to him, Buzachi Oil illegally extracts oil from the field, he urged the authorities to investigate the company and if the fact is confirmed, the government should terminate the contract with the subsoil user and nationalize the field as well as terminate all licenses.

Prime Minister Alikhan Smailov replied that from June 12 to June 30 an inspection was carried out and no facts of illegal extraction and sale of oil were found.

Karaturun Vostochny (the Buzachi Oil field) was acquired in 2001 at an open auction by the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan (now the Ministry of Energy). It belongs to the category of small oil fields. Its recoverable reserves do not exceed 500 thousand tons of oil and 3 billion cubic meters of gas.

The company also has a contract to produce hydrocarbons at the Karaturun Morskoy field also located in the Mangistau region.

In 2021 the production volume amounted to about 208.2 thousand tons of oil and more than 5.8 million cubic meters of gas, in 2022 – 236.5 thousand tons of oil and 10.4 million cubic meters of gas.

Even if the state decides to nationalize the field it would be difficult to do this for several reasons. In particular, the oil field is pledged in the bank. In 2018 Buzachi Neft entered into an agreement with Bank CenterCredit to issue a loan for $17 million for a period of 7 years. As a pledge the company granted its subsoil use rights to the Karaturun Vostochny and Karaturun Morskoy fields. The owner of the company Murat Safin acted as a guarantor. The last tranche was paid in July 2019. The loan was taken to pay for the costs of drilling wells and development of the fields.

According to Forbes Kazakhstan Murat Safin was mentioned in the rating of the 50 richest people in Kazakhstan with a fortune of $82 million in May 2013.

The staff of Buzachi Neft LLP is 240 people and about 1,000 people work in contractor and subcontractor companies. In 2022 the company’s revenue from the sale of oil amounted to 40 billion tenge.

According to Article 146 of the Code “On Subsoil and Subsoil Use” gas flaring is prohibited, except for several cases as an accident. Thus, Buzachi Neft might be found not guilty of the fire. The company has already stated that the violation of the technological regulations occurred by operations of the drilling team of Zaman Energo. It is possible that the customer and the drilling contractor will still have legal proceedings to find out the degree of guilt of the parties. As it is happened between the British BP and its contractors after the accident in the Gulf of Mexico on the Deepwater Horizon drilling platform. The company accused Transocean (the owner of the drilling platform) of multiple failures in the operation of safety devices and safety violations and demanded damages in the amount of $40 billion. At the same time the supplier filed a counterclaim against the oil company.