--> SPECIAL ADDRESS: Partnership in Kazakhstan: Chevron and Tengiz, by R. H. Matzke; #90986 (1994).

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Abstract: SPECIAL ADDRESS: Partnership in Kazakhstan: Chevron and Tengiz

R. H. Matzke

After six years of complex negotiations, Chevron achieved success in April, 1993 by signing our joint-venture agreement with the Republic of Kazakhstan to develop the Tengiz and Korolev oil fields on the eastern shore of the Caspian Sea.

Tengiz is one of the 10 largest fields ever discovered and has approximately 25 billion barrels of oil in place--the same amount as the recoverable reserves currently forecast in the entire United States. Additionally, Tengiz field holds several trillion cubic feet of natural gas--U.S. natural gas reserves total 167 trillion cubic feet. Eventually, we believe the Tengiz and Korolev fields could be producing 10 times their current capacity--nearly 750,00 barrels a day.

In Kazakhstan, producing and transporting oil is a great challenge. The Caspian shore is a desert lying nearly 100 feet below sea level and temperatures range from 120°F in the summer to -30°F in the winter. Strong winds and sand storms are present during every season and the area is also susceptible to flooding. Although the crude oil is very light in specific gravity, we are faced with carefully controlling the high levels of toxic hydrogen sulfide found in the gas and the technical challenges of extracting oil of high temperatures and high pressures lying beneath salt at depths from 12,000 to 16,000 feet.

Over the first four years of the project, Chevron will invest about $1.5 billion and we expect the total investment to reach within the range of $20 billion in the 40-year life of the venture.

The Tengizchevroil joint venture is an example of Chevron's willingness and ability to confront and survive environments of uncertainty and change. For several years, Chevron had strived toward finding a project that a joint Chevron-Soviet team could support and many proposals and counterproposals were made. By late spring of 1991, we could see a breakthrough close at hand, but the breakup of the Soviet Union made the resource we were interested in the property of a newly independent Republic of Kazakhstan. Although we had already been working with the Kazakh government in Almaty and with representatives of the province of Atyrau, we had to start over again in terms of the conceptual bridge building required of both sides. As it turned out, we were fortunate that Tengiz lay in Kazakhs an, a new nation that had been an island of stability in a region otherwise in turmoil.

Several lessons can be learned from our experiences to date. Placing priority on respect of our business partners, nurturing a mutual trust, and standing our ground while remaining open to compromise are qualities which have proven invaluable to our accomplishments. Understanding and becoming involved in the needs and objectives of the local communities are essential. One must build credibility and trust locally by being on-site and demonstrating a genuine concern and esteem for the culture of the host country. The final, absolutely critical characteristic needed to work successfully with emerging nations is patience.

AAPG Search and Discovery Article #90986©1994 AAPG Annual Convention, Denver, Colorado, June 12-15, 1994