/REUTERS, Moscow, Dmitry Zhdannikov, July 02, 02/ - Confirmed on the last week reserves of Kazakh field Kashagan, which is most likely the greatest oil discovery for the last 30 years, significantly increases positions of Kazakhstan in intent to became one of the most greatest players at the world oil market, analysts say.

Revenue from the world's biggest oil find for 30 years is strengthens positions of Nursultan Nazarbayev , but the Kazakh economy will face the challenge of becoming less dependent on energy production.

"Kashagan reserve can even turn out to be greater than Prudhoe Bay reserves in Alaska. This discovery changes the whole idea of hydrocarbons in Kazakhstan and Caspiy", - said analyst of Troika Dialogue Valery Nesterov.

International consortium with Agip at the head informed on Friday that reserves of Kashagan proved to be 7-9bn barrels and this field on Caspiy comprises to 38bn barrels of possible reserves.

Paul Collison, senior oil and gas analyst at Brunswick UBS Warburg believes that group used a very conservative assessment of recoverable reserves, which with the help of new secondary recovery technologies could gradually rise to 13 billion

By comparison, Britain's two biggest oil discoveries in the 1970s, the Brent and the Forties fields, amounted to up to two billion barrels, while top-class Angolan fields do not exceed one billion barrels. Alaska's Prudhoe Bay initial proven reserves stood at 8.6 billion barrels and have since been upgraded to 13 billion.

"Due to Kashagan, the country's dream of producing up to two million barrels per day (bpd) by 2010 is becoming a reality," said Valery Nesterov from Troika Dialog. Currently Kazakhstan produces 900,000 bpd.

Analysts also said Kazakhstan would push Azerbaijan, until now considered the most promising Caspian oil producer, into second place.

The Kazakh discovery also represents a threat to Russia, where oil output is booming for the fourth consecutive year and local firms harbor ambitions to grab new international markets, taking advantage of potential concern among consuming nations of over-dependent on OPEC crude.

GOOD OR THREAT FOR ECONOMY?

Kazakhstan counts on oil, as on base of its economical prosperity, however experts say that with exception of obvious advantages, Kashagan hides several threats.

Of course, increase of proved reserves would help country to attract cheaper loans and increase sovereign rating, said Nesterov. Collison also noted that Russia, population 150 million, was currently exporting three million bpd to hard currency markets. Kazakhstan, population just 15 million, plans to ship up to two million bpd by 2010.

"Russia, the world's second largest oil exporter, will gradually face serious competition from a world class oil rival," said Nesterov. Besides Agip, the Kashagan consortium includes Britain's BG, French TotalFinaElf, Royal Dutch Shell and U.S. Exxon Mobil, each with 16.6 percent of the shares. U.S. Phillips Petroleum and Japan's Inpex hold 8.33 percent each.

However, on the other hand, Kashagan creates real threat for Kazakhstan economy becoming fully dependent on oil revenues, as it was happened with all oil countries except Norway.

"For Kazakhstan the problem (of oil dependence) is much more acute than for Russia, and diversifying the economy could become a real challenge for the country's leaders, who may not necessarily want to do it," said Paul Collison, senior oil and gas analyst at Brunswick UBS Warburg.

"It would not surprise me if one day Kazakhstan will have more leverage to oil and gas than Indonesia or Venezuela," Collison said.

WHERE TO DIRECT OIL?

But huge reserves of crude oil have little value without adequate transport outlets, an acute problem from the landlocked Caspian.

Experts agree that the first oil will go in 2005-2006 either in Russian oil-pipes or in Caspian pipeline consortium (KPC).

"CPC has great facilities that can be increased to 68m tones", - said Nesterov. However, as it stands now, the Iranian option seems next to impossible," said Collison.

The USA are against the oil transit through Iran and actively support the construction of pipe from Azerbaijan to Turkey Baku-Dzheyhan. This project costs $2.9bn.

TotalFinaElf acquired this month a five percent stake in the Azeri-Turkish link despite having no big oil reserves in Azerbaijan but having a stake in Kashagan.

Nesterov is paying attention to gas also. Research showed that some fields have more gas that oil. This can lead to problems with demand.

However, experts agree in opinion that publication of Kashagan reserves will definitely lead to energization of development works on Caspiy, where such fields as Kurmangazy remain untouched.

[2002-07-02]