Mubadala finds oil in Caspian Sea

Mubadala Oil and Gas has found oil and gas in a concession in Kazakhstan, but says more drilling is needed to ascertain whether the field is commercially viable.

The offshore well, drilled last month, cannot be formally called a discovery as the operator was forced to cap it for safety reasons before running a final production test, a source in the consortium said.

Mubadala Oil and Gas is the energy arm of Mubadala Development, a strategic investment company owned by the Abu Dhabi Government. "Mubadala can confirm that its first exploration well on Rakushechnoe More structure within N Block area, located in the Kazakhstan sector of the Caspian Sea, encountered oil and gas at several levels," said Andrew Mitchell, a spokesman.

The 2009 deal to drill on N Block, 30km southwest of Aktau, was a coup for Mubadala given the level of competition for the block from Russian and international oil majors.

The concession is 51 per cent owned by KazMunaiGas, the Kazakh state company, with Mubadala and the US company ConocoPhillips each holding a 24.5 per cent share. The consortium has spent about US$100 million (Dh367.3m) on this first well, and now plans to drill a second well in the same location this year.

The first well was capped to avoid the risk of a blowout, as happened a decade ago at a well drilled in the same geological structure, said a source in the consortium.

"It's a huge structure that we drilled and we've seen a lot of signs of oil in this well," the source added. "We definitely have no reasons to be pessimistic. We're still smiling."

Kairgeldy Kabyldin, the chairman of KazMunaiGas, first revealed that the first well had found "evidence of hydrocarbons". Mr Kabyldin said the structure could hold more than 4.6 billion barrels of oil, with up to 2 billion eventually being produced.

The different location and geology of N Block means it should be free from the technical challenges faced by the supergiant Kashagan Field to the north, which has experienced soaring costs and is not expected to begin producing oil until 2013, eight years behind the original schedule.

Mubadala is also in talks with neighbouring Turkmenistan to gain access to other exploration opportunities in the Caspian.

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