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Caspian Sunrise PLC on Monday announced the drilling of a deep well on the Yelemes Deep structure in Kazakhstan and gave an update regarding the impact of sanctions against Russia.
The Kazakhstan-focused oil & gas exploration and production company said deep well 802, the sixth deep well in total to be drilled at the BNG contact area, is also the final deep well the firm is obliged to drill as part of the BNG programme. It will be drilled to 4,300 metres, with drilling expected to take four months.
Caspian Sunrise said cash costs are expected to be significantly lower than for previous deep wells, as it will be using its own rig and drilling through easier sandstone.
The company also provided an assessment of impact of Russian sanctions. It said its oil continues to flow through the Russian pipeline network to Russian ports on the Baltic Sea, and it doesn't see these pipelines being closed ‘whatever happens’.
Caspian Sunrise however said it is suffering a significant loss of revenue due to a discount on its oil of about $30 to $35 a barrel, compared to the Brent oil benchmark. This is due to Kazakh oil and Russian oil being lumped together by the market under the term Urals oil.
Looking ahead, the company expects buyers who have not signed up to boycott Russian oil, including China, India and other large Asian economies to take advantage of the current discount for Urals oil and switch their buying to this cheaper oil and reduce the oil they buy from other more expensive sources.
However it believes this discount is likely to reduce as the natural market arbitrage take effect.
Caspian Sunrise shares were up 19% at 4.69 pence each on Monday morning in London. The stock remains down just 5.2% so far in 2022.
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