Commercial production at Kashagan to be further delayed

Commercial production at the giant Kashagan oilfield is to start “before September 2013 at latest”, Newskaz.ru reports, citing the country’s Oil and gas Minister Sauat Mynbayev.

When asked what would happen if the commercial production were further delayed [beyond September], he said that “in line with the agreement as of 2008, the consortium partner companies would bear all the costs”.

When speaking at a government sitting, the country’s Minister of Economic Affairs and Budget Planning Erbolat Dossayev said that the start of commercial production at Kashagan might be further delayed.

In an interview for journalists he elaborated that “production at Kashagan would be postponed from June to early September”.

“This postponement would have no effect on budget revenues (…) the postponement is due to testing of the equipment”, he added. The Kashagan field, named after a 19th century Kazakh poet from Mangistau, is located in the Kazakhstan sector of the Caspian Sea and extends over a surface area of approximately 75 kilometers by 45 kilometers. The reservoir lies some 4,200 meters below the shallow waters of the northern part of the Caspian Sea and is highly pressured (770 bar of initial pressure). The crude oil that it contains has high ‘sour gas’ content.

 The development of Kashagan, in the harsh offshore environment of the northern part of the Caspian Sea, represents a unique combination of technical and supply chain complexity. The combined safety, engineering, logistical and environmental challenges make it one of the largest and most complex industrial projects currently being developed anywhere in the world.

 According to Kazakhstan geologists, geological reserves of Kashagan are estimated at 4.8 billion tons of oil. According to the project’s operator, the oilfield’s reserves are estimated at 38 billion barrels, with 10 billion barrels being recoverable. Besides, natural gas reserves are estimated at over 1 trillion cubic meters. The consortium developing the field comprises Eni, Shell, ExxonMobil, Total and KazMunaiGaz (all with a 16.81% stake) as well as ConocoPhillips (8.4%) and Japan's Inpex (7.56%).

Tengrinews.kz reported late May 2012 that Kazakhstan and NCOC companies had signed an agreement to start commercial production at the giant Kashagan oilfield in the period from December 2012 to June 2013.

NCOC, a consortium developing the giant Kashagan oilfield, plans to produce 75 000 barrels of oil per day at the initial production stage, Tengrinews.kz reported mid-May 2012, citing NCOC Vice Managing Director Zhakyp Marabayev as saying on the sidelines of a CIS summit on oil and gas.

According to him, plans are there to bring the production figure up to 350 000 barrels a day or even up to 450 000 barrels a day at the first stage of the oilfield development.

“The current facilities enable to produce up to 350 000 barrels a day (…) Should the gas injection capacities be expanded, we could produce up to 450 000 barrels a day”, he said at that time.

Early October 2012 Tengrinews.kz reported, citing Kazakhstan’s Oil and Gas Minister Sauat Mynbayev as saying October 2 on the sidelines of the KazEnergy Oil Conference held in Astana, that ConocoPhillips might exit the project.

According to the СonocoPhillips’s press-release as of late November 2012, the deal to sell the stake to India’s ONGC Videsh Limited was expected to be finalized in the H1 2013. ConocoPhillips’s proceedings from the sale are expected to reach $5 billion. The deal is to be approved of by the Kazakhstan’s Government.

Kazakhstan is to take a decision on whether to exercise its preemptive right to purchase the СonocoPhillips’s stake in the consortium developing the giant Kashagan oilfield before May 25, 2015.