New operator for Kashagan to be launched by September 2014

Member companies of the international consortium in charge of developing the giant Kashagan oilfield are working to launch a new operator of the project to replace the current NCOC, tengrinews.kz reports, citing the country’s Oil Minister Uzakbai Karabalin quoted by Newskaz.ru.

In October 2008 the Republic of Kazakhstan reached an agreement with the seven companies participating in the Kashagan PSA to form a new joint operating company North Caspian Operating Company B.V. In January 2009 NCOC formally became operator under the PSA, taking over the role that was formerly held by Agip KCO.

“NCOC is undergoing changes (…) a new managing system is being created (…) the new operator will comprise best specialists employed with member companies of the consortium”, he told a briefing in Astana May 27.

According to him, the work will be complete by September, “with the new operator being much more effective than before”.
“Both subcontractors and the Ministry were dissatisfied with the system in place up to now. It has been too costly; decision-making took a lot of time due to complexity of the hierarchy”, Mr. Karabalin said.

The most probable time to resume the commercial production at the giant Kashagan oilfield is late 2015, the country’s Vice Minister of Oil and Gas Magzum Myrzagaliyev said May 22.

Commercial production at Kashagan started September 11, 2013. However, it was suspended 2 weeks later due to a gas leakage. The production process was resumed shortly. However, another leakage was detected in October.

According to the country’s Minister of Economic Affairs Yerbolat Dossayev, the suspension of the project resulted in losing 0.5% of the GDP in 2014.

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.

“We expect Kashagan to come on stream shortly. The volume of crude to be produced hinges on the period of repairs currently under way. Our estimates stand at about 2 million tons for 2014”, Tengrinews.kz reported mid-January 2014, quoting the country’s Oil and Gas Minister Uzakbai Karabalin as saying at a press-conference following the sitting of KAZENERGY petroleum association.