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​Kashagan: everything is insured, except …

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By Laura Suleimenova

Image 0A comment under the article "Kashagan as premonition" published on “AkZhaik" website inquired why criminal case hasn't been initiated still against contracting companies that constructed faulty pipes in the North Caspian project. Pipes later required replacement. But this is, no hard feelings, please, a naive question, in the light of the Agreement signed in December of last year between the Kazakhstan party and NCOC - the operator of the North Caspian project (see "Everything was written off and still remained endebted").


The consortium agreed to withdraw its requirement about reimbursement ($909 million) during the period from January 1, 2004 to October 1, 2013 connected with construction and operation of pipelines designed for sulphurous gas and sulphurous oil running from D island to Bolashak oil and gas processing unit, as well as future expenses on dismantling.

In return the Kazakhstan party exempted contractors from losses suffered by the state in connection with all types of activities on construction and operation of initial pipelines. Kazakhstan assumed the obligation not to impose demands about indemnification neither in judicial, nor in any other manner. Besides, the Agreement specified that contractors can't be brought to any administrative responsibility, since according to the RoK Administrative Code a limitation period on the possible offenses allowed by contractors during the from January 1, 2004 to December 31, 2013 has already expired.

One important point: the parties agreed that all or some of the released contractors who were involved in initial pipes fabrication and construction will be engaged in pipelines "replacement" activities. Then, as one would expect, the bid for construction of new pipelines was won by the Italian company "Saipem SpA", the company that buikt the old pipeline (see "Deja vu, or Correction of mistakes for Saipem").

Among contractors engaged in pipeline design and fabrication are ERSAI Caspian Contractor LLC, Petrovalves Srl, Tectubi Raccordi SpA, Fabricom GTI NV/AS, EEW – Erndtebrucer Eisenwerk Gmbh&Co, NDT Services Ltd LLP, BJ BJ Services Company Middle East Ltd, Van Oord Offshore BV, Esab Saldatura SpA, Voestalpine Bohler Welding Italia SpA. In other words, all those companies that were involved in the first, failure project. In the list of contracts that were awarded to companies there are about 100 more smaller companies - most likely, the majority of them also were involved in the previous project..


Within the framework of the agreement the managing committee of the Consortium approved the next program of insurance of its own risks.

Construction activities on offshore complx within the framework of Kashagan field development are insured based on general limit of $1,65 billion in case of emergency or incidents. In particular, activities on onshore complex - $250 thousand, tows for barges - $500 thousand, activities on offshore complex - $1 million, offshore field pipelines - $3 million, offshore in-filed piping - $2 million, onshore field pipeline - $500 thousand.

Also general insurance of a civil liability and responsibility during construction of offshore and onshore units – based on the limit of $50 million in case of each accident or incident, construction activities on onshore complex (except depreciation, as well as on offshore complex) - the limit +10% of the declared cost in case of each accident or incident has been provided; onshore complex from terrorism - $250 million, additional expenses of the operator on all existing and future wells on a contract site – combined unified limit on each incident or a case - $550 million, insurance of responsibility before the third parties - $200 million, etc.

Everything has been insured, up to professional responsibility of medical employees. Only in 2015 NCOC will spend over $19 million for insurance payments for the Experimental Program Stage.

As for the inhabitants of the Pre-Caspian area, as well as for bioresources of the Caspian Sea – no insurance payments or compensations are provided.

Photo: D Island. August 26, 2013. Photo from Ak Zhaik archive.

May 6 2015, 15:50

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