Kazakhstan's Government will not be compensating the international consortium of companies developing the giant Kashagan oilfield for expenses related to replacement of faulty pipes, the country's Prime Minister Karim Massimov announced today.
“In line with the agreement, the Government will not be compensating for the expenses related to replacement of the pipes. These expenses will be incurred by the companies", he said at a joint sitting of the Parliament.
He emphasized that Kazakhstan “had had high expectations (…) as extra revenues from export of crude coming from the oilfield could be of great help at the moment (…) the macroeconomic situation might be somewhat different if we could rely on revenues from sales of crude produced at the oilfield".
“We are expecting the production to be resumed late 2016 or early 2017 so that we could count on the revenues when planning the country's budget", he said.
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.
“At Kashagan both the oil and gas pipes have to be fully changed. 200 km of pipes have to be purchased to replace the damaged pipes. When it comes to scenarios of laying the pipes, there are two possible options. If the optimistic scenario works out, the oil production will be resumed in the first half of 2016; should we apply the second scenario, the expected time of resumption is the second half of 2016. The estimates may be adjusted (…)", the country's Oil and Gas Minister Uzakbai Karabalin told a briefing July 30, 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.