Kashagan faces more potential delays, Kazakh minister warns

By bne IntelliNews April 24, 2013

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The start of commercial production at the Kashagan oilfield, currently expected in June, could be delayed yet again, Kazakhstan's Minister of Economy and Budget Planning Yerbolat Dosayev warned on April 23.

Speaking at a cabinet meeting, Dosayev said that the oil and gas ministry needs to increase target production at other fields, to make up for a possible delay in launching production at Kashagan. The official did not comment on when production at Kashagan is now likely to start, or why he expects a delay.

Meanwhile, Interfax cites Oil and Gas Minister Sauat Mynbayev as saying that production will start by September at the latest. After many years of delays, the international consortium developing the giant offshore field was expected to launch production in June.

The Kazakh government had, until recently, been forecasting a major leap in oil output this year, on the back of the start of commercial production at Kashagan. President Nursultan Nazarbayev said on April 5 that he expects Kazakhstan to soon join the world's top five oil exporters.

Over the next five years, Kazakhstan's oil production is expected to increase by around 25%, from 82m tonnes in 2012 to 102m tonnes in 2017. As a result, economic growth is also expected to increase, ending the slowdown Kazakhstan experienced in the last year.

Kashagan, in the Caspian Sea, was the largest oilfield discovery in the world in the last three decades, and has estimated recoverable reserves of around 13bn barrels of oil. It is being developed by an international consortium led by Italy's Eni, which has a 16.81% stake. State-owned KazMunaiGas, Shell, Total and ExxonMobil hold similar stakes, with Inpex owning 7.56%. US major ConocoPhilips is in the midst of a drawn out process of selling its 8.4% interest, with Astana having the final say on whether it goes to KazMunaiGas, India or China.

However, the field is extremely difficult technically, which has seen repeated delays to the start date for production. The consortium is under pressure from Astana to start production as soon as possible, and faces heavy penalties if production does not begin this year.

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