Kashagan oil field will be profitable, NCOC consortium insists

By bne IntelliNews June 9, 2015

bne IntelliNews -

 

Kashagan, Kazakhstan's massive but troubled oil field,  is expected to relaunch production in the second half of 2016, and achieve a phase one output of 370,000 barrels per day (b/d) by the end of 2017, according to the NCOC consortium's managing director, Stephane de Mahieu.

In an interview with Kazakhstan's state-run Kazinform news agency published on June 9, Mayo said that the replacement of pipelines linking the offshore field with onshore facilities had started in spring 2015 and would be completed in the second half of 2016. "Production is planned to be resumed soon after the construction of the pipelines," de Mahieu said in the interview, published in Russian.

The managing director of NCOC said that in the first months of operations output would reach 90,000 b/d and would be quickly taken up to 180,000 b/d. This level will be maintained for the following six months as the consortium will work on injecting sour gas back into the field to bring the production to 370,000 b/d by the end of 2017. After that a decision will made on phase two of Kashagan's development, de Mahieu said.

He said that as of August 2014 total investment in Kashagan stood at $44.5bn, adding that in 2014 NCOC and the Kazakh government agreed that initial costs of laying the pipelines and consequent replacement of them, estimated to cost $3bn, would not be reimbursed. "From this point of view it is fair to say that the financial burden caused by defects of the initially built pipelines will be borne by the shareholders of the project, not the Republic of Kazakhstan."

Production at Kashagan was launched on September 11, 2013, but a leak on the gas pipeline running to the onshore processing facility at Bolashak led production to be halted on September 24. An attempt to restart operations was abandoned on October 9.

De Mahieu explained that the shareholders had decided to continue investing in the field because such a great sum had already been invested in it. He admitted that if they were starting now, given the current low price of oil, the shareholders would have great difficulty making a decision to go ahead. However, he added: "I am convinced that the potential of the Kashagan field will be realised fully and it will be profitable."

Kashagan is being developed by the international consortium NCOC. State-owned KazMunaiGas owns an 16.88% stake in the project, Eni, Shell, Total and ExxonMobil hold 16.81% each, with Japan's Inpex owning 7.56%. US major ConocoPhilips sold its 8.33% stake to KazMunaiGas for $5.4bn in 2013, which in turn sold it to China's CNPC.

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