Kazakh oil field Kashagan to resume production in October, says PM

By bne IntelliNews June 15, 2016

Oil production at embattled giant Kashagan field in the Caspian Sea should resume in October, Kazakh Prime Minister Karim Massimov said on June 14.

The relaunch of Kashagan is part of a government’s plan to increase oil production to 75mn tonnes this year, above the planned 74mn. The oil-dependent Kazakh economy has taken a hit as low oil prices resulted in falling output: the low price of oil makes production from ageing oil fields unprofitable. The government expects oil output to total 74mn tonnes this year if the oil price averages $30 per barrel and 77mn tonnes at $40 per barrel. The country produced 80mn tonnes of oil in 2015, against 81mn tonnes in 2014.

Massimov said he has tasked the energy ministry and state-owned oil and gas company KazMunayGas with the relaunch of the Kashagan field. “All negotiations needed have been completed and necessary legislative decisions have been adopted. That is why I ask you together with the consortium [developing Kashagan] to bring everything to its logical end to launch [production at] Kashagan in October,” Massimov told a government conference call.

Production at Kashagan, under development by international consortium NCOC, was launched in 2013 but was suspended in September after a leak on the gas pipeline running to the onshore processing facility at Bolashak. An attempt to restart operations was abandoned on October 9. The consortium is now replacing the pipelines at a cost of $3bn although low global price of oil and uncertainty over the production costs make the field prospects blurred.

Earlier, officials claimed that after the relaunch Kashagan would reach a commercial output of 70,000-75,000 barrels per day within “a matter of months”. However, with the price of oil, currently hovering around $45 per barrel, Kazakhstan would manage to add 1mn tonnes of oil from fields that had reduced output due to low oil prices.

Stake holders in Kashagan are Eni, Shell, Total and ExxonMobil, each holding a 16.81% stake in the project and Japan’s Inpex with a 7.56% stake. US major ConocoPhilips sold its 8.33% stake to KMG for $5.4bn in 2013, which in turn sold it to China’s CNPC. Kazakhstan holds a 16.81% stake in the project through KazMunayGas and the national sovereign wealth fund Samruk-Kazyna. Kashagan is the second largest field in the world with recoverable reserves estimated at 9bn-13bn barrels.

 

 

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