Kashagan to be developed by consolidated company14 july 2014, 15:08
Kashagan will be developed by a consolidated joint-venture company, Tengrinews reports citing a statement of the North Caspian Operating Company (NCOC), the delegated operator of the giant oil and gas field project developed under the North Caspian Sea Production Sharing Agreement (NCSPSA).
“Transition of the Kashagan project from development to production offers an opportunity to further integrate and consolidate the operator and agent activities to put the venture into a better position for further development of the field under the NCSPSA. To capitalize on this opportunity, the NCSPSA shareholders have agreed to work towards a gradual transition from the current operating model to a single consolidated joint-venture company,” the statement said.
The companies involved in the development of the field - Kazakhstan's KazMunaiGas, American ExxonMobil, Anglo-Dutch Shell, Italian Eni and French Total with 16.81% each, Chinese CNPC with 8.4% and Japan's Inpex with 7.56% - are going to launch the new operator in September 2014.
According to the statement, the new consolidated company will avail of the previous achievements of NCOC and those of development, production, and drilling agents. It will operate under a single corporate management system, but will bear the same name as the current operating company: North Caspian Operating Company (NCOC).
The transition does not envisage any changes to the Production Sharing Agreement (PSA) or the NCSPSA ownership structure.
The company will be headquartered in Atyrau in western Kazakhstan. Only those who will serve as liaisons with the government officials will work in Astana. Pierre Offant was replaced by Stephane de Mahieu of ExxonMobil as NCOC Managing Director on May 1, 2014.
Kashagan is a gigantic oil and gas field in Kazakhstan's offshore section of the Caspian Sea. Its recoverable oil reserves are estimated at around 13 billion barrels. There are also large reserves of natural gas at Kashagan – more 1 trillion cubic meters. However, the project has been characterized by production delays, cost overruns and technical complications.
The production was halted over a gas leak two weeks after it was finally started in September 2013. Almost immediately after the production was resumed in October 2013 more gas leaks were discovered. Test showed that the pipes failed to withstand the corrosion boosted by high content of hydrogen sulphide (a toxic gas harmful to both humans and equipment) and there were minuscular cracks all over the pipes and all of them had to be replaced with those made of a more resistant and expensive allow. This will cost several additional years of delay and billions of dollars.
The process of integration and consolidation will start this year. “Activities associated with establishing the single operating company will not affect the pipeline repair activities, preparations for the production restart, or completion of the remaining Phase 1 scope of work, the company assured.
Writing by Dinara Urazova, editing by Tatyana Kuzmina