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Kashagan project cost may rise again

13 october 2014, 14:17
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Kashagan ©REUTERS
Kashagan ©REUTERS

The cost of Kashagan project may rise once more, this time by $4 billion, Astana TV Channel reports citing the Financial Times.

According to FT, this is the amount needed to replace the old leaking pipes with new corrosion-resistant pipeline. The need to reconstruct the 200km pipeline adds to the project that has already become the most expensive oil project in the world, costing $50 billion so far.

Oil production at the field began on September 11, 2013. However, on September 24, a gas leakage was discovered during a routine inspection of the pipeline and the production was suspended. It was resumed shortly after, but another leakage detected in October brought the production to its present halt.

After no obvious fractures or perforations were discovered in the pipes, tests were made in a British lab to determine the cause of the leaks. It was discovered that sulfurated hydrogen-driven corrosion had carved tiny but deep cracks in the pipes and the alloy the pipes were made of was just not suitable for the exception conditions. Thus, a more resistant and expensive alloy was required for the pipes to hold.

The Kashagan field, named after a 19th century Kazakh poet from Mangistau, is located in the Kazakhstan sector of the Caspian Sea shelf and has a surface area of approximately 75 by 45 kilometers.

Its recoverable oil reserves are estimated at around 13 billion barrels, while its immense reserves of natural gas are believed to be more than 1 trillion cubic meters.

However, the project has been marred by cost overrun, technical complications and delays since its very beginning.

The oil and gas reservoir lies 4,200 meters below the shallow waters of the northern part of the Caspian Sea, is highly pressured (770 bar of initial pressure) and contains crude with high sulfuric content.

Therefore, the development of the fields is complex technically, logistically and environmentally, making Kashagan one of the most difficult projects developed anywhere in the world.

Resumption of the production is not expected anywhere in the near future. The Ministry of Energy of Kazakhstan said that the production would be resumed in 2016 but some experts believe that it is not going to happened anywhere before 2017.

This uncertainty makes all the companies involved in the project uneasy: ExxonMobil (16.81%), Royal Dutch Shell (16.81%), Eni (16.81%), Total (16.81%), KazMunaiGas (16.81%), CNPC (8.4%) and Inpex (7.56%) had all seen the potential of the project but now have to deal with the difficulties and risks that may and do arise.

By Dinara Urazova


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