Suspension at Kashagan won't affect Kazakhstan's 2013 budget

Production from the Kashagan oilfield was not taken into consideration when the 2013 Kazakhstan state budget was made, so it it not going to affect the planned revenue side of the budget, Interfax-Kazakhstan news agency is quoting Kazakhstan Minister of Economy and Budget Planning Yerbolat Dosaev as saying. “The suspension of the field will not affect the 2013 budget, because the revenues are distributed based on the Production Sharing Agreement (PSA). The production won't affect the 2014 budget either,” said Dosaev in Astana. The Minister added that the suspension of production at Kashagan won’t affect Kazakhstan's ability to achieve the 2013 oil production target either. “We thought they were starting the production in May; after that we made the adjustments in the cumulative oil production targets for this year,” noted the Minister. According to the Ministry of Oil and Gas, Kazakhstan plans to produce 82 million tons of crude in 2013. On October 9, Kazakhstan Minister of Oil and Gas Uzakbai Karabalin announced the start of commercial oil production at Kashagan. In line with the Kashagan field PSA, production of 75 thousand barrels a day indicates the start of commercial production. According to the Ministry of Oil and Gas, the Kashagan field is expected to produce 8 million tons of oil in 2014. The oil production at Kashagan started on September 11. As per the PSA the commercial production was supposed to start before October 1. However, a gas leak was discovered during a routine check of the ground gas pipeline from the offshore Island D to Bolashak refinery at the Caspian Sea coast. The production was haltered. It was restarted on October 6 after some repair works. Yet, on October 9 during another routine check of the gas pipeline between the Island D and Bolashak another gas leak was discovered. The oil production was stopped again. The Kashagan oil field is developed by North Caspian Operating Company (NCOC). The shareholders are AgipCaspian Sea B.V. (16.81%), KMG Kashagan B.V. (16.81%), ConocoPhillips North Caspian Ltd. (8.4%), ExxonMobil Kazakhstan Inc. (16,81 %), Inpex NorthCaspian Sea Ltd. (7,56 %), Shell Kazakhstan Development B.V. (16.81%) and Total EP Kazakhstan (16.81%). ConocoPhillips as withdrawn from the Kashagan project selling its share to Kazakhstan's KMG. KazMunaiGas is expected to subsequently resell the share to Chinese CNPC. Agip is responsible for offshore operation while Shell and Exxon are responsible for onshore projects and drilling. NCOC estimates the reserves of the Kashagan field at 35 billion barrels with 11 billion barrels of recoverable reserves. It’s considered to be the largest oilfield in the world after Prudhoe Bay Oil Field (discovered in 1968). The Phase I of the field's development is supposed to see production of 370 thousand barrels a day with a possible increase to 450 thousand barrels a day. It is planned to increase the production to 375 thousand barrels a day during the Phase II and stay on the flat for at least three years.