Kashagan accident won’t delay commercial output-minister

Sept 26. Reuters. ASTANA

By Raushan Nurshayeva

* On track to start commercial output in October -minister
* Giant field to help Kazakhstan ramp up oil production
* Kashagan oil may flow to energy-hungry China

Kashagan accident won't delay commercial output-ministerAn accident has halted production at Kazakhstan’s giant Kashagan offshore oilfield two weeks after its launch, but this will not delay the start of commercial output in October, the Kazakh oil and gas minister said.

It took nearly 13 years and about $50 billion before first oil was produced on Sept. 11 at the field in the Caspian Sea. Kazakhstan expects it to produce around 8 million tonnes of crude in 2014 and eventually reach 1.5 million barrels per day.

The multi-national consortium developing Kashagan needs to launch commercial output by an October deadline or faces fines under a production-sharing agreement with Kazakhstan.

“Production was stopped yesterday”, due to a gas leak, Minister Uzakbai Karabalin told reporters on Thursday. “We believe it will take three or four days to fix it.”

The emergency situations department of the Atyrau region in western Kazakhstan, where Kashagan is located, said there were no casualties or threats to personnel.

Asked whether the accident could delay the start of commercial output, Karabalin said: “We believe that it should have no impact.”

The consortium developing the field could not be immediately reached for comment.

KazMunaiGas, Italy’s ENI, U.S. major ExxonMobil, Royal Dutch Shell and France’s Total each hold 16.81 percent stakes in Kashagan. Japan’s Inpex owns 7.56 percent.

The target for commercial output under a contract with international oil majors developing the field is 75,000 barrels per day (bpd).

“We are glad our colleagues are actually coping with the task,” Karabalin said. “They had already achieved (production) of 48,000 bpd. In general, the entire system works well.”

The high-pressure reservoir in Kashagan’s shallow area, which freezes during the harsh winter, is estimated to contain 35 billion barrels of oil in place, with 9 billion to 13 billion barrels being recoverable.


China National Petroleum Corp (CNPC) acquired an 8.33 percent stake in the project this year. The deal, estimated to be worth $5 billion, followed Kazakhstan’s decision in July to use its pre-emptive right to buy an 8.40 percent stake from U.S. oil major ConocoPhilips for a similar price.

KazMunaiGas head Sauat Mynbayev said after the deal with CNPC was signed this month that Kazakhstan planned to export its quota of crude from Kashagan via the CPC pipeline running to Russia’s Black Sea port of Novorossiysk.

He did not exclude, however, that Kazakhstan could export Kashagan oil to China via the existing Atasu-Alashankou pipeline to help feed its neighbour’s rising energy consumption.

Kazakhstan, with a population of 17 million, is Central Asia’s largest economy and the second-largest oil producer in the former Soviet Union after Russia.

Karabalin said last week that under “a pessimistic scenario” Kazakhstan’s oil output was forecast to exceed 110 million tonnes by 2030. Oil output is officially forecast to rise to 82 million tonnes this year from 79.2 million in 2012.

China already controls around a quarter of Kazakhstan’s oil output, and CNPC’s entry into Kashagan further firmed Beijing’s foothold in the energy-rich nation.

The upper chamber of Kazakhstan’s parliament voted on Thursday to ratify an agreement with China on expanding the capacity of the Atasu-Alashankou oil export pipeline.

The 962 km (600 mile) pipeline, which shipped first oil to China in 2006, is run by subsidiaries of KazMunaiGas and CNPC.

It may achieve its peak capacity of 20 million tonnes of crude already this year under a project estimated at 126 billion tenge ($820 million), Karabalin told parliamentarians. Shipments totalled 10 million tonnes in 2012, official Kazakh data show.