Resumption of oil production not planned at Kashagan field in 2014

April 28. Trend. Astana

By Daniyar Mukhtarov

Resumption of oil production not planned at Kashagan field in 2014The resumption of oil production is not planned at the Kashagan field in 2014, North Caspian Operating Company reported.

“The restart of production will depend on the results of the investigation which are due by the end of Q2, but production is not expected to resume in 2014,” the report said.

The current assessment, based on investigation results to date, is that both oil and gas lines might have to be fully replaced, to be confirmed once the ongoing investigation is completed. The Operator is now developing a full replacement plan, which is expected to be finalized by mid-2014.

The plan includes tenders to select suppliers and contractors, deciding on the material specifications, and incorporating the availability of key equipment. The intention is to develop an optimized plan to replace the lines taking into account any potential for early production restart. As a precautionary measure, to avoid losing time, the Consortium has already initiated the tender process for the purchase of pipeline joints.

Following the start of production from the Kashagan field on 11 September 2013, the operations had to be stopped on 24 September, due to a gas leak in the onshore section of the gas pipeline running from D Island to the onshore processing facility “Bolashak”. The Department of Emergency Situations and the relevant authorities were immediately informed in accordance with the regulations. The access to the line was secured and the respective joint replaced. Production was resumed, but had to be stopped again on 9 October after the detection of a gas leak. Following repair of the affected joint, pressure tests were performed revealing some other potential gas leaks. A thorough investigation was launched at that time.

The immediate cause of the pipeline failures was traced by material experts to be sulphide stress cracking (SSC) due to unexpected locally elevated hardness of the steel.

Laboratory analyses and simulations of the operational environment with samples from the pipeline concluded that the steel specifications for the pipeline were appropriate for the conditions of the Kashagan field. The specifications meet the requirements of the NACE standards (National Association of Corrosion Engineers), respective ISO standards, and best practices in international oil and gas field development. As was previously communicated, the sour gas line was designed to withstand the expected H2S content and the presence of water.

Kashagan is one of the largest fields discovered in the past 40 years. Kazakh geologists estimate geological oil reserves at 4.8 billion tons.

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Further blow for Kazakh Kashagan oil project

Apr 28. Trend

The $50bn Kashagan oil project in Kazakhstan is likely to be delayed by two more years while 200km of pipeline is replaced, in a further blow for the companies developing the largest oilfield outside the Middle East, Financial Times reported on April 27.

Erbolat Dossayev, Kazakhstan’s minister for economy and budget planning, told the FT that he expected production to start at the end of next year at the earliest – but that it could be delayed until 2016.

It is the first public admission by the government that the project will not only fail to produce oil this year but may not resume production until 2016. “It will be two years,” added one industry official.

It is a blow for the consortium of companies – including ExxonMobil, Royal Dutch Shell, Total, Eni and CNPC – which have invested some $50bn in the project so far in the hope that it would one day produce as much oil as Libya. Kashagan is the world’s fifth-largest field by reserves and the largest outside the Middle East, according to the US Department of Energy.

The delay is the latest in a string of setbacks for the enormous Kashagan field, which had originally been scheduled to start production in 2005 but has become emblematic of the cost overruns and delays that have plagued major energy projects, keeping oil prices elevated even as the US shale revolution lifts supplies.

The delay has also angered Kazakhstan’s government, which had been counting on the field to catapult the country into the big league of oil producers and lift government revenues substantially.

Mr Dossayev said that the delay represented a loss of 0.5 percentage points of GDP this year. He said he hoped production could be restarted late next year, so “we can put some volumes for the crude oil production in our plan in the budget”.

“But if not we will wait until 2016,” he said in an interview in Kazakhstan’s capital, Astana.

Kashagan briefly started producing oil in September last year, only to shut down a few weeks later due to a gas leak.

People familiar with the matter said that months of research had revealed numerous tiny cracks in the pipeline, as the highly corrosive sulphur-containing gas produced as a byproduct of Kashagan’s oil ate through the steel.

While a decision on how to address the problems is not likely to be taken by the consortium of oil companies until June, people familiar with the matter said that the two pipelines carrying oil and gas from an artificial island in the Caspian Sea to the shore would need to be replaced.

The companies involved have already begun to prepare for a protracted shutdown. Shell, which had been due to take over the operation phase of the project once production had started, has begun sending some expats home, one person familiar with the matter said. The arcane structure of operating companies that manages the project is also being downsized.