TengrizChervrOil capacity expansion soars by $15bln
Apr 01. Tengrinews
By Dinara Urazova
The Future Growth Project (FGP) and the Wellhead Pressure Management Project (WPMP) are two large-scale TengizChevrOil efforts to expand production capacity in Kazakhstan. FGP will ensure an increase of production volume by 12 million tons and WPM will improve loading of the currently operating refineries.
The dates of the implementation of the projects have been postponed from 2019 to 2021 and their cost has soured from $23.7 billion to $38.8 billion, Tengrinews reports citing Ak Zhayik.
The cost of FGP increased from $11 billion to $14 billion and that of WPM – from $10.4 billion to $22.4 billion. At the same time, the costs of drilling and construction of wellhead platforms were optimized from $2.3 billion to $1.9 billion.
Experts has identified three factors behind the increase in the cost of the projects: postponing of the implementation until 2021, construction of Prorva port for transportation of modules from Aktau seaport (general contractor – Tenizservice LLP) and use of modular method of construction preferred by TCO.
Choosing modular method over traditional bears both benefits and disadvantages. On the one hand, it allows the oil companies operating TCO (Chevron-50%, Exxon Mobile-25%, KazMunayGas-20%, LukArco-5%) to load overseas plants in times of the global economic crisis and avoid high concentration of personnel on construction site, which is necessary in traditional method.
In the fall of 2006, there was a mass fight on Tengiz between Kazakhstani and Turkish workers, as a result of which 140 people were injured. Decreasing the number of workers could help avoid tensions, lower the risk of strikes or interethnic conflicts.
On the other hand, modular method is significantly more expensive than traditional method. In traditional method, all the equipment is assembled right at the construction site, making logistics both easier and cheaper, since equipment may be transported in pieces by railway.
Modular method is more complicated. In TCO’s case, the equipment will be assembled into modules like huge Lego parts and then put together on the site. This bears significant difficulties as waterways will have to be used. Apparently, choosing this method greatly contributed to the price spike.
Most of the modules will be manufactured in South Korea, which was preferred over Japan and China because production is costly in the first and not always good in the second. The specifics of module construction are close to vessel construction and TCO needs to undertake a huge amount of work within limited time. A small part of modules will be constructed for TCO in Italy.
Ak Zhayik expects that only pipe racks and other small equipment will be produced in Kazakhstan, since the scale and level of technology in Aktau shipyards makes quick construction of hi-tech modules impossible. However, according to official TCO information, Kazakhstani content in the WPMP will amount to $7.8 billion.