Azerbaijan, Baku, Nov. 21 / Trend E. Kosolapova/
Exxon Mobil Corp., Royal Dutch Shell Plc and their partners in Kazakhstan's Kashagan oil field face a delay of at least two years on a plan to boost output 20 percent, reducing the time they have to recoup costs in the $46 billion project that's already running eight years late, according to two people with knowledge of the matter, Bloomberg reported.
Kazakhstan has told the partners to put the $5 billion step-up plan, taking output to as much as 450,000 from 370,000 barrels day, on hold until they study how the start of production next year affects the deposit, the people said, asking not to be identified because the information is private.
Work on the interim project, which involves injecting natural gas back into the field to help force out more oil, was due to start this year.
The partners plan to build a system to pump gas back into the field, pushing oil output to as much as 450,000 barrels a day, according to the website of Eni. In October of last year, Oil and Gas Minister Sauat Mynbayev said the field may reach that level of production in 2016.
Shell and Exxon are negotiating to gain operating control and boost their shares of Kashagan, to ensure it will be profitable before embarking on the second phase, people said in August. The companies have warned they may exit the project unless Kazakhstan extends the venture's production-sharing agreement, or PSA, by 20 years beyond its 2041 deadline. The accord allows the investors to recoup costs before the government takes its share of oil revenue.
"Discussions are ongoing with the PSA authority," NCOC said by e-mail. Kazakhstan's Oil and Gas Ministry oversees the Kashagan agreement.
Kashagan is one of the largest fields discovered in the past 40 years. According to analysts. Kashagan has the potential to unite the top five largest oil companies in the world. Kazakh geologists estimate geological oil reserves at 4.8 billion tons. According to the project operator, total oil reserves are 38 billion barrels (six billion tons), with a recoverable volume of about 10 billion barrels. Natural gas reserves are estimated at over one trillion cubic meters.
The companies, develop the project, are planning to begin commercial production on Kashagan in the first quarter of 2013.
At present the Kashagan project participants are Eni, Royal Dutch Shell, Exxon Mobil, Total and KazMunaiGas, which owns equal shares (16.81 per cent), as well as ConocoPhillips - 8.4 per cent and Japan's Inpex - 7.55 per cent.