BAKU, Azerbaijan, Dec. 29
By Nargiz Sadikhova - Trend:
Kashagan
The Kashagan field is located in the northern part of the Kazakh sector of the Caspian Sea. Its recoverable reserves reach approximately 9-13 billion barrels (1-2 billion tons) of oil.
The first commercial oil production started at Kashagan in 2016. The project operator North Caspian Operating Company (NCOC) shipped the first million tons of oil for export in early 2017. By mid-2017, NCOC reached an actual production level of more than 200,000 barrels per day.
Presently, NCOC includes seven big experienced energy companies, namely, "KMG Kashagan B.V." (16.9 percent), "Shell Kazakhstan Development B.V." (16.8 percent), "Total E&P Kazakhstan" (16.8 percent), "Agip Caspian Sea B.V." (16.8 percent), "ExxonMobil Kazakhstan Inc." (16.8 percent), "CNPC Kazakhstan B.V." (8.3 percent) and "Inpex North Caspian Sea Ltd." (7.6 percent).
Project status
From April 14, 2019 till May 19, 2019 turnaround at Kazakhstan’s Kashagan was implemented, meaning that the turnaround took 32 days instead of planned 45 days. This is the first repair done at the field since its launch in 2016.
According to the ministry of energy, following the turnaround, NCOC has reached a record breaking volume of oil extraction at the field (390,000-400,000 barrels a day).
Projects of Kashagan field expansion being implemented since 2017 (worth $2 billion) are aimed to reach oil output at the level of 420,000 barrels a day in 2022 and 500,000 barrels a day in 2027.
Presently, Kazakhstan’s Ministry of Energy is waiting for NCOC to submit the concept of large scale Kashagan field development within the framework of future work on the field.
Tengiz
The Tengiz oil field was discovered in 1979 and is one of the biggest and deepest oil fields in the world. The total explored reserves of Tengiz reach 3.2 billion tons, while recoverable reserves range from 890 million tons to 1.37 billion tons.
In 1993, Tengizchevroil LLP, which is the project operator, was established on the basis of an agreement between Kazakhstan and Chevron. Presently, Tengizchevroil includes Chevron (50 percent), ExxonMobil Kazakhstan Ventures Inc. (25 percent), KazMunayGas (20 percent) and LukArco (5 percent).
This year Tengiz oil field was recognized as the main driver of country’s energy sector development. Payments to the budget from the Tengiz project implementation exceeded $143 billion over the period from 1993 to 2019.
Project status
On June 29, work at the Third Generation Plant construction site of Tengiz is temporarily suspended. Construction work was soon resumed. As of July 19, 23 pre-fabricated modular flyovers have been installed at the field within the Future Growth Project. The project is to be completed in 2022.
In November, Chevron has increased the cost estimate for the Future Growth (FGP) and Wellhead Pressure Management of Kazakhstan’s Tengiz oil field projects (WPMP) to $45.2 billion. The expected start-up of FGP has shifted to mid-2023 and will now follow WPMP, which remains on schedule for start-up in late 2022. The updated estimate has been submitted by Tengizchevroil (TCO) for shareholder approval. Overall, the increase in total cost, including contingency, is about 25 percent.
In November, FGP – WPMP project is approximately 70 percent complete. Detailed engineering and procurement are essentially complete, mitigating the risk of further impact on fabrication or construction. Work at three of the four fabrication yards is finished. The logistics system is working well, and the 2019 sealift has successfully wrapped up. Modules are being delivered, re-stacked, and set on foundations as planned. Drilling is ahead of schedule with 40 of the 55 wells drilled and completed.
Also, Kazakhstan has called on Chevron and ExxonMobil to reassess the cost of Kazakhstan’s Tengiz’s growth project. According to then Minister of Energy Kanat Bozumbayev increased by 25 percent cost of the project’s implementation, is ‘too high’.
On Dec.10, Chevron Corporation announced a 2020 organic capital and exploratory spending program of $20 billion. According to the program, Chevron is planning to allocate approximately $3.7 billion for the FGP – WPMP projects.
According to the ministry of energy, the actual value of funds used for the project’s implementation is $28.5 billion, actual value of procurement within the project is $6.3 billion.
In December, Sweden Alfa Laval company announced that it will install equipment at an oil and gas facility near Kazakhstan’s Tengiz oil field. The company won an order for air cooled heat exchangers worth $7.4 million. Deliveries are scheduled for 2020.
Karachaganak
Karachaganak is one of the largest oil and gas condensate fields in Kazakhstan. Karachaganak Petroleum Operating produces oil and gas from the Karachaganak field.
The shares in the consortium are distributed as follows: Eni - 29.25 percent, Royal Dutch Shell - 29.25 percent, Chevron - 18 percent, Lukoil - 13.5 percent and KazMunayGas - 10 percent.
Project status
On May 7, the construction of a fourth gas re-injection compressor launched at the field.
The turnaround at Karachaganak field was implemented starting mid-September 2019 through October 14, which meets the plan.
On Nov. 2, Fluor Corporation, which is an US multinational engineering and construction firm, was awarded a three-year engineering services agreement, plus two potential one-year extensions, by Karachaganak Petroleum Operating B.V. for projects at Karachaganak. Fluor’s scope of work includes feasibility studies, front-end engineering design and other engineering services.
As Eni told Trend, during the third quarter of 2019, average gross production at Kazakhstan Kashagan oil field was 503,000 barrels of oil equivalent per day.
On Dec. 9, Karachaganak Petroleum Operating B.V. (KPO) company, which develops Kazakhstan’s Karachaganak oil field, has announced successful start-up of the Fifth Trunk Line Project and 9863 Gas Injection Well, which is the first out of three gas injection wells for this project.
The Fifth Trunk Line Project is an upgrade of the injection network capacity downstream of Unit Two by means of installation of a new 12-inch trunk line, connected to wellheads via 8-inch flowlines and drilling and completion of three new gas injection wells
Currently the priority of operating on the field is the extension of the efficient field development. This year, Karachaganak Expansion project was being implemented (worth $4.5 billion), which will allow to maintain output volume at the field.
Abay, Dunga fields
The Abai field is located in the waters of the Kazakh sector of the Caspian Sea at a distance of 60-70 kilometers north-west from the coast of the Bozashi peninsula. The sea depth in the area of work is 8-10 meters. Geological reserves of hydrocarbons on the Abai block are estimated at over 350 million tons of oil equivalent.
The Dunga oil field is operated by Total (60 percent), alongside Oman Oil Company (20 percent) and Partex (20 percent).
Project status
In March 2019, KazMunayGas and Eni signed an Agreement on joint work and the Agreement on financing within the joint implementation of the Abay area project.
On July 4, 2019, Kazakhstan’s national oil extracting company KazMunayGas, Italian Eni company and the Ministry of Energy of Kazakhstan signed a protocol on providing the right for development and extraction of hydrocarbons within the joint development of the Abay area.
The realization of the project will increase the investments in the exploration and extraction work in Kazakhstan’s sector of the Caspian Sea.
The next stage of cooperation is signing the contract on exploration and extraction of the Abay area, which includes drilling of the well 2,500 meters depth, carrying out 2D seismic exploration work and other type of work worth 14 billion tenge, the report says.
On July 29, Kazakhstan’s national oil and gas company KazMunayGas, Italian Eni company and the Ministry of Energy of Kazakhstan signed a contract on exploration and extraction of hydrocarbon raw materials from the Abay field.
On July 4, Kazakhstan and French oil and gas company Total approved a 15-year extension of the Production Sharing Agreement (PSA) for the Dunga field. The agreement was originally signed in 1994 and is due to expire in 2024.
The new agreement which extends the PSA for the period from 2024 to 2039 was signed during the meeting with the representatives of Total.
This extension will allow to additionally extract over nine million tons of oil. The agreement for the realization of Phase 3 development of the Dunga field was also reached. The project requires a $300 million worth of investment and will create 400 more direct jobs in the region at the peak of construction activity. It will also allow to increase the extraction volume from 600,000 to 850,000 tons of oil a year.
Zhenis block
Zhenis block is located in the southern part of the Kazakhstan sector of the Caspian Sea. In November 2018, KazMunayGas and Lukoil signed agreements on joint activities on and financing of the Zhenis project.
Project status
In April 2019, Kazakhstan KazMunayGas national company, Russian LUKOIL oil company and the Kazakhstan’s Ministry of Energy have signed a contract for the exploration and hydrocarbon extraction in the Zhenis block
In accordance with the signed contract, the main minimum obligations are drilling of one exploration well and carrying out 3D seismic exploration.
In Dec. 2019, LUKOIL Chief Executive Vagit Alekperov said that company is expecting that hydrocarbons reserves at Zhenis block in Kazakhstan will be no less that 500-700 million barrels (approximately 70-100 million tons).
Currently the company is implementing work on interpretation of historical seismic and geological material, which was provided by Kazakhstan’s KazMunayGas National Company.
Kalamkas-Sea field, Khazar structure
The Kalamkas-Sea field, located in the Kazakhstan sector of the Caspian Sea, was discovered in 2002. It is 120 kilometers southwest of Kashagan and very close to the Khazar field. The total recoverable reserves of the Kalamkas-Sea and Khazara fields are 70 million tons of oil.
The Khazar structure is part of the contract area of the Pearl project, which is implemented by Caspi Meruerty Operating Company (CMOC) under the PSA. In addition to Shell (55 percent), its shareholders are KazMunayGas (25 percent), Oman Oil (20 percent).
Project status
In April 2019 it is announced that North Caspian Operating Company (NCOC) will start the development of Kalamkas-Sea and Khazar fields in the Caspian Sea.
As of July, The development concept of fields by drilling of wells is being worked on.
The work on the fields is to be held in partnership with Caspi Meruerty Operating Company BV. It is estimated that the drilling of over 30 wells is needed for the development.
As of Aug. 2019, NCOC is planning to submit plan for the development of fields in 4Q2019. The joint development of Kalamkas-Sea and Khazar oil fields still is the prioritized development concept for the company.
NCOC prefers the option of simultaneous development of the fields in order to provide synergy.
The issues of the project’s implementation cost and timeframe are being negotiated by Kazakhstan’s government and the partners of the project.
On Oct.21, 2019, North Caspian Operating Company (NCOC) and Shell company announced the abandonment of Kalamkas-Sea and Khazar oil fields development plans respectively. According to the ministry, the decision was based on low profitability of the projects due to the high capital costs.
Following the end of the procedure on return, Kazakhstan may consider the possibility of attracting other investors into the project. New agreements will be based on existing tax laws instead of the terms of production sharing agreement.
Project implementation costs incurred (Shell company has invested nearly $900 million into Khazar project) by existing shareholders will remain non-refundable.
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