Production at Kazakhstan’s Kashagan field unprofitable at current oil prices

Production at Kazakhstan’s Kashagan field unprofitable at current oil prices

Baku, Azerbaijan, Feb. 3

By Elena Kosolapova - Trend:

Oil production at the oil and gas field 'Kashagan' in the Kazakh sector of the Caspian Sea is unprofitable at current oil prices, Sergey Smirnov, an expert of the Institute of Political Solutions of Kazakhstan, told Trend.

The world oil prices dropped from almost $110 per barrel to below $ 50 in recent months. In case with Kazakhstan, the country heavily depends on oil revenues, which is its main source of income.

Smirnov recalled that earlier the vice minister of energy of Kazakhstan, Uzakbai Karabalin said the average cost of oil in the country is about $50 per barrel.

"But this is so when the onshore fields are included. Marine projects, especially the Kashagan project, are significantly more expensive. Given the difficult geological conditions at the field, the price of the Kashagan oil will clearly be above $50, given the costs that have already been realized. Therefore, at $50-$60 per barrel, the production will be unprofitable," said Smirnov.

Kashagan is a large oil and gas field in Kazakhstan, located in the north of the Caspian Sea. The production at the field was stopped in September 2013, two weeks after the start due to a gas leak. Another leak was discovered almost immediately after the resumption of production in October 2013. The analysis revealed numerous cracks in the pipeline, which needed to be completely replaced. The replacement was said to take at least two years.

Smirnov reminded that Kazakhstan's energy minister, Vladimir Shkolnik, said earlier that the production at Kashagan is expected to start by late 2016.

Smirnov believes that if the oil prices will remain at the current level, the project will not be launched in the defined time due to being unprofitable.

"Even if the project is launched, the production volume will not be at the earlier planned level, but just a launch for the sake of showing off, as it was in September 2013," said the expert.

He added that in this situation, Kazakh government and the shareholders of the project for the development of Kashagan will have to come to an agreement and the time of launching will again become negotiable.

The geological reserves of Kashagan are estimated at 4.8 billion metric tons of oil. The total oil reserves amount to 38 billion barrels, some 10 billion out of them are recoverable reserves. There are large natural gas reserves at the Kashagan field - over one trillion cubic meters.

Smirnov reminded that currently, many countries and foreign oil companies are reducing the volume of investment projects. He believes the consortium engaged in the development of Kashagan will also have to reduce the investments in the project.

The expert added that with the delays in starting the oil production at Kashagan, Kazakhstan will not be able to increase the production volume higher than the current level (81 million metric tons of oil and condensate per year).

"Kazakhstan doesn't have so many new fields," he said. "Mainly, old onshore fields are under development and additional exploration of old fields is underway. Large new volumes cannot be opened in old fields. This exploration work can at best save production at current levels."

In addition, mostly stranded oil, which requires expensive production technologies, is left in Kazakhstan, he said.

"For example, the production cost in Mangyshlak is $80," the expert said.

Given such prime cost of oil, in case of maintaining the current level of oil prices, decrease in production in the country is quite possible, according to Smirnov.

At the same time, in his opinion, low oil prices may hold on for long enough.

"In Saudi Arabia, the production volumes of which affect the situation now, the production cost of oil is up to $10 per barrel. So they can survive with such prices for 2-3 years if they wish," said Smirnov.

At the same time, a lot of factors affect the price of oil, including speculative and especially political one, he said. Therefore, it is very difficult to predict anything in this field.

Edited by SI

---

Follow the author on Twitter: @E_Kosolapova

Subscribe to Trend in Google News! Subscribe
Georgian FM meets Slovenian counterpart
Georgian FM meets Slovenian counterpart
Gasoline prices in Georgia increase
Gasoline prices in Georgia increase
Export-oriented local Georgian company to get benefits within USAID program
Export-oriented local Georgian company to get benefits within USAID program
Loading Bars
Latest
1,900 more COVID-19 cases reported in Kazakhstan
Biden says those who refuse to testify in Jan 6 probe should be prosecuted
ISIS claims responsibility for mosque attack in Afghan city of Kandahar
Fully vaccinated foreign visitors can enter U.S. starting on Nov. 8
China's Shenzhou-13 crewed spaceship docks with space station module
UK records more than 40,000 COVID cases for third day in a row
Biden says Clinton will be released ‘shortly’ from California hospital
Amazon-owned Twitch says source code exposed in last week's data breach
Israel's annual inflation up 2.5 pct, highest in nearly decade
Africa's COVID-19 cases surpass 8.41 mln: Africa CDC
US shares specific data on cybercrime with Russia, awaits its actions, White House says
Saudi Arabia appoints Al-Rabiah as new Hajj minister
Chronicles of Victory: President Ilham Aliyev interviewed by Turkish A Haber TV channel on October 16, 2020 (PHOTO/VIDEO)
Chronicles of Victory: October 16, 2020
Czech PM Babis pledges smooth power handover to opposition
UK MP dies after being stabbed at constituency meeting
China’s Shenzhou-13 manned spacecraft successfully reach orbit
Four migrants dead, 21 missing off Spanish coast
FIA approves schedule for Azerbaijan Grand Prix in 2022
COVID-19 kills 197 more Iranians over past 24 hours
Georgian FM meets Slovenian counterpart
Armenia trying to prepare ground for new provocations against Azerbaijan by spreading fake information - MoD
Azerbaijani FM discusses mine threat in liberated territories with French CNEMA delegates (PHOTO)
Azerbaijan lifts flight restrictions for number of countries
Azerbaijani President signs law "On Independence Day"
EBRD to allocate loan to Turkmen beverage company
Azerbaijan records decline in fixed capital revenues for 9M2021
Turkmenistan, WB talk new areas of co-op
Uzbek-Korean JV announces tender to buy clarifier
Gasoline prices in Georgia increase
Money transfers to Azerbaijan via Golden Crown service grow for 9M2021
Iran looking to develop renewable energy - SATBA
Azerbaijani MoD discusses mine clearing in liberated territories with French delegation (PHOTO)
Iran eyeing increase in trade with Spain
Export-oriented local Georgian company to get benefits within USAID program
Saudi Arabia to ease coronavirus curbs from Oct. 17
Russia, Venezuela developing secured messenger — Rostec
Kazatomprom to look for new ways to bolster nuclear energy for peaceful purposes
Turkmenistan discloses area allotted for sowing winter barley in Dashoguz region
Agreement with Azerbaijan on additional gas supplies aimed at ensuring Turkey's gas reserves – Erdogan
First container train on its way to Azerbaijan's Karabakh (PHOTO/VIDEO)
Uzbekneftegaz receives gas flow from well at Khojikazgan field
Kazakhstan to exempt Caspian oil exports from customs duties
Kazakhstan unveils data on trade with other EAEU states
Volume of financial assets of non-financial corporations in Georgia increases
LUKOIL Uzbekistan to buy ceramic balls for catalysts via tender
Azerbaijan, as victorious country, is ready to normalize relations. We hope that Armenian leadership will not pass up on this historic opportunity - President Aliyev
U.S. administers 405.4 mln doses of COVID-19 vaccines
Кazakh national telecommunications operator opens tender to buy spares
Geostat shares data on revenues of Georgian enterprises for 2020
Azerbaijan shares data on number of vaccinated citizens
Netherlands’ FMO is open to new investments in Uzbek financial sector (Exclusive)
Azerbaijan confirms 1,850 more COVID-19 cases, 735 recoveries
Student of Baku Higher Oil School: ‘I am proud to bear the name of such a historical figure!’
French Renault begins production and commercial activities in Uzbekistan
NEQSOL Holding supports ADA University’s project to restore Gazakh Seminary (PHOTO)
Azerbaijan's agrarian agency discloses volume of issued subsidies in 9M2021
Money transfers to Georgia exceed investments
Russian peacekeepers - guarantors of peace in Karabakh - President Putin
Georgian air cargo transportation decreases
Azerbaijan ready to start talks with Armenia on delimitation of borders - President Ilham Aliyev
TAP helped in reducing European gas market volatility
Armenia has destroyed 16 of the 17 mosques in Shusha - President Aliyev
President Ilham Aliyev: Armenia refuses to provide us with full maps of mined areas
For about 30 years, Armenia, together with Iran, used former occupied territories of Azerbaijan for drug trafficking to Europe - President Aliyev
Illegal Armenian armed forces attempt new provocation against Azerbaijani units
Azerbaijan's State Employment Agency to launch project on financial support of entrepreneurs
President Ilham Aliyev hailed special role of President Vladimir Putin in cessation of hostilities in Karabakh
City of Aghdam was called “Hiroshima of the Caucasus” - Azerbaijani president
Karabakh conflict has been consigned to history - President Aliyev
Azerbaijan takes part in meeting of heads of security and intelligence agencies of CIS
Brent oil price on the ICE exchange up over $ 85/barrel
Iran seeks to transform its ports to transshipment hubs
Microfinance sector in Georgia hopes to rebound from COVID-19, shares forecast
President Ilham Aliyev attends CIS Heads of State Council's session in video conference format (PHOTO)
France's intention to take part in de-mining of Azerbaijan's lands - important, MP says
Death toll climbs to seven following fatal gun battles in Beirut
Azerbaijani ombudsman issues statement on anniversary of shelling of funeral procession in Tartar by Armenian troops
EBRD talks on financing of construction of high-voltage transmission line in Uzbekistan
Israeli companies getting increasingly interested in Russian market — Lavrov
TAP compensated decreasing share of imports from Norway and other LNG to Europe
Azerbaijan’s Parliament adopts bill ‘On Independence Day’
Agriculture goods production increases in Kazakhstan
Turkmenistan’s cotton mill shares export data for 9M2021
Kazakhstan unveils data on local car insurance
Turkmen enterprise reveals volume of oil products shipped to consumers
Uzbekistan approves funding for dozen of scientific projects
Azerbaijan’s Parliament to send congratulatory letter to President Ilham Aliyev, First Vice President Mehriban Aliyeva
Azerbaijani agrarian agency talks female entrepreneurs provided with preferential loans
Uzbekistan reveals number of vaccinated citizens as of October 15
Kazakhstan boosts cargo transportation by road
USAID ready to continue investing in agriculture dev’t in Azerbaijan
JOCAP updates on offshore installation campaign for Absheron field
JOCAP details ongoing works at Azerbaijan’s Absheron gas field
Georgia shares data on COVID-19 cases for October 15
IEA lowers forecasts for Azerbaijan’s 2022 oil output
Georgian honey exports skyrocket, following COVID-ravaged year
Azersu OJSC eyes attracting investments for implementation of its projects
Oil prices climb on power boost, set for multi-week gains
Brand new iPhone 13 smartphones with 50GB free internet now available at Azercell Exclusive shops!
All news