Resumption of production at Kashagan unlikely before 2017, says expert

Resumption of production at Kashagan unlikely before 2017, says expert

Baku, Azerbaijan, Apr. 30

By Elena Kosolapova - Trend:

Resumption of production at the Kashagan field in Kazakhstan is unlikely to happen in 2015 or 2016, according to Oleg Yegorov, the senior fellow at the Institute of Economics of the Kazakh Education and Science Ministry.

"I believe it will not take place before 2017," Yegorov told Trend by telephone April 30.

Kazakhstan expects the oil production at Kashagan to resume in late 2015 or in 2016.

Yegorov recalled that it is needed to replace about 200 kilometers of pipes at the field. The work should be conducted not only on the coast, but also on an artificial island built at the field and in the sea.

"In technical terms, it is quite complex and long-term work," he said. "Aside from that, it will be possible to conduct work on the offshore site in the warm season, because in winter the sea near the Kashagan field is frozen."

Moreover, as the expert said, depending on the situation on the world market, it is possible that the resumption of production at Kashagan will not start in 2017 either and will be postponed to a later date.

"In particular, if the oil demand is less than the offer, and the oil prices remain for a long time at a low level, the production at Kashagan may prove to be unprofitable, and the field can be mothballed for some time," said the expert.

Egorov reminded that the developers of Kashagan had to make huge amount of investments in this field. Now, they are required to additionally invest over $2 billion for changing the pipes, he said, adding that moreover, the shareholders of the project should pay a huge amount of fine as they haven't put the field into operation in the time envisaged in the contract.

He said that in order to ensure the profitability of oil production at Kashagan, the oil prices should be $80-$90 per barrel. The production at the similar offshore fields, for instance, in the Gulf of Mexico or the North Sea became profitable with these prices, he said.

"No one will work at a loss," Egorov said.

He added that all the timeframes and obligations of the project's operator envisaged in the contract have long ago been violated.

The expert reminded that the first time when the developers were supposed to put the field into operation in 2005, they gave Kazakhstan the chance to repurchase the first part of its share in the project (8.3 percent). Two years later, they were supposed to put the field into operation again, but they didn't and as a result, the shareholders sold over 8 percent more to Kazakhstan, he added.

Therefore, another postponement of field's launch for one reason or another will not be something extraordinary, but just another violation of the contract, Egorov added.

At the same time, even if oil production at Kashagan is resumed, investments in this project will not pay off very soon, because production volumes will be small at the initial stage, according to the expert.

Kashagan is a large oil and gas field in Kazakhstan, located in the north of the Caspian Sea. 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.

The production at the Kashagan field started Sept. 2013, but in October, it was ceased after a gas leak in one of the main pipelines. The analysis revealed numerous cracks in the pipeline, which needed to be completely replaced. The replacement was said to take at least two years.

Edited by CN

---

Follow the author on Twitter: @E_Kosolapova

Subscribe to Trend in Google News! Subscribe
Saudi Arabia lends support to Turkmenistan on construction of TAPI gas pipeline
Saudi Arabia lends support to Turkmenistan on construction of TAPI gas pipeline
Turkmen Petronas Carigali announces tender for oil operations insurance
Turkmen Petronas Carigali announces tender for oil operations insurance
2,693 more COVID-19 cases reported in Kazakhstan
2,693 more COVID-19 cases reported in Kazakhstan
Loading Bars
Latest
OPEC+ deal meets current market conditions — Deputy CEO of Gazprom Neft
Economy minister talks Azerbaijan's plans to increase non-oil export
Azerbaijan to approve long-term strategic plan for economic dev't
French business activity weaker than expected in September
Georgia increases export of hazelnuts
Iran-Turkey Strategic Relations Committee to hold meeting in Tehran
Azerbaijan's Minister of Economy talks recent business support applications (PHOTO)
Azerbaijan plans to create 1,500 MW new generation capacity from renewables
Era Enerji applies for Turkish Energy Ministry's oil, gas exploration license
OIC-IPHRC to prepare report on human rights violations committed by Armenia during occupation of Azerbaijani lands
Iran implements plan for development of Yaran oil field
Georgia, Latvia express readiness to further deepen economic co-op
Boeing lifts China jet demand estimate over two decades to $1.47 trln
IFC eyes to help Georgia’s financial sector unlock new areas
Saudi Arabia lends support to Turkmenistan on construction of TAPI gas pipeline
Another int'l delegation visiting Baku to investigate crimes of Armenia in previously occupied Azerbaijani territories
Japanese TEPCO to implement first investment project in Georgia
US wants to be united with European allies to ensure secure gas supply - Jennifer Granholm
Iranian currency rates for September 23
Oil prices rise on tight supply, renewed risk appetite
Iran to develop Yadavaran oil field
Central Bank of Iran announces amount of currency sold at NIMA exchange rate
Iran's Razavi Khorasan Province faces decline in water resources
Azerbaijani servicemen wrap up another orienteering competition (PHOTO/VIDEO)
Turkmen Petronas Carigali announces tender for oil operations insurance
S. Korea to invest $35.8 million in hydrogen tram tech
2,693 more COVID-19 cases reported in Kazakhstan
Georgia sees economic growth over last few years - EU
Georgia reveals number of mortgage loans issued in country
UAE economy to grow 2.1 percent this year
S.Korea's export grows 22.9 pct in 1st 20 days of September
Algeria closes airspace to all Moroccan planes
Chip dearth forecast to have limited impact on automakers' profit
Under pressure, U.S. donates half billion more COVID-19 vaccine doses to world
Azerbaijani FM meets with Secretary General of Council of Europe
Foreign Ministers of Azerbaijan, Poland discussed strategic partnership
Federal Reservecan't protect economy in event of U.S. default - Fed chair
US House committee recommends imposing sanctions against key Russian officials
Biden and Macron agree to meet next month in push to repair ties
Turkey reports 28,168 daily COVID-19 cases
Working group on strategic communications to be created within GUAM
Turkey sees growth in value of electrical product exports to France
Azerbaijani chess team wins 5th round of European Cup
UN chief calls for efforts to build on momentum against racism
Russia to resume flights to Djibouti, Denmark, New Zealand, South Africa, Peru on Oct 5
Macron to send envoy back to US, France says after Biden call
Iran, Ireland FMs discuss bilateral ties in NY
First micro-bank to appear on Georgian financial market
Standard and Sensitive Ratings Agency sees positive growth trend in Uzbek Uzmetkombinat's securities
Azerbaijan discloses top 10 importers of its oil products in 2021
Azerbaijan shares data on number of vaccinated citizens
House of Azerbaijan opens in Austrian Salzburg (PHOTO)
Azerbaijan confirms 1,356 more COVID-19 cases, 2,651 recoveries
Georgia shares data on projects implemented in country's agricultural sector
Device for increasing productivity of bee colonies successfully tested in Azerbaijan (PHOTO)
Bulk of loans issued in Azerbaijan fall on household sector - Central Bank
Int'l community should put pressure on Armenia to abandon revanchist approach - FM
Tbilisi sees increase in number of real estate transactions
Georgian wine company expands production
Azerbaijan's money supply in manat notably up for 8M2021
Armenia attempts to prevent progress by obstructing negotiations – Azerbaijani FM
Azerbaijani Cabinet of Ministers cancels distance learning requirement
Azerbaijan leads among CIS countries in terms of vaccination rates
OSCE MG co-chairs plan to meet with Azerbaijani, Armenian FMs in NY
Azerbaijan records slight decrease in mortgage lending from local banks
Kazakhstan eyes preserving co-op with EBRD on basis of renewable energies
Turkish servicemen arrive in Azerbaijan for "Indestructible Brotherhood-2021" joint exercises (PHOTO)
Azerbaijan meets significant part of Georgia's electricity needs
Kazakhstan increases exports of machine-building products
Iran increases exports to Russia
Azerbaijan and Turkey to establish joint innovation, technology centers
Iran's exports to Turkmenistan soar
Azerbaijani, Belarusian military specialists hold meeting regarding medical provisions (PHOTO)
Iran’s Bahar Azadi gold coin price rising
International Bank of Azerbaijan opens tender to buy ATM cassettes
Iran's Energy Exchange announces products to be on sale September 25
Turkmenistan's Turkmengaz opens tender for purchase of general equipment
Azerbaijan's Azerpambig extends tender to purchase tractor spares
Kazakhstan decreases production of some precious metals
Uzbekistan reveals number of vaccinated citizens as of September 22
Covid-19: India warns of compulsory quarantine for Brits in vaccine travel spat
India is completely 'atmanirbhar' in missile technology: DRDO chief
Iran’s KPRC to launch new plants
UNGA: EAM Jaishankar talks Afghanistan, Indo-pacific with counterparts
PM Modi congratulates Justin Trudeau on election win
Transition to net-zero can affect inflation in 3 ways
Georgia sees increase in revenues from international tourism
Turkmen president proposes to create ‘Central Asia - Caspian region’ co-op zone
Trade turnover between Uzbekistan and Turkmenistan for 8M2021 revealed
Parliament proposes to bring back historical toponyms on Azerbaijan's liberated lands
State Customs Committee discloses TOP-5 trade partners of Azerbaijan
Norway sovereign wealth fund backs FedEx CEO pay
LUKOIL Uzbekistan extends tender for supply of catalysts
Azerbaijan's GoldenPay sees increase in turnover
Turkey share data on car transportation between Iskenderun, Saudi Arabia's Jeddah ports
Azerbaijani president to make speech via video at 76th session of UN General Assembly
Increased LNG supply competition reduces attractiveness of cross-border gas pipeline projects
Azerbaijan Investment Holding to supervise International Bank of Azerbaijan - presidential decree
Nar provides school supplies for first graders of schools in Tartar and Fizuli (PHOTO)
Tamiz Shahar OJSC transferred to management of Azerbaijan Investment Holding - presidential order
All news