Kashagan – new milestone in Kazakhstan’s oil history

Kashagan – new milestone in Kazakhstan’s oil history

Baku, Azerbaijan, Oct. 18

By Elena Kosolapova – Trend:

A new milestone began in Kazakhstan’s oil history in October – after many years of waiting, the country finally began to produce oil at the giant oil field Kashagan in the shallow water part of the Caspian Sea.

Kashagan is the biggest oil field opened in the last 40 years; it is among the ten largest oil fields in the world and ranks first for volume among oil fields in the post-Soviet space.

Kazakhstan has not held celebrations on this occasion yet; the country's leadership and shareholders of the project refrain from loud statements. However, at the end of last week, the Energy Ministry said that several wells have been commissioned at the field and the first small batch of the Kashagan oil, extracted within the balancing and commissioning, has been exported.

Indeed, there is very important information behind these modest messages: there is oil at the Kashagan field; despite the huge sulfur content and complex geological conditions, it is possible to extract oil at the field, refine and export; equipments at the field work, and it seems that after a number of delays, Kashagan will finally start to operate.

With its total oil reserves of 38 billion barrels, including 9-13 billion barrels of recoverable reserves, Kashagan field will have a significant impact on the oil sector of both Kazakhstan and the world as a whole.

The majority of oil fields have already reached the production peak in Kazakhstan and oil output is reducing for several years.

Kazakhstan is implementing the subsoil exploration projects onshore and offshore in the hope of discovering new oil fields, but their prospects are still vague. Kashagan field is the only real source of oil for Kazakhstan today, allowing increasing production. According to the analytical agencies’ estimates, oil production growth will be noticeable due to Kashagan field in the country.

Thus, according to the forecasts by the US Energy Information Administration (EIA) at the end of last week, oil production will reach 1.81 million barrels per day in Kazakhstan in 2017 compared to 1.72 million barrels in 2016.

However, the forecast for 2017 increased by 70,000 barrels per day only amid the news about the beginning of the commissioning work compared to the forecast of the previous month. It is planned to produce 75,000 barrels on the field per day with further increase only at the initial stage of development. After the stable production is achieved on the field, the forecast is likely to grow even more.

The Kazakh government expects Kashagan field to allow the country to join ten largest oil producers in the world. According to BP, only 1.8 percent of the world oil production accounted for Kazakhstan in 2015.

However, the amount of dividends to be obtained by Kazakhstan from Kashagan field remains uncertain.

According to the Kazakh Ministry of Energy, the average prime cost of oil is about $50 per barrel in the country. The cost of Kashagan oil is more than the average prime cost of oil throughout the country. According to the estimations as of 2012, Kashagan became the most expensive field in the world. Afterwards, the investments were still made in the field.

Kazakhstan will have to compensate for multibillion expenses of shareholders on the development of this field for decades. The prime cost of Kashagan oil is not officially known, however in 2015, Chairman of the Management Board of the national oil and gas company of Kazakhstan ‘KazMunayGas’ Sauat Mynbayev expressed opinion that the limit of payback at Kashagan is about $80-100 per barrel.

For example, Goldman Sachs investment bank believes that oil prices should be in the range of $120- $130 per barrel for Kazakhstan to make a profit from the sale of oil from Kashagan.

Even if Mynbayev and several foreign analysts were mistaken in their calculations a bit, it is clear that the profit from Kashagan will be very small, given the current oil prices around $50 per barrel.

However, Kazakh Deputy Energy Minister Magzum Mirzagaliev has recently said that Kashagan will be profitable for Kazakhstan at any oil price, because the government will receive royalties and taxes from this project.

Mirzagaliev left unanswered the question how profitable this project will be for its shareholders, including the national oil and gas company ‘KazMunayGas’, which represents Kazakhstan.

Regarding the impact of Kashagan oil to the global oil market, the majority of analytical agencies mention Kashagan among the reasons that lead to an increase in oil supplies to the global market in the coming years.

In the current situation, when oversupply is observed in the market, Kashagan oil will be another factor hindering the achievement of balance in the world market and, as a consequence, preventing the rise in oil prices Kashagan shareholders are interested in perhaps more than all the rest manufacturers.


Elena Kosolapova is Trend Agency’s staff journalist, follow her on Twitter: @E_Kosolapova

Iran's Energy Exchange announces products to be on sale on May 8
Iran's Energy Exchange announces products to be on sale on May 8
Eurostat names amount of petroleum oils imports by EU countries from Turkmenistan
Eurostat names amount of petroleum oils imports by EU countries from Turkmenistan
Iran's NISOC ready to increase oil extraction
Iran's NISOC ready to increase oil extraction
Loading Bars
WHO records over 721,000 new daily cases of COVID-19 worldwide
EU medicine regulator starts rolling review of Sinovac COVID-19 vaccine
Qatar reports 645 new COVID-19 cases, 208,877 in total
Central Bank of Iran shares data on impact of oil exports on economic performance
UK records another 2,144 coronavirus cases, 27 deaths
Turkish president, German chancellor discuss bilateral ties, regional issues
OSCE Minsk Group Co-Chairs welcome release of Armenian detainees
Ombudsman prepares report on hate crimes, hostile approach towards Azerbaijanis
Egypt will bring a royal mummy to Expo 2020 in Dubai
Uzbekistan’s 1Q2021 vegetable production revealed
Uzbekistan notes threefold increase in balance of mortgage loans repayment
Georgia sees increase in imports of buckwheat in 1Q2021
Review of regulations to improve Iran home appliances production - official
President Sadyr Zhaparov signs decree on Cabinet of Ministers of Kyrgyzstan
Austria interested in participating in projects in Turkmenistan
Azerbaijani, Georgian peoples live in peace and friendship - PM
Azerbaijan approves renewed make-up of joint commissions with several countries
Azerbaijan to hold webinar on "New Opportunities for Startup"
Azerbaijan discloses data on construction work carried out by private enterprises in Baku
Russian, Turkish presidents discuss issues related to Karabakh
Iran’s Bahar Azadi gold coin price falls
Azerbaijani Finance Ministry places medium-term bonds on auction
Iran's Energy Exchange announces products to be on sale on May 8
Azerbaijan has very responsible approach to ensuring cybersecurity - Kaspersky Lab
Georgian organic farm begins production of sunflower oil
Iran approves projects on establishment of trade zones
Azerbaijani minister names amount of government spending to restore Karabakh in 2021
Canada reveals volume of bilateral trade with Georgia
Georgian Minister of Agriculture talks success of German businesses
Hungarian airline Wizz Air to resume flights from Georgia's Kutaisi International Airport
European Parliament acting unfairly by calling Armenian terrorists "POWs" - MP
Eurostat names amount of petroleum oils imports by EU countries from Turkmenistan
Activities of trade markets between Iran, Pakistan to contribute to trade –Deputy Minister
Kazakhstan investing in Georgian ports, specifically in Batumi oil terminal
Georgia expects increase in low-cost airlines during summer season
Georgia NCC and NATO-EU Information Center to implement joint projects
Iraq commits to return Iran's debts
US welcomes Azerbaijan’s release of three Armenian detainees
Iran's TEDPIX index sees gains
Volume of raw silk cocoon to be produced in Iran revealed
Shameful monument to fascist Nzhdeh in Karabakh must be demolished - Russian media outlet
Shekel weakens after Yellen rate remarks
Flydubai expands network to over 80 destinations, resumes flights to Russia and Iran
Azerbaijan wraps up investigation on Lebanese mercenary who fought in Karabakh on Armenian side
Blue Origin to begin space tourism ticket sales Wednesday
Navoi Mining and Metallurgical Combine leads among Uzbekistan’s taxpayers
Meeting between Azerbaijani, Georgian foreign ministers being held
Azerbaijan shares data on number of vaccinated citizens for May 5
Relations between peoples of Azerbaijan, Georgia based on long history - President Aliyev
Azerbaijan confirms 1,080 more COVID-19 cases, 2,074 recoveries
Georgian, Azerbaijani people are interlinked, interdependent on each other - Georgian PM
UAE to launch flights to Uzbekistan’s Tashkent
Austrian chancellor urges European drug regulator to fast-track Sputnik V’s registration
Azerbaijan continues to be one of biggest investors in Georgia’s economy - President Aliyev
Georgia's prime minister visits grave of Azerbaijan's National Leader Heydar Aliyev (PHOTO)
Azerbaijani IT company to locally launch smartphone app for accepting non-cash payments
Iran's NISOC ready to increase oil extraction
Silk production campaign underway in Turkmenistan’s Dashoguz region
Azerbaijan's PulPal payment system to add cryptocurrency wallet
Geostat unveils statistics on Georgia's oil imports
Azerbaijan reveals funds to be allocated for student tuition
Uzbekistan, S. Korea preparing for buyout of state share of mining and processing JV
Uzbekistan’s textile export to grow in 2021 - German expert
IMF predicts higher oil prices and better COVID-19 response for Iran by second half of 2021
Georgian parliament adopts new law regarding National Bank of Georgia
Georgia to face double-digit inflation if lari continues to plunge in value - TBC-Bank
Turkey reveals 4M2021 data on chemicals exports
Germany, France, Spain reach general agreement over fighter jet
Average monthly salary in Baku down
Turkey's export value of clothes up in 4M2021
Significant amount of funds to be invested in Georgian Poti port dev't - Deputy minister
Russia reports nearly 8,000 daily COVID-19 cases
Electra Consumer Products signs Yeinot Bitan acquisition deal
SOCAR Turkey subsidiaries awarded zero waste certificates
Increasing manufacturing of household appliances in Iran can guarantee exports - ICCIMA
Cost of chargeable services rendered to Baku's population in 1Q2021 dips
Georgia sees increase in potato imports
Georgian PM invites Azerbaijani president to Georgia
1Q2021 turnover of catering sector in Baku disclosed
Baku Stock Exchange holds auction on placement of CBA's short-term notes
Georgia reveals prices of fuel for May 4
Iran hopes Gorgan-Aktau flight to boost its tourism industry
Azerbaijani payment system offers B2B and C2B services in domestic market
Saudi Arabia considers barring overseas haj pilgrims for second year
Khazar Consortium in Turkmenistan opens tender to purchase of hygienic products
SOCAR Turkey’s petrochemical unit increases recycling by over 30%
Details of Iran’s face mask trade disclosed
Iran reveals COVID-19 data for May 5
Uzbekistan, Turkmenistan, Iran talk pilot train transportation
Most transactions on government securities in Azerbaijan fall on primary market
Azerbaijan, Turkey, Uzbekistan plan to ink MoU on audit sphere
Czech sees opportunities for co-op with Uzbekistan in industry and agriculture – Ministry
Turkmen Health Ministry extends tender for medical supplies purchase
Iran sees reduction in reliance on oil exports - Iranian president
Iran's Golestan Province to work on more agricultural projects
Iran expects sanctions to be lifted soon - President Rouhani
Azerbaijan seeks to expand its capabilities in mechanical engineering - expert
Azerbaijani president receives Georgian PM (PHOTO/VIDEO)
Georgia, US highlight importance of COVID-19 vaccination
Turkey sends batch of new engineering machinery, equipment to Azerbaijan (PHOTO/VIDEO)
All news