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Posts Tagged ‘Kashagan’

Oil From $50 Billion Kashagan Field Starts Flowing to Export

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By Nariman Gizitdinov: 14 October 2016

Kashagan, a vast oil field in the Caspian Sea, sent its first crude for export after about 16 years in development and more than $50 billion of investments.

The venture loaded 26,500 metric tons of crude for export into the country’s pipelines, Kazakhstan’s Energy Ministry said in an e-mailed statement. Of that, 7,700 tons was sent to the Caspian Pipeline Consortium. Reaching stable production will take “some time” as commissioning work continues both offshore and onshore, the ministry said.

The project has been plagued by multiple delays and cost overruns. A 2008 budget estimate of $38 billion jumped to $53 billion by the end of last year as the partners replaced undersea links after sour gas cracked the pipes. The crude from Kashagan is reaching an already saturated market, with prices at less than half the level of 2013 when the project hit a setback. Expectations for the field’s exports even prompted OPEC to flip supply predictions for next year.

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Kashagan to Start Production in 2017, Says Royal Dutch Shell Report

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BY MICHELLE WITTE in BUSINESS on 13 APRIL

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ASTANA – Production at Kazakhstan’s giant Kashagan offshore oil field is expected to restart in 2017, Royal Dutch Shell stated in its 2014 annual report.

“After the start of production from the Kashagan field in September 2013, operations had to be stopped in October 2013 due to gas leaks from the sour gas pipeline. Following investigations, it has been decided that both the oil and the gas pipeline will be replaced. Replacement activities are ongoing, with production expected to restart in 2017,” page 27 of the annual report, released on March 12, said.

After sour gas leaks forced production to halt soon after it began in late 2013 – already years behind the original schedule – predictions as to when the project would actually produce have been repeatedly made and then pushed back, and even in late January of this year, Energy Minister Vladimir Shkolnik was announcing that Kashagain would come online in late 2016.

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Project Delays Will Cost These Oil Majors Billions

Screen Shot 2014-04-06 at 21.01.34Extracts from a Motley Fool article by Rupert Hargreaves published 28 July 2014

In total, Kashagan is now expect to cost a total of $136 billion, more than 140% above initial estimates. Production has been consistently delayed; the most recent delay, which occurred at the end of last year, concerns the project’s pipelines. At present, the project is being overseen by Italy’s Eni, although ExxonMobil is shortly set to take over. Shell, Eni, and Total all have a 16.8% stake in the project, and Morgan Stanley’s analysts believe that as a result of the delays, these three companies will have their 2016 net income estimates reduced by $500 million each. That is a large figure, even for these oil giants.

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Kashagan delays mar outlook for Eni, Total and Shell

Screen Shot 2014-02-10 at 16.29.29Extract from FT article by Guy Chazan published 20 July 2014

Three of Europe’s largest oil companies could take a $1.5bn hit to earnings as a result of delays to Kashagan, the $50bn oil project in the Caspian Sea that has been bedevilled by hold-ups and cost over-runs.

FULL FT ARTICLE

Copyright The Financial Times Limited 2014.

Reflections on the notorious Kashagan ‘Cash All Gone” project 

By John Donovan

In view of the recent shattering news from the jinxed Kashagan project…

Production at Kazakhstan’s Kashagan Oil Field Halted Until 2016

…it is interesting to reflect back on the situation as it was in 2007, reported in this Reuters article by Tom Bergin.

It seems that not much has changed.

It also explains why Royal Dutch Shell ended up issuing a profits warning and launching a fire sale of assets, following a succession of disastrous projects mired by incompetence. 

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Pipeline problems cloud Kashagan oil outlook

Screen Shot 2014-04-06 at 21.01.34Extract from a Geoff Hiscock article published by The Australian on 2 July 2014

A YEAR ago, one of the world’s biggest oil and gas projects, the massive Kashagan field in Kazakhstan’s part of the Caspian Sea, was on the verge of starting production after more than a decade of development and US$40 billion in costs.

Its backers, a combination of international oil companies ExxonMobil, Shell, Total, Eni, Japan’s Inpex, the China National Petroleum Corp (CNPC) and Kazakhstan’s state-owned KazMunaiGas, had every expectation Kashagan would be producing as much as 8 million tonnes of oil this year, equivalent to 170,000 barrels a day.

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Report: Exxon May Take Over as Kashagan Operator

Screen Shot 2014-04-06 at 21.01.34Extract from a Reuters/Rigzone article by Dmitry Zhdannikov, published Friday 6 June 2014

LONDON, June 6 (Reuters) – U.S. oil major Exxon Mobil is in line to take over as operator of the giant Kashagan field in an attempt to fix the beleaguered $50 billion project offshore Kazakhstan, industry publication Nefte Compass reported on Friday. The Kashagan shareholders are Eni, Exxon Mobil, Royal Dutch Shell, France’s Total and Kazakh state oil company Kazmunaigas, each with 16.8 percent, and Japan’s Inpex and China National Petroleum Corp. (CNPC) as junior partners.

FULL ARTICLE

RELATED ARTICLE

Kashagan Appoints Exxon Executive To Run Troubled Oil Venture

ALMATY, June 6 (Reuters) – The troubled Kashagan oil development has named an executive from U.S. firm Exxon Mobil to run the venture while also streamlining its complicated structure in an attempt to fix the beleaguered $50 billion project offshore Kazakhstan. The group said on Friday Stephane de Mahieu, an Exxon secondee, had become managing director as of May 1, 2014. However, it denied a report in industry publication Nefte Compass that Exxon would take over as operator of Kashagan saying that instead all seven oil firms involved will be effectively operators through a rejigged venture.

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Kashagan ‘Cash All Gone’ Pipeline Debacle

Shell has been a key participant in the Kashagan project consortium which includes Eni and ExxonMobil. Given its notorious track record of over-promise and under delivery, having Shell involved is a bad omen for any elephant project.

By John Donovan

The latest news from the “Cash All Gone” project (as it is widely known) is that due to the need to replace fatally flawed leaking pipelines, the oilfield may not restart until 2016. 

The project is already years behind schedule and countless billions over budget.

I have received some related comment and questions from a retired Royal Dutch Shell EP expert that deserve to be put into the public domain.

Shell has been a key participant in the Kashagan project consortium which includes Eni and ExxonMobil. Given its notorious track record of over-promise and under delivery, having Shell involved is a bad omen for any elephant project. 

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Kashagan oilfield may not restart until 2016

Screen Shot 2014-04-06 at 21.01.34Extracts from a Reuters article by Mariya Gordeyeva published 21 May 2014 under the headline: Kashagan oilfield may not restart until 2016, Kazakh minister says

May 21 (Reuters) – Oil output at Kazakhstan’s giant Kashagan field may not resume until early 2016, Kazakh Oil and Gas Minister Uzakbai Karabalin said on Wednesday, urging foreign partners to start replacing leaky pipelines at the deposit. Production at Kashagan, the world’s biggest oil find in 35 years, started last September but halted in early October after the discovery of gas leaks in the $50 billion project’s pipeline network. The North Caspian Operating Company (NCOC), which develops the offshore field in the Caspian Sea, said last month that it did not expect to produce oil this year due to the leaks. “It (production) may restart by the end of 2015 if all goes well,” Karabalin told Reuters on the sidelines of the Astana Economic Forum. “Otherwise, it may turn out to be early 2016. NCOC includes Eni, Exxon Mobil, Royal Dutch Shell, Total, China’s CNPC, Japan’s Inpex and Kazakh state-run company KazMunaiGas.

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Kazakh Minister: All Kashagan Pipelines To Be Replaced

Screen Shot 2013-07-15 at 07.03.50Extracts from a Reuters article by Olesya Astakhova published 15 May 2014

MOSCOW, May 15 (Reuters) – The consortium developing the giant Kashagan oilfield will have to replace the entire pipeline system at the deposit, Kazakhstan’s oil minister said on Thursday, confirming that output there would not resume this year. The North Caspian Operating Company (NCOC) developing Kashagan said last month that it did not expect to produce oil this year due to the leaks. NCOC includes Eni, Exxon Mobil, Royal Dutch Shell, Total, China’s CNPC, Japan’s Inpex and Kazakh state-run company KazMunaiGas. 

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Kashagan project closed indefinitely

Screen Shot 2014-04-06 at 21.01.34Extract from oilprice.com article by James Burgess published 23 April 2014 under the headline: “Kashagan Field Plans Pipeline Replacement”

After weeks of review, the operators of Kazakhstan’s giant Kashagan oil field have concluded that pipelines carrying oil and gas will need to be replaced due to extensive damage. The consortium — which includes Eni, Total, Royal Dutch Shell and ExxonMobil — has been repeatedly frustrated by delays and engineering obstacles. With the discovery of the severely corroded pipelines, the project, which was shut down in October 2013 after a brief start, is now closed indefinitely.

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Royal Dutch Shell bets on LNG, on an epic scale

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By John Donovan

The comments below are from a Motley Fool article that draws attention to the fact that Shell’s Prelude FLNG project represents a bet “on an epic scale.”  The author is right. The project is an uninsured, uninsurable risk, which like Shell’s Alaskan ambitions, could potentially destroy Shell. 

As to the likelihood of the project being “on schedule and on budget,” we know Shell’s atrocious “misfires” track record on that score e.g. the Corrib Gas project in Ireland: 13 years behind schedule and four times over budget. And “Cash All Gone” (Kashagan), another white elephant.

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