Posts Tagged ‘Kashagan’

By Nariman Gizitdinov – Jan 11, 2012 6:00 PM GMT

The Kazakh government is considering a request from Exxon Mobil Corp., Royal Dutch Shell Plc (RDSA) and other partners to raise the budget for the first phase of the Kashagan oil project by 20 percent to $46 billion, according to a person with knowledge of the matter.

The international oil companies, which include Eni SpA (ENI) and Total SA (FP), will bear the extra cost themselves, the person said, declining to be identified as the information isn’t public. Kazakhstan’s state energy company, which also has a stake, will reimburse them with barrels of oil for its share once output starts, he said.

Kashagan, once touted as the world’s biggest discovery in four decades, has been plagued by cost overruns and delays over the past decade. An early estimate of $24 billion for the first phase was revised up to $38.6 billion. The venture underestimated the cost of building artificial islands for equipment and to house workers in a region that’s frozen almost half the year, while construction expenses also surged.

Shell, Exxon, Eni and Total each hold a 16.8 percent stake in the field, as does state-owned KazMunaiGaz National Co., according to the website of the North Caspian Operating Co., or NCOC, which manages the project. ConocoPhillips holds 8.4 percent and Japan’s Inpex Corp. (1605) has 7.56 percent.

The costs and schedule of the field’s development are “currently being considered” with the government after a review was carried out, NCOC said in an e-mailed statement.

KazMunaiGaz referred questions to Kazakhstan’s (OLPDKAZA) Oil and Gas Ministry, which didn’t respond to an e-mailed request for comment. Shell declined to comment, as did Eni and Total. Charlie Engelmann, an Exxon spokesman based in Irving, Texas, directed a request for comments to the project’s joint operator.

The Caspian Sea field will produce 370,000 to 450,000 barrels of oil a day in the first phase, which may double in the second phase in 2018 or 2019, Deputy Oil Minister Lyazzat Kiinov said last month.

Production is slated to begin in June 2013 “at the latest,” Deputy Oil Minister Lyazzat Kiinov said last month.

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

SOURCE ARTICLE

After 11 years and $39 billion of investment, Exxon Mobil Corp., Royal Dutch Shell Plc (RDSA) and their partners have yet to sell a drop of oil from what was touted as the world’s biggest discovery in four decades.

October 26, 2011, 7:24 PM EDT

By Nariman Gizitdinov and Hellmuth Tromm

Oct. 27 (Bloomberg) — Royal Dutch Shell Plc and other partners in the Kashagan venture may complete expansion as early as 2017, allowing Kazakhstan to reach its goal of becoming one of the world’s biggest oil exporters faster.

“If the partners will choose the field’s development conception by the end of this year or beginning of next year” and the government approves it, the expansion may be finished by 2017 or 2018, as much as a year earlier than the company previously estimated, said Bolat Akchulakov, chief executive officer of KazMunaiGaz National Co., a partner in the project.

The venture, which also includes Eni SpA, Exxon Mobil Corp. and Total SA, has invested $33 billion in the Caspian development, where the first oil is scheduled to flow by the end of 2012. Kazakh President Nursultan Nazarbayev, who visited the oilfield last month, said the expansion will help turn Kazakhstan into one of the world’s five largest oil exporters.

In 2008 the partners agreed to cede a larger share in Kashagan, one of the world’s biggest oil fields, to KazMunaiGaz and pay higher royalties after government criticism of cost overruns and delays in the first phase. The second phase has stalled because Kazakhstan isn’t satisfied with proposed costs, a person with knowledge of the matter said in June.

It will take 1 1/2 years to complete a detailed plan for the expansion, Akchulakov said in an interview in Astana on Oct. 25. The partners may then need about six months to make final investment decisions and another four years to carry out the project, he said. KazMunaiGaz said last year the expansion has been delayed to 2018 or 2019.

Frozen Waters

“Kashagan is a very complex field not only because it’s offshore, but also because it’s in shallow waters and its oil has a high level” of polluting hydrogen sulfide, Akchulakov said. Large-scale gas injection into the field will require more careful planning than was done earlier, he said.

Water at Kashagan is only 3 to 6 meters deep, and low salinity combined with shallow waters and winter temperatures below minus 30 degrees Celsius (minus 22 Fahrenheit) result in the northern Caspian Sea freezing for almost five months of the year, according to Kashagan’s website. Ice drifts and ice scouring put heavy constraints on construction and production, and call for novel technical solutions, it said.

The northern Caspian is also a sensitive environmental area, home to sturgeon, seals, and coastal wetlands that attract a variety of birds, it said. The crude oil it contains has a high ‘sour gas’ content, with 15 percent hydrogen sulfide, the operator said.

Output at Kashagan, which has already been delayed three times, will reach about 370,000 barrels a day during the first phase and rise to a 450,000 barrels a day by 2015 or 2016, Oil and Gas Minister Sauat Mynbayev said on Oct. 4. The original start date of 2005 was pushed back to 2008 and Eni later said production would begin in 2010.

“If the oil production at Kashagan will start in December next year reaching stable output there will take time,” Akchulakov said. He didn’t give a forecast for when stable oil output may be reached.

–Editors: Hellmuth Tromm, Alex Devine

To contact the reporters on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net; Hellmuth Tromm in Berlin at htromm@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

SOURCE ARTICLE

Royal Dutch Shell and its partners are to ask the Kazakh government for an extension to the 2013 deadline for the first oil from their troubled Kashagan field.

By Richard Orange, Almaty, Kazakhstan

5:40AM BST 01 Jul 2011

SOURCE ARTICLE

Royal Dutch Shell will shut its Caspian office for the giant Kashagan oil field at the end of this month, effectively putting the crucial £30bn ($50bn) project on ice for at least two years.

Staff at Shell Development Kashagan in Atyrau have been laid off or relocated and the office closes on May 30. Photo: ALAMY

By Richard Orange, in Aktau 3:32PM BST 24 May 2011

The move followed the Kazakh government’s decision to reject a new lower-cost design for the crucial main development phase of the oilfield which has the potential to produce more than 1m barrels a day.

Staff at Shell Development Kashagan in Atyrau, a port on Kazakhstan’s Caspian coast, have been laid off or relocated over the past few weeks, and on May 30, the office will be closed.

The move follows a warning from Karim Massimov, Kazakhstan’s prime minister, that the project would not go ahead unless the disagreements on cost were overcome.

“This is an issue about cost,” he told Financial Times in an interview published on Monday.

Shell is shutting down Shell Development Kashagan, the orders of the North Caspian Operating Company (NCOC), the joint venture which manages the development.

SDK is tasked with managing offshore development for the crucial second phase, and its closure means that NCOC is convinced that the start of project will be delayed at least two years.

This could push first production well into the next decade, making it all but impossible for Shell and its partners to make an acceptable profit before the contract expires in 2037.

When Kashagan was discovered in 2000, it was the biggest oil discovery in more than 30 years, with commercial reserves of some 9bn-13bn barrels of oil. But it is also one of the world’s most difficult fields, and under Italy’s ENI, the company chosen to operate it, costs soared to $136bn, making it the costliest project anywhere in the world.

At the end of last year, a set of new lower cost design options, drawn up by Shell’s Kashagan Cost Reduction Team – one of which reduced development costs for the second phase from $68mn to $50bn – was presented to the Kazakh oil ministry by the project partners.

But the Kazakh oil minister Sauat Mynbayev in January rejected the new designs as “inefficient from an economic point of view.”

On February 14, NCOC gave the order to wind down the work on the crucial second phase.

According to a report this month from Wood Mackenzie, the oil industry consultants, the decision was confirmed in April.

Shell Development Kashagan’s main office in The Netherlands is also being shut down and all staff will be moved elsewhere by June 30.

The team which developed the Kashagan Cost Reduction Plan will refine the low-cost design for NCOC, and submit it again to the Kazakh oil ministry in the second half of the year.

Wood Mackenzie’s report estimated that a delay of two years would bring the Kazakh government an extra $400m a year in revenues from the time the field goes into production at the start of 2013 until 2017, and up to $600m if it then only approves a gradual development.

State oil company Kazmunaigas (KMG) is already struggling to meet its share of spending, which was $1.4bn this year alone.

Wood Mackenzie argues that the Kazakh government will ultimately pay the highest price for the delay, however. It estimated that a delay of two years would cut $8.5bn from the $79.8bn net present value of the project for the government, but only $5.2bn from the $70.7bn net present value for Shell and its partners.

The delay also makes it unlikely that the field will ever reach the 1.5bn barre-per-day peak originally envisaged. The first phase of the project will take oil production to 370,000 b/d, the second phase was supposed to push that to 1m b/d.

The Kashagan consortium is led by Shell, ENI, France’s Total, ExxonMobil, and KMG, which each have 16.81pc stakes in the field. ConocoPhillips, from the US, and Japan’s Inpex each hold 8pc.

• Shell slashes $18bn from Kashagan costs 25 Oct 2010
• Kazakhstan delays work on vast oil field 04 Apr 2011

SOURCE ARTICLE

DAILY TELEGRAPH: Royal Dutch Shell has radically simplified the design of the Kashagan oil development, slashing $18bn (£11.5bn) from the cost of the second phase of development as it strives to make the project economically viable.

By Richard Orange in Almaty
Published: 11:38AM BST 25 Oct 2010

The total development costs are estimated at $136bn, making it the world’s costliest project, according to data from the Project Management Institute.

TELEGRAPH ARTICLE

Campbell Keir, director of Royal Dutch Shell in Kazakhstan, says the offshore Kashagan field is one of the most technically challenging fields in the industry, which may be the future of the energy sector.

A recent settlement decided that Total will provide the first managing director of the newly established North Caspian Operating Company. The decision ended more than a year of dispute between the project’s international oil company partners – most notably ExxonMobil of the US, and Total, Royal Dutch Shell and Eni of Europe – and the Kazakh government.

The project also has more partners than most ventures of its kind: besides ENI, there is Royal Dutch Shell PLC, Exxon Mobil Corp.,Total SA, ConocoPhillips, Inpex Holdings Inc. of Japan and KazMunaiGas. Strained relations between the partners have added to the project’s complexity.

Royal Dutch Shell Kazakhstan said that KazMunaiGas, the state oil company, would create a joint venture with Royal Dutch Shell, the Anglo-Dutch oil and gas group, to handle the production segment of the Kashagan oilfield.