The complex and troubled Kashagan development, offshore Kazakhstann, is apparently experiencing further difficulties due to infrastructure subsidence and rotting pipework.
The 13billion barrels recoverable (estimated) oilfield located at the northern end of the Caspian Sea in very shallow water has yet to produce a drop of oil and the latest revelations could put the project back further.
Artificial islands have been built to accommodate Kashagan’s production equipment. However, we have learned that these islands, built of large concrete blocks with infill, are sinking.
Equipment, most of which is supported by piles, is settling unevenly posing structural stresses on the pipework and misalignment of machinery.
Not only that, it is claimed that, with the internal corrosion in pipelines/process piping and process vessels and the fact that very little of the rotating equipment has apparently ever been maintained after lying there for five-plus years, to attempt production could be dangerous.
However, commissioning activities are ongoing, anticipating imminent start-up. It has been reported from a news bureau in Astano that, in June, the Bolashak processing facility, which will process crude from Kashagan, was formally opened.
The operating consortium – North Caspian Operating Consortium – has since said that it had started introduction of sweet gas into the offshore facilities on the artificial D Island on July 17, following the lighting of the flare on July 14.
The consortium faces hefty fines if production does not start by October 1, but the launch date is still not clear. The Kazakh government had hoped for start-up on July 6.
Recently appointed new energy minister, Uzakbai Karabalin, said on July 18 that preparations were 98% completed, and production would start by October at the latest, according to the official Kazinform bureau.
But there is speculation that first oil may slip into next year.
While the battle to get Kashagan producing continues, the Kazakh government confirmed early last month that it is using its preemptive right to block the sale of ConocoPhillips’ stake in the field to India’s ONGC Videsh.
The stake is instead set to be sold to China National Petroleum Corp (CNPC), reinforcing China’s growing role in Kazakhstan’s energy sector. A deal worth a little over $5billion is apparently what has been struck. Around 25% of Kazakhstan’s oil output is now produced by Chinese companies.
NCOC members currently comprise KazMunaiGaz, Eni, Exxon, Inpex, Shell, Total and ConocoPhillips. Post deal CNPC will displace ConocoPhillips.
Late last year, CNN Money branded Kashagan as the most expensive energy project in the world, its development having apparently gobbled around $120billion thus far.
Another estimate is that $40billion has been spent already but that the total project cost is put as high as $180billion.
Kashagan was first drilled in 2000 and the current top end estimate is that in-place reserves are as much as 35billion barrels of oil and 40trillion cu.ft of natural gas.
Aside from the complex and very difficult carbonates-based geology, a further downside is the reservoir’s high hydrogen sulphide content.
The main development comprises a structure named Island D and a suite of 12 production wells. There are two production trains.
The initial production rate is expected to be 180,000 barrels per day, eventually rising to 370,000 bpd and later 1.5million bpd is possible.
The Kashagan contract area covers an area of over 5,500sq.km and comprises five separate fields . . . Kashgan, Kalamkas A, Kashagan Southwest, Aktote and the Kairan.
The North Caspian is a very hostile and sensitive environment where temperatures range from minus 50C in the winter to plus 45C in the summer. It has even been necessary to build special ships to service the project’s requirements.