Reports indicate that oil production from Kazakhstan's Kashagan field is not going to recommence before the beginning of the new year.
Kashagan field's operator North Caspian Operation Company (NCOC) says it is premature to make any statement regarding the steps that need to be taken in order to surmount the pipeline problems that have plagued the $40 billion project since the start of oil production in September. This renders it difficult to say when oil production at the field will resume, especially as Caspian is anticipating difficulties during repairs at the field because of cold weather.
Only last month, Kazakhstan's Minister of Oil Gas said that oil production from the Kashagan field may be resumed by this month.
Production at the giant field commenced on September 11, 2013, but was halted after only two weeks due to the discovery of a gas leak. After the sealing of the leak, production was restarted on October 6 only to be stopped again three days later due to the discovery of another gas leak.
A portion of the defective pipe was dug up and sent to a lab in Britain for tests. Analysts believe that there my be hairline fractures in the pipe caused by the corrosion occurring due to contact with hydrogen sulfide. Kashagan's crude oil is mixed with "sour gas" which contains high quantities of the toxic and highly corrosive gas.
Some of the tests the lab is conducting will take a few weeks, after which it will issue a final report. NCOC stated that the final results from the inspection are expected in early 2014.
The prolonged stoppage will potentially be a drag on the finances of the consortium coordinating the project, which includes Total, ExxonMobil, Eni, and Shell.
The delay could also impede the realization of Kazakhstan's goal to reposition itself as a major oil exporter, because the oil sector is a key part of the broader economy's safety net as it wrestles with the ongoing fallout of a 2008 banking sector collapse.
In a statement, the consortium said, "Serious predictions of the restart of production can only be made when the root cause of the defects has been identified, and the extent of defects has been mapped."
Kashagan is the largest field discovered in the last 30 years; Source: newstribune
Because ice envelopes equipment in the winter and extreme heat radiates across the field in the summer, repair work and construction is very difficult in Kashagan. Additionally, the significant presence of hydrogen sulfide and the field's high pressure has rendered it costly and technically complex.
The consortium had intended over the course of 2013-14 to increase production to 370,000 bpd in the second stage from 180,000 bpd in the first stage.
Kashagan is the largest field discovered in the last 30 years, and the largest outside of the Middle East. It is estimated to contain 38 Bbbl of oil-in-place, of which 16 Bbbl are potentially recoverable reserves.
Kashagan produces light oil with 45° API gravity with a high gas-oil ratio from a Late Devonian to middle Carboniferous age reservoir that consists of limestone with low porosities and permeability. The field is over-pressured, which contributed to the drilling challenges. Temperature also played a part in the drilling challenge, as the Caspian Sea can fall below -20°C in winter with a layer of ice over the Kashagan project area for several months.
ConocoPhillips drilled the first exploration well, Kashagan East-1, with the Sunkar drilling rig in 2000 after acquiring interest in 11 blocks off the Kazakhstan coast in 1998.
A development plan was approved in 2004. The $136 billion plan called for a three-phase production development. Development commenced in 2006. However, in 2007, the partners revised the plan and budget, which delayed the production date and increased the development cost.