Chevron approves $37-billion expansion of Kazakh oil project
SAN RAMON, California (Bloomberg) -- Chevron Corp. will go ahead with the $36.8-billion expansion of the Tengiz oil project in Kazakhstan, one of the biggest new investments since crude’s slump two years ago.
The company and its partners including Exxon Mobil Corp. will spend $27.1 billion on facilities, $3.5 billion on wells and $6.2 billion for contingency and escalation, Chevron said it a statement on Tuesday. First oil from the expanded project is planned for 2022.
The Tengiz expansion comes after oil explorers around the globe slashed more than $1 trillion in investments to weather a downturn that saw oil prices tumble 75% from June 2014 to a 12-year low in January. The slump has reduced prices of some services and rigs required for drilling and Chevron said it’s taking advantage of that.
Tengiz “has undergone extensive engineering and construction planning reviews and is well-timed to take advantage of lower costs of oil industry goods and services,” Jay Johnson, executive V.P. for upstream at Chevron, said in the statement.
The expansion will increase crude production in the field by 260,000 bpd. The project’s total hydrocarbon output will rise to about 1 MMboed, according to the statement.
Project Spared
Exxon owns 25% of the venture, KazmunaiGaz National Co. 20% and Russia’s Lukoil PJSC 5%.
Though the expansion of Tengiz was put on hold last year after cost estimates ballooned amid the plunging oil prices, it was the only major new project Chevron spared from the austerity budget the company imposed in 2016. Tengizchevroil, the venture that operates the project, probably will issue bonds or otherwise tap lenders to finance the expansion, CEO John Watson told analysts and investors at Chevron’s annual strategy presentation in March.
Discovered in 1979, Tengiz was too technically challenging for Soviet engineers to develop. A blowout in a well called T-37 in June 1985 blazed for more than 400 days before it was extinguished by U.S. well-control experts, according to a history of the field published by Tengizchevroil.
Chevron won the rights to develop the field in 1993 after the collapse of the Soviet Union.
