Kashagan field seen taking another decade to reach target
LONDON (Bloomberg) -- Kazakhstan’s giant Kashagan oil field has taken 16 years and more than $50 billion to bring to the verge of production. It could take another decade to reach its potential, with initial output at half the forecast level.
Eni, working with partners Royal Dutch Shell, Total and the Kazakh state, expects Kashagan to start in October and pump 370,000 bopd within a year. Consulting firm Wood Mackenzie contends the field will produce only about 154,000 bopd in 2017 and won’t get anywhere near targeted volumes until the next decade.
“It will take time to reach production capacity,” Samuel Lussac, WoodMac’s research manager for Russia, said in an interview. “We don’t expect Kashagan Phase 1 to produce more than 300,000 bopd until the early 2020s.”
Lussac expects efficiency rates lower than projected by Eni, explaining the difference in forecasts for the vast field in the northern Caspian Sea. The project, initially due to come on stream more than a decade ago, has been plagued by delays and cost overruns caused by multiple setbacks. A 2008 budget estimate of $38 billion jumped to $53 billion by the end of last year following sour-gas leaks that cracked the pipelines.
Eni said in July that Kashagan would pump 230,000 bopd by the end of this year, and plateau at 370,000 bopd by mid-2017. WoodMac sees the plateau—which it estimates at 380,000 bopd—no sooner than 2026.
Challenging Project
In November 2014, Total described Kashagan as “the mother of all projects,” saying “the combination of challenges on this project are without equivalent in our industry.”
The owners of the oil discovery, the world’s biggest since Russia’s Priobskoye North in 1982, have changed over the years. Kazakhstan’s stake is now 16.88%; Eni, Total, Shell and Exxon Mobil each own 16.81%. China National Petroleum Corp. has an 8.33% interest and Japan’s Inpex Corp. has 7.56%.
The imminent start of Kashagan has led the Organization of Petroleum Exporting Countries to raise its forecast for non-OPEC supply growth next year by 350,000 bopd to an average of 56.52 MMbopd. The International Energy Agency also increased its forecast for non-OPEC supply in 2017, predicting growth of 380,000 bopd.
