Day by day manufacturing on the Kashagan oil discipline has dropped by 60 p.c, according to the Kazakh Ministry of Energy, amid deliberate upkeep work, contributing to a 13 p.c lower in manufacturing nationally.
Last month the ministry requested that the companions within the North Caspian Working Firm (NCOC) consortium that operates Kashagan delay scheduled upkeep work – which was slated to start in October – into subsequent yr.
When the Kashagan discipline was found in 2000, it was the second largest recognized oil discipline on the earth. Its recoverable reserves are estimated to be 9 to 13 billion barrels of oil. When constant business manufacturing started in 2016, the challenge was dramatically behind scheduled and more than $30 billion over budget. (Manufacturing had really began in 2013 however the discipline shut down inside a month on account of leaks in a pipeline.)
At current, the Kashagan discipline is managed by NCOC, during which a plethora of oil main subsidiaries are shareholders: KMG Kashagan B.V., a KazMunayGas subsidiary (16.877 p.c), Shell Kazakhstan (16.807 p.c), Whole EP Kazakhstan (16.807 p.c), AgipCaspian Sea B.V. (16.807 p.c), ExxonMobil Kazakhstan (16.807 p.c), CNPC Kazakhstan B.V. (8.333 p.c), and Inpex North-Caspian Sea Ltd. (7.563 p.c).
The Kashagan discipline is claimed to supply 400,000 barrels per day, sometimes.
Upkeep work at Kashagan was scheduled to start on October 3, however commenced on October 7.
Minister of Power Almasadam Satkaliyev stated that restore work was anticipated to regulation between 30 and 40 days.
“The Ministry of Power has accepted the scheduled upkeep for a period of 40 days; nonetheless, the consortium administration (NCOC) has indicated their intention to finish the repairs in a shorter timeframe of 30 days,” he stated
Regardless of Kazakhstan’s efforts to reschedule the Kashagan upkeep, the drop in manufacturing conveniently forces Astana to satisfy commitments it has made to OPEC+ to cut back oil manufacturing.
As Reuters reported final week, “Kazakhstan has been one of many laggards within the OPEC+ deal to curb oil manufacturing, persistently exceeding the group’s output quota.”
Manufacturing had elevated in September, Reuters reported, “due to a 30% output increase on the Tengiz discipline” following the completion of upkeep work there.
The Tengiz oil discipline started manufacturing in 1993 and is believed to be the sixth largest oil discipline on the earth. Tengiz is presently operated by Tengizchevroil with a number of stakeholders: Chevron Company (50 p.c), ExxonMobil Kazakhstan (25 p.c), KazMunayGas (20 p.c), and Lukoil (5 p.c).
Though Kashagan is technically the bigger discipline, Tengiz outperforms it in manufacturing, with announced targets for 2023 round 608,000 barrels per day.
This isn’t the primary time Kazakhstan has disenchanted its OPEC+ companions with manufacturing overruns.
The upkeep work additionally comes as Astana appears to be like to settle a dispute concerning a $5 billion environmental nice with the Kashagan companions. As Bloomberg reported final week, “Oil majors together with Eni SpA, Shell Plc, Exxon Mobil Corp. and TotalEnergies SE have drafted proposals associated to allegations they saved an excessive amount of sulfur on the discipline.”
The foundation of the environmental nice is a 2022 inspection by the Atyrau Area’s Ministry of Ecology, which claimed to search out that the sector had far exceeded sulfur storage limits. In line with Bloomberg’s reporting, the Kashagan companions are providing to make further investments in social initiatives ($110 million over two years), discovered 1,000,000 greenback social improvement fund, in addition to make further funds “associated to the provision of liquefied petroleum fuel to the federal government.”
The proposal, in flip, seeks the withdrawal of the “sulfur-damage compensation claims in Kazakhstan and all environmental harm claims in worldwide arbitration” and adjustments to Kazakh regulation to keep away from future claims. The companions would additionally not admit any fault in a potential settlement.
In a separate case, Kazakhstan is pursuing a $160 billion claim in opposition to Eni SpA, Shell Plc, Exxon Mobil Corp., and TotalEnergies SE. That determine has balloon enormously since Kazakhstan’s authorities first requested $16.5 billion in June 2023 as compensation for disputes associated to manufacturing and income sharing. Kazakhstan claims that income from manufacturing was by no means absolutely delivered to the federal government, regardless of guarantees.
Bloomberg’s sources tied the escalating declare to allegations of corruption.
Almost a decade in the past, Casey Michel wrote right here at The Diplomat that Kashagan was Kazakhstan’s white whale” – “all the time in sight, however all the time simply past attain.” Its white whale period might have handed, but it surely’s price remembering what occurred to Ahab ultimately.
In 2020, Kazakhstan introduced its intention to attain “carbon neutrality” by 2060. Some analysts argue that concentrate on is formidable however achievable. However in the interim, fossil fuels stay central to Kazakhstan’s economic system and to its vitality combine.
