Every day manufacturing on the Kashagan oil subject has dropped by 60 p.c, based on the Kazakh Ministry of Vitality, amid deliberate upkeep work, contributing to a 13 p.c lower in manufacturing nationally.
Final 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 12 months.
When the Kashagan subject was found in 2000, it was the second largest identified oil subject 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 venture was dramatically behind scheduled and greater than $30 billion over finances. (Manufacturing had really began in 2013 however the subject shut down inside a month as a consequence of leaks in a pipeline.)
At current, the Kashagan subject is managed by NCOC, wherein 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 subject is alleged to provide 400,000 barrels per day, usually.
Upkeep work at Kashagan was scheduled to start on October 3, however commenced on October 7.
Minister of Vitality Almasadam Satkaliyev stated that restore work was anticipated to legislation between 30 and 40 days.
“The Ministry of Vitality has accredited the scheduled upkeep for a period of 40 days; nevertheless, 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 fulfill commitments it has made to OPEC+ to scale 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 subject” following the completion of upkeep work there.
The Tengiz oil subject started manufacturing in 1993 and is believed to be the sixth largest oil subject 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 subject, Tengiz outperforms it in manufacturing, with introduced 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 seems to be to settle a dispute concerning a $5 billion environmental wonderful 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 subject.”
The basis of the environmental wonderful is a 2022 inspection by the Atyrau Area’s Ministry of Ecology, which claimed to seek out that the sector had far exceeded sulfur storage limits. In response to Bloomberg’s reporting, the Kashagan companions are providing to make extra investments in social initiatives ($110 million over two years), discovered one million greenback social growth fund, in addition to make extra funds “associated to the availability 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 modifications to Kazakh legislation 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 declare 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, however it’s price remembering what occurred to Ahab in the long run.
In 2020, Kazakhstan introduced its intention to realize “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 financial system and to its vitality combine.