Kashagan

Location and Discovery

The Kashagan oil field is located approximately 80 kilometers offshore from Atyrau, Kazakhstan, in the North Caspian Sea. It was discovered in July 2000 by the Kashagan East-1 discovery well, and subsequent exploration wells, including Kashagan West-1 and Kashagan East-2, confirmed its commercial viability in June 2002.

Size and Reserves

Kashagan is one of the largest oil discoveries in the last 30 years, and it is considered the fifth largest oil field in the world. The field spans an area of 2,678 square kilometers, measuring 75 kilometers long and 45 kilometers wide. It is estimated to contain between 35 and 70 billion barrels of oil, with recoverable reserves ranging from 7 to 13 billion barrels.

Geology

The Kashagan field is a carbonate platform of the Late Devonian to middle Carboniferous age. The reservoir is located about 4.2 kilometers beneath the seabed and is characterized by limestone with low porosities and permeability. The oil is light with a 45° API gravity, has a high gas-oil ratio, and a very high hydrogen sulfide (H2S) content of 19%. The field is heavily overpressured, presenting significant drilling challenges.

Development and Operation

The Kashagan oil field is being developed and operated by the North Caspian Operating Company (NCOC), a joint venture comprising:

• KazMunaiGas (KMG): 16.9%
• Shell: 16.8%
• Total: 16.8%
• Eni: 16.8%
• ExxonMobil: 16.8%
• CNPC: 8.3%
• Inpex: 7.6%.

Phases of Development

Phase One (Experimental Program - EP)

• Commenced commercial production in October 2016.
• Reached its maximum design capacity of 380,000 barrels per day (bopd) in the first half of 2019.
• Includes 40 wells and five artificial islands (two large islands, A and D, and three smaller islands, EPC 1, 2, and 3).
• D Island serves as the offshore processing and production hub.

Full Field Development Programme

• Plans to increase the field’s output up to 1.5 million barrels of oil per day (Mbopd).
• Includes 35 drilling centers, two offshore processing hubs, three offshore gas plants, a large-scale onshore processing facility, approximately 1,000 kilometers of infield pipelines, umbilicals, and power cables, and 500 kilometers of trunk lines.

Infrastructure and Facilities

• The field has been developed with a complex infrastructure including artificial islands, offshore processing hubs, and extensive pipeline networks.
• ENKA, a Turkish construction company, has been involved in various contracts since 1998, including the construction of the Bautino Supply Base, offshore civil works, and the Pipeline Replacement Project.
• The development includes the use of advanced techniques such as GPS-mounted excavators for underwater profiling and grading work.

Challenges and Delays

• The project has faced significant challenges due to the harsh offshore environment, high levels of toxic and corrosive hydrogen sulfide, and very high reservoir pressure.
• Production was halted in 2013 due to gas leaks caused by sulphide stress corrosion in the pipelines, which required a $1.8 billion pipeline replacement project completed in December 2016.
• The project has experienced cost overruns and delays, with initial estimates of $24 billion increasing to $46 billion for phase one and overall costs projected to be around $136 billion for the full development.

Production and Output

• Initial production started in September 2013 but was suspended shortly after due to pipeline leaks.
• Production was restarted in September 2016 after the completion of the pipeline rehabilitation project.
• As of August 2019, the field had produced a cumulative total of 30 million tonnes of crude oil, more than 8.44 billion cubic meters of gas, and 1.75 million tonnes of sulphur.
• NCOC plans to increase the field’s output to 420,000 bopd by 2022 and 500,000 bopd by 2027.

Environmental and Social Impact

• The project involves significant environmental and logistical challenges, including the protection of offshore structures against surging ice and the respect for local biodiversity, as Eni ensures no exploration activities within UNESCO World Heritage sites.

Economic Impact

• The Kashagan project is the biggest international investment in Kazakhstan, with an estimated investment of £45 billion ($55 billion).
• Despite its potential to significantly boost Kazakhstan’s oil production, the project has faced economic challenges, including the impact of low oil prices on the country’s energy industry.