Focus of the Issue
Kazakhstan Chance in the Project of the Century
Artur Shakhnazaryan, Oleg Chervinsky
The shareholders of the JV “Tengizchevroil” and the Government of Kazakhstan finally approved the Future Development Project of Tengiz production field. As it was expected, Kazakhstan oilfield service companies can look forward to the contracts within the scope of this project to the amount of USD 8 thousand million at the least
Production increase by half
The Government of Kazakhstan and the joint venture “Tengizchevroil” (TCO), developing Tengiz production field in Atyrau region of Kazakhstan, at the end of last year signed a Memorandum of Understanding in terms of which the mutual commitments of the Parties were determined for TCO plans to increase Tengiz field production rate as the result of implementation of the Future Development Projectand the Wellhead Pressure Control (PFD) Project.
The Oil and Gas Minister of the Republic of Kazakhstan Uzakbai Karabalin, who signed the document on behalf of Kazakhstan Party, gave his comments on this event: “Today we have signed a Memorandum between the Government of ROK and “Tengizchevroil” on cooperation for the purpose of investments promotion, training and development as well as employment through implementation of the Future Development Projectand the Wellhead Pressure Control Project of the “Tengizchevroil” LLP. Within the terms of this Memorandum of Understanding the mutual commitments of the Parties have been determined regarding TCO plans to increase Tengiz field production rate. This step accords with efforts of the Government of ROK and TCO for further tasks performance in terms of the development of the Future Development Project. We expect that with the development of this project the production facilities at Tengiz will be increased and the annual oil production will be increased from 26 million tons to 38 million tons. This is a significant increase in oil production with further relevant profits for the Republic of Kazakhstan”.
The Future Development Project includes construction and installation of the oil stabilization units and electric power generation plants. In the PFD, gas and sulphur processing plants are not provided: gas will be injected and sulphur will be sold in the world market. By 2016, within the contractual territory of TCO substantially no “sulphur pads”, accumulated during production, should be left. The PFD also includes the construction of an independent pressure increase system, a system of gathering, a new sour gas injection sites (SGI-2 - two more injection wells) and well sites, as well as a drilling program.
The third plant and the other PFD production facilities are projected to place within the existing licensed territory of Tengiz production field, to the south of the operational second generation plant.
We cannot go further without PIS.
The essential part of TCO shareholders expenses under the implementation of the PFD will be allocated to the Pressure Increase System (PIS). Reservoir pressure in Tengiz beds is on the downward trend and has already declined by half. The lower is the pressure; the lower will be the HC recovery factor. If we don’t take the saving measures, then the reservoir pressure can go downward in two or three times, and in this case the oil production in Tengiz can be shut down.
The technologies of easy accessible oil production, used in the past years, caused the reservoir pressure decline in the production field. This fact gave chance to many Kazakhstan geologists and government authorities to blame TCO shareholders in the depletion of Kazakhstan resources. But under the business environment for initial 15 years of TCO activity, there could be no other chance to reach the profitability of the project. The project of gas re-injection into the reservoirs stabilized the situation and stopped the pressure decline. This work is planned to be continued.
The PIS project estimate is huge - more than 10 USD billion. The total cost of the PFD implementation will exceed 20 USD billion, according to present estimates of TCO. For comparison: last investment project in Tengiz - project of second generation plant construction/sour gas injection - cost 6,5 USD billion.
Thus, on the investments scale this is a second project during the years of independence of the republic after the experimental program of Kashagan production field.