Projects
Kashagan Requests New Money.
Artur Shakhnazaryan, AtyrauKashagan oil field development operator - NCOC company is intended to significantly update and extend the deadline for the first production phase - pilot development planning. The operator has already developed a project called the APDP, which stands for "additional pilot development planning". In spring in Atyrau the project was presented to the public, where the public hearings on the preliminary EAI of the project were held. As expected, the response of the authorities should be given as quickly as possible, before the beginning of September.
The APDP project provides access to production output of 370 thousand barrels per year (or 47.1 thousand barrels per day) in the year 2020 instead of previously planned 2018. In general, this will increase the overall production in Kazakhstan for a little more than 24 million tons of oil. Then, with the launch of additional sour gas injection compressors, after 5 years more in 2025, the first 450 thousand barrels of oil per year “production red level” will be reached. Thus, if the authorities of Kazakhstan give the go-ahead to make changes in the technological scheme, then the extension of the total duration of the pilot commercial development and the deadline of the first oil production base achievement will happen. The achievement of this parameter is pushed to the year 2015. It is approximately 15 years later than predicted in 1998 when an international consortium was established, in accordance with the North Caspian Sea Production Sharing Agreement (NCSPSA).
That is why now you can already confidently assert that the achievement of the project pay-off period based on current NCSPSA timeframe effective until 2041 is unachievable, even with previous high oil prices exceeding $100. Not talking about the current price, which is twice smaller. About 45 billion dollars of capital expenditure is already spent on the project, and the consortium participants have become hostages of the investments. But the most important thing is in order to return at least part of the expenses, a record amount in the history of world oil industry to be invested in one oil project, it is necessary to further ramp up the costs.
The APDP from a perspective
What is changing? The purpose of the APDP project is the same as in the PDP, approved most recently in 2011. The same final oil output. The deadline is changed and the processing chain in the marine part of the project becomes more complicated. Two years are added to the drilling operation and the whole focus in the processing chain moves to the increase of the volumes of sour gas injection into the reservoir. After sustaining losses with hydrogen sulfide, which, as it turned out, cannot be controlled even after the purification process, the APDP developers offer to solve the problem by injecting into the reservoir the maximum possible volume of sour gas (hydrogen sulfide). The development of Kashagan is complicated by features associated with the location of the oil field on the shelf of the Caspian Sea, as well as abnormally high formation pressure in the productive pool and a high content of hydrogen sulfide in the produced output. These differences necessitate the holding of a large work on preparation of the oil field for full-scale development, solving many issues in the APDP period.
Specifics of the APDP consists of three core plans: the operator of the project the NCOC company plans to expand the project’s operational area to the South West, roughly speaking, to increase the working area. It is planned to drill two additional wells there. As a sidenote, currently the general fund of the wells at Kashagan stands at 52 wells. Out of 52 wells 42 are situated in the pilot development planning area of Kashagan - 40 planned, one prospect and one for the injection of bore mud into the reservoir. Two more will be added to them, but in totally new area, not explored previously either during the prospecting phase or the phase of pilot development planning. These wells should give a new necessary information about physical and dynamic properties of the oil field reservoir.
It is worth to assess this segment of the APDP, most likely, there was a serious omission previously, which is necessary to correct in such a non-trivial manner. The need to increase the drilling operation is forcing the NCOC to increase the APDP implementation period for two years, to five years instead of three, and instead of completion in 2018 increase the project implementation period to the year 2020. Accordingly, each year of period extension automatically increases the volume of current expenditure.