Vast Kazakh Oil Field Seen Taking Another Decade to Reach Target

Updated on
  • Kashagan won’t hit Eni’s 2017 output goal until 2020s: WoodMac
  • OPEC heeds Eni’s forecast, raising its non-OPEC supply outlook

Kazakhstan’s giant Kashagan oil field has taken 16 years and more than $50 billion to bring to the verge of production. It could take another decade to reach its potential, with initial output at half the forecast level.

Eni SpA, working with partners Royal Dutch Shell Plc, Total SA and the Kazakh state, expects Kashagan to start in October and pump 370,000 barrels a day within a year. Consulting firm Wood Mackenzie Ltd. contends the field will produce only about 154,000 barrels a day in 2017 and won’t get anywhere near targeted volumes until the next decade.

“It will take time to reach production capacity,” Samuel Lussac, WoodMac’s research manager for Russia, said in an interview. “We don’t expect Kashagan Phase 1 to produce more than 300,000 barrels a day until the early 2020s.”

Lussac expects efficiency rates lower than projected by Eni, explaining the difference in forecasts for the vast field in the northern Caspian Sea. The project, initially due to come on stream more than a decade ago, has been plagued by delays and cost overruns caused by multiple setbacks. A 2008 budget estimate of $38 billion jumped to $53 billion by the end of last year following sour-gas leaks that cracked the pipelines.

Eni said in July that Kashagan would pump 230,000 barrels a day by the end of this year, and plateau at 370,000 barrels by mid-2017. WoodMac sees the plateau -- which it estimates at 380,000 barrels a day -- no sooner than 2026.

Challenging Project

In November 2014, Total described Kashagan as “the mother of all projects,” saying “the combination of challenges on this project are without equivalent in our industry.”

The owners of the oil discovery, the world’s biggest since Russia’s Priobskoye North in 1982, have changed over the years. Kazakhstan’s stake is now 16.88 percent; Eni, Total, Shell and Exxon Mobil Corp. each own 16.81 percent. China National Petroleum Corp. has an 8.33 percent interest and Japan’s Inpex Corp. has 7.56 percent.

The imminent start of Kashagan has led the Organization of Petroleum Exporting Countries to raise its forecast for non-OPEC supply growth next year by 350,000 barrels a day to an average of 56.52 million barrels. The International Energy Agency also increased its forecast for non-OPEC supply in 2017, predicting growth of 380,000 barrels a day.