Economic crisis may lead to lower costs for Kashagan

energy

Economic crisis may lead to lower costs for Kashagan

By SRI ⋅ July 3, 2009 ⋅

(SRI) - The consortium of international oil companies developing the Kashagan oil field in the Caspian Sea said on Thursday that the global economic crisis is likely to significantly reduce the costs of developing the giant offshore deposit.

“The global economic crisis has had a substantial impact on the global market, which will affect the [Kashagan] project participants’ obligations,” the national oil company KazMunaiGas (KMG) said in a statement. “This […] is expected to significantly cut project expenditures for Kazakhstan and the Kashagan consortium members, while abiding by a development timeframe and deadline for the start of production at the [Kashagan] oil field.”

KMG and the Western members of the consortium said existing contracts would be adjusted to reflect a new economic environment but gave no specific figures.

The latest cost estimates for the project were $136 billion.

The consortium that develops Kashagan consists of KMG, Eni, Exxon Mobil, Royal Dutch Shell, Total, each holding a 17.81-percent stake, ConocoPhillips (8.4 percent) and Inpex (7.56 percent). The project operator is the North Caspian Operating Company (NCOC), which comprises of all partner companies, each responsible for a different area of the project.

Kashagan, with recoverable reserves of 13 billion barrels, was originally scheduled to begin commercial production in 2005. Repeated delays, however, have pushed the starting date to the end of 2012. The field is expected to reach peak production of 1.5 million barrels of crude oil a day, approximately double Kazakhstan’s current production, by the end of this decade.