ALMATY Oct 4, 2006 (Dow Jones Newswires)
Kazakhstan's giant Kashagan oil field will probably start producing at the end of 2009, as the operators of the field have to rebuild some installations to comply with safety rules, Philippe Rochoux, Total SA's (TOT) managing director in the country, told Dow Jones Newswires in an interview Wednesday.
This will entail additional costs, to be estimated at the end of this year, when the Eni-led (E) consortium which operates the field agrees on the adjustments, Rochoux added.
Kazakhstan's energy minister said in the summer that the Kashagan project would suffer a delay, and production was expected to start between 2009 and 2010.
Total owns a 20.37% interest in the field, along with Eni, ExxonMobil (XOM), Royal Dutch Shell PLC (RDBS.LN), ConocoPhillips (COP) and Inpex (1605.TO).
"We discovered at the end of last year that the way we conceived the installations posed safety problems. Buildings are too close to each other and we can't simply operate with them," Rochoux said.
The presence of hydrogen, a dangerous gas that is prone to burst suddenly, in the exploration and production process requires a minimum distance between buildings, he said. "Kashagan's size is exceptional, installations are too. It's no surprise we need to adjust."
Kashagan, located in the northern part of the Caspian Sea, is considered by experts as the largest field in the world outside the Middle East, with estimated recoverable reserves of 7 billion to 9 billion barrels of oil equivalent and further potential for 9 billion to 13 billion barrels using secondary recovery techniques.
The cost of developing Kashagan has been estimated at around $29 billion, with an expected production peak of 1.2 million barrels a day by 2010.
The Kashagan project is also highly dependent on Kazakhstani oil-export routes, which need to be expanded to keep up with the pace of current exploration projects in the country.
Existing transport networks, through Russia via a pipeline from the Caspian Sea to the Russian port of Novorossiysk on the Black Sea, as well as rail transport, won't be enough to transport 1.2 million barrels a day from Kashagan, Rochoux said.
That's why Total and its partners in the consortium are big advocates of a plan to link the Kazakh city of Atyrau to the port of Aktau on the Caspian Sea, and then through the Baku-Tbilisi-Ceyhan pipeline that runs through Azerbaijan, Georgia and Turkey to the Mediterranean Sea.
Total aims to get a 5% interest in the $3 billion-$4 billion connection project, Rochoux said, adding that he's hopeful the project will be launched next year.
The project seems to have the full backing of the Kazakhstani government, which has said it is keen to diversify its hydrocarbon transport routes. The country currently relies mostly on Russian routes to export its output. Total is aiming to take stakes in other exploration projects, Rochoux said.
But the company is facing tough competition from other majors rushing into the country, as well as a desire from the Kazakhstani government to gain more control over exploration and production projects on its own territory.
Advanced talks between Total and the Kazakhstani state-owned oil company KazMunaiGas (RDGZ.KZ) over the possibility of the French oil major taking a 25% stake in the promising field of Kurmangazy have been suspended recently as KazMunaiGas decided it wouldn't need the French company's help at this stage, Rochoux said.
Despite competition, a growing appetite from the country's regime to get involved in oil projects and changing tax legislation, Kazakhstan remains a land of opportunities, he said.
It's one of the most stable countries in the region, Rochoux pointed out, adding he doesn't see it taking the same path as its neighbor, Russia, which has been challenging oil companies operating in the region over environmental licenses.
Copyright (c) 2006 Dow Jones & Company, Inc.
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