Kazakhstan Oil Field Begins Production After Lengthy Delay

After years of delay, the largest oil field outside the Middle East started producing crude this week, as oil began to flow from the Kashagan field in Kazakhstan. A consortium of oil companies, including Exxon Mobil and ConocoPhillips of the United States, are starting to put in plans to increase production over the next several years.

Geologists discovered the field in 2000. At the time, it was the largest new deposit since 1968 and it remains so today. This may be symptomatic of a wider problem that such oil sources are becoming harder to find.

“This is one of the most complicated projects in the world,” Claudio Descalzi, the chief operating officer for exploration and production at Eni, the Italian oil company involved in the project, said. “It’s really an historical moment. It’s first-quality oil, very light oil, and we are close to countries that are growing, and that present the best markets.”

But the project has been stalled for years, amid technical problems, disputes with the Kazakh government and infighting among the oil companies. Furthermore, such fields have also become less important, given the recent progress in the shale industry.

The companies tapping into the reserve — KazMunayGas, the national oil company of Kazakhstan; Shell of the Netherlands; Total of France; Inpex of Japan; Exxon; Conoco; and Eni — are taking measured approach, the New York Times reported.

While they have drilled scores of wells, the initial production is just 26,000 barrels a day, not much more than drop in the global oil supply. Eventually, the project could add about 1.5 million barrels of oil a day to global output. At that level, the oil will amount to about 1.6 percent of the world’s total, or roughly the amount Libya produces.

The cautious approach, in part, reflects the nature of the project. The very characteristics that caused the field to be overlooked for decades — its depth and location in the Caspian Sea — pose major risks.

“It’s very important to prove to everybody that we are able to develop this type of complex reservoir,” said Mr. Descalzi of Eni.

http://www.nytimes.com/2013/09/12/business/global/kazakhstan-oil-field-starts-production-after-years-of-delay.html

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