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Wednesday 6 November 2019

For Kazakh Energy Minister, Tengiz Expansion Costs too Much


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NUR-SULTAN / EX ASTANA (Reuters) — Kazakhstan believes an increased cost estimate for the Tengiz oilfield expansion is too high and wants oil majors Chevron and ExxonMobil to review it, Energy Minister Kanat Bozumbayev said on Wednesday.

Chevron, which leads the consortium developing one of the Central Asian nation’s biggest oilfields, said last week that cost overruns would balloon project expenses by 25% to $45.2 bln. It blamed a one-year delay and higher construction and equipment costs.

“Generally, we told them that in our opinion the sum is too high”, Bozumbayev told reporters when asked about Tengiz costs […] This means poor planning.” Chevron and ExxonMobil have sent experts to Kazakhstan to review the project and it was too early to talk about the final figures, he added.

Additional expenses would need to be compensated from future revenue, eating into Kazakhstan’s share of profits. The Kazakh government has repeatedly locked horns with its partners in giant projects such as Tengiz, Kashagan and Karachaganak, with a $1.6 bln dispute regarding the latter in arbitration.

Kazakh state energy firm KazMunayGaz and Russia’s LUKOIL are partners in the Tengiz joint venture. The Tengiz expansion is set to increase the field’s output by 12 mln tonnes a year by 2025/26 from the current 29 mln tonnes a year.

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