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Kazakhstan Considers Request to Increase Kashagan Project Cost

Thursday 12 January 2012

(Boolmberg) – Kazakhstan considers a request of Kashagan oil project’s partners to increase the budget for its first phase, Bloomberg reported with the reference to source aware of the matter.

The source said that Exxon Mobil Corp., Royal Dutch Shell Plc (RDSA) and other partners of the project made a request to increase the Kashagan’s first phase cost by 20% to US $46 billion. The current estimated cost of the project’s first phase hits $38.6 billion. The whole project is expected to cost $187 billion and it is expected to start production from the project’s experimental program is late 2012 with production of 75,000 barrels (11,900 m³) of oil per day. It should reach a production rate of 1.5 million barrels per day (240,000 m³/d) towards the end of 2010s.

Kashagan is Kazakhstan’s super-giant oil and gas field, located in the north of the Caspian Sea. Geological reserves at Kashagan are estimated at 4.8 billion tons of oil according to the Kazakh geologists. The field is offshore in a harsh environment, where sea ice is present in the winter and temperatures from -35° C to 40° C can be encountered.

The largest participants of the Kashagan project are currently the companies Eni, KMG Kashagan B.V., Total, ExxonMobil, and Royal Dutch Shell. Other participants are ConocoPhillips and Inpex. About 50 million tons of oil a year will be extracted in the first stage of experimental-industrial field development. The expected oil reserves of the Kashagan field are no less than 10 billion tons and gas reserves – more than 1 trillion m³.

According to the source, the international oil companies, which include Eni SpA (ENI) and Total SA (FP), will cover the extra cost themselves. Kazakhstan’s state energy company, which also has a stake in project, will reimburse them with barrels of oil for its share once output starts, he said.

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