Page 9 - FSUOGM Week 44 2019

FSUOGM INVESTMENT FSUOGM
Costs balloon at Tengiz oilfield expansion in Kazakhstan
KAZAKHSTAN
The project is also running a year behind schedule.
US oil major Chevron has warned that the overall cost of an expansion project at the Tengiz oilfield in western Kazakhstan is set to reach $45.2bn, up 25% from its initial estimate, with the scheme also running a year behind schedule.
Chevron and its partners at Tengiz took a final investment decision (FID) in 2016 on a $36.8bn plan to ramp up annual oil production at Tengiz to 39mn tonnes (783,000 barrels per day), from 625,200 bpd last year. It was the larg- est single investment approval in the global oil industry that year, at a time when producers were reeling from record-low oil prices.
Chevron revealed in its third-quarter earn- ings call on November 1 that it had revised its cost estimate for the Future Growth Project and Wellhead Pressure Management Project (FGP- WPMP) at Tengiz after undertaking a detailed spending review. In addition to the $45.2bn sum, a further $1.3bn has been set aside for contin- gency costs, it said.
First oil from FGP, which involves an expan- sion in sour gas injection at the field to boost oil recovery rates, has also been postponed to mid- 2023, from the original 2022 target, Chevron said. WPMP, which aims to boost flow rates at existing wells by adding a new pressure facility, is still on track for completion in 2022.
The project is currently 70% complete, Chevron said, with detailed engineering and procurement
nearing finish. Work on project modules at three of four fabrication yards in South Korea, Italy and Kazakhstan has also been concluded. Drilling operations are ahead of schedule, with 40 of 55 planned wells already sunk.
Chevron owns a 50% stake in the Tengizchev- roil (TCO) consortium operating Tengiz and the smaller Korolev field, under a production-shar- ing agreement (PSA) reached with the Kazakh government in 1993. ExxonMobil holds a fur- ther 25% interest, while Kazakhstan’s state oil company KazMunayGas (KMG) has 20% and Russia’s Lukoil has 5%.
TCO managed a steady increase in oil pro- duction between 2014 and 2017 despite testing market conditions, thanks to its low costs. Out- put dipped slightly last year, however, as a result of lengthy maintenance work.
Tengiz is often cited as Kazakhstan’s most suc- cessful upstream project, with its investors hav- ing taken a Soviet-era oil discovery and applied capital and advanced technology to transform it into a major international development. TCO accounted for almost a third of Kazakhstan’s national oil output last year, with its share set to grow once the expansion is complete and as other onshore fields become depleted.
Chevron reported a 36% year-on-year fall in its third-quarter profits to $2.58bn, blaming the decline on lower oil prices which more than off- set an increase in its production. ™
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