Page 4 - FSUOGM Week 42 2019

FSUOGM COMMENTARY FSUOGM
Hopes of Kazakh offshore revival dashed
Kazakhstan’s next big greenfield project has collapsed, with investors dismissing it as unfeasible
KAZAKHSTAN
WHAT:
Shell and its NCOC investors no longer plan to jointly develop two fields near Kashagan.
WHY:
The investors do not consider the project commercially feasible.
WHAT NEXT:
Kazakhstan had been banking on the fields’ development to support growth and reduce reliance on its three largest oil and gas projects.
THERE were hopes that the launch of the Kasha- gan oil project in late 2016 would spur a wave of new offshore oil and gas projects in Kazakh- stan. Those hopes have now been dashed, with investors abandoning plans to develop a pair of oilfields in the field’s vicinity.
The North Caspian Operating Co. (NCOC) consortium has opted against developing Kala- mkas-Sea, one of the largest in a cluster of fields encircling Kashagan, the Kazakh energy minis- try confirmed on October 21. Stating its reasons, the consortium told NewsBase the project’s eco- nomics were simply too “challenging.”
NCOC member Royal Dutch Shell has also dropped plans for the adjacent Khazar field, the ministry said, located on the Zhemchuzhina block where Shell is partnered with Oman Oil and Kazakhstan’s KazMunayGas (KMG) in a separate consortium known as Caspi Meruerty Operating Co. (CMOC). Shell considered the venture unprofitable given its high cost, accord- ing to the government, despite having already
sunk $900mn in investments at the site.
“The [Khazar] project was not competitive enough versus other opportunities in Shell’s global portfolio,” the Anglo-Dutch major told
Reuters.
NCOC and CMOC had been working on a
$5bn plan to develop Kalamkas-Sea and Khazar jointly. Feasibility studies were carried out last year, with the investors looking at the drilling of wells on artificial islands similar to those used at Kashagan, and which would be connected with the latter’s existing infrastructure, sources pre- viously told NewsBase. Preliminary projections suggested output could reach 100,000 barrels per day, adding to the 385,000 bpd currently produced at Kashagan.
Dashed hopes
The decisions at Kalamkas-Sea and Khazar are a major setback to Kazakhstan’s efforts to drive forward offshore development. The second-larg- est oil producer in the former Soviet Union was
P4
w w w . N E W S B A S E . c o m Week 42 23•October•2019