Kashagan cost set to rise due to pipeline replacements

The cost of Kashagan, already the world’s most expensive oil project, is set to rise by nearly US$ 4 billion as the companies developing it are forced to replace 200 km of leaking pipelines.

The cost rise is another setback for the venture, run by a consortium made up of Royal Dutch Shell, ExxonMobil, Total, Eni and CNPC.

The consortium spent some US$ 50 billion on the field’s development, but after startup, production lasted only a few weeks before leaks of poisonous gas forced its suspension. Earlier this month a government minister admitted it would not restart until at least 2016.

This week, the cost of replacing the pipelines and restarting production has been estimated at between US$ 1.6 - 3.6 billion, depending on the specification of the equipment chosen.

A year ago, when the first trickle of crude briefly flowed, it was already eight years behind schedule. Having cost US$ 43 billion, it was US$ 30 billion over budget.

Edited from various sources by Elizabeth Corner

Sources: Financial Times, Economist

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