All pipelines to be replaced in Kashagan oilfield after gas leaks

The consortium developing the giant Kashagan oilfield will have to replace the entire pipeline system at the deposit, Kazakhstan's oil minister has announced, confirming that output there would not resume this year.

Asked by Reuters if the consortium developing the Caspian Sea oilfield was planning to replace all its pipelines, Oil & Gas Minister Uzakbai Karabalin replied: "Yes, we do plan to do so."

Referring to delayed output at Kashagan, he said Kazakhstan had been forced to lower its 2014 oil output forecast to 81.7 million t from 83 million.

Problems with gas leaks

Production at Kashagan, the world's biggest oil find in 35 years, started last September but was halted in early October after the discovery of gas leaks in the US$ 50 billion project's pipeline network.

The North Caspian Operating Company (NCOC) developing Kashagan said last month that it did not expect to produce oil this year due to the leaks.

NCOC includes Eni, Exxon Mobil, Royal Dutch Shell, Total, CNPC, Japan's Inpex and Kazakh state-run company KazMunaiGas.

Pipelines may have to be fully replaced

Citing the results of an investigation, NCOC also did not rule out that oil and gas pipelines might have to fully replaced, a possibility raised by Reuters in April.

Kazakhstan is the second-largest post-Soviet oil producer after Russia. The government had originally hoped that Kashagan would produce 8 million t of crude in 2014.

Extreme environment

The field's oil is 4200 m (4590 yards) below the seabed at very high pressure, and associated gas reaching the surface is mixed with some of the highest concentrations of toxic, metal-eating hydrogen sulphide (H2S) ever encountered.

NCOC has identified stress cracking due to sulphur-laden gases as "the root cause of the pipeline issues" at Kashagan.

Much of Kashagan is built on artificial islands to avoid damage from pack ice in the Caspian, which freezes for five months a year in temperatures that drop below minus 30 °C (-22 °F).

Pipeline reconstruction likely

Oil production in the Kazakhstan oil field of Kashagan will start no earlier than the end of 2015, and only after reconstruction of a 200 km pipeline. The Minister of Economy and Budget Planning, Yerbolat Dosayev, says that the postponement means a loss of 0.5% of the GDP for Kazakhstan this year.

“Kashagan was presented as the biggest oilfield to be explored in recent years,” Eduard Poletayev, Kazakhstan expert, told Vestnik Kavkaza. “It was presented in Kazakhstan as the project of the century; foreign investors paid great attention to it; and there were very favorable conditions.

“A restricting factor for successful exploitation of Kashagan were the difficult natural conditions, even for experienced foreign oil companies.”

Edited from various sources by Elizabeth Corner

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