New gas leak arrests Kashagan

October 11, 2013

For the second time since it produced first oil a month ago, a gas leak has sidelined Kashagan’s operations.

The North Caspian Operating Company (NCOC) said that the leak was found on a pipeline running from the artificial D Island to the onshore Bolashak processing plant in Atyrau.

Kashagan, estimated to house 16 billion bbls, has weathered a number of setbacks since its 2000 discovery. Hailed as the largest oil discovery in decades, production kicked-off on September 11 after a ten-year delay and multiple consortium changes. Six days later, a gas leak was detected, and operations came to an abrupt halt.

Production was back up and running on October 8, but the October 9 gas leak will force the NCOC to shut down operations once again. No resumption date has been announced at this time.

This scenario threatens the NCOC’s contractual obligations to launch commercial output of 75,000 b/d this month or the multi-national consortium behind the oilfield’s development faces fines under its production-sharing agreement with Kazakhstan.

In July, Kazakhstan exercised its pre-emptive rights to buy an 8.4% stake from ConocoPhillips in the field, also for around $5 billion. Following that deal, the state-owned China National Petroleum Corp (CNPC) acquired an 8.33% stake in Kashagan on September 7, reportedly beating out India’s Oil and Natural Gas Corporation in the process. The CNPC deal is also estimated around $5 billion.

Offshore the Caspian Sea, the total Kashagan Contract area covers more than 2,125 square miles of northern Caspian Sea waters and contains five separate fields -- Kashgan, Kalamkas A, Kashagan Southwest, Aktote and Kairan.

KazMunaiGas; Italy's ENI; ExxonMobil, Royal Dutch Shell and France's Total are partners in consortium with each holding 16.81% stakes in Kashagan. Japan's Inpex owns 7.56%. Eni is the operator.



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