Kazakhstan's Gigantic Kashgan Oil Field about to Begin Production

In the Caspian Sea’s choppy waters off western Kazakhstan’s coast, D-Day is approaching on a man-made mound called D Island. It is the nerve center of the Kashagan field, the world’s biggest oil discovery in decades.

By Eurasianet | Wed, 17 October 2012 

D Island -- a futuristic splash of fluorescent orange and gleaming silver set against the Caspian’s blue-gray waters -- is now gearing up for the historic day when it will start pumping oil. For energy conglomerates wishing to cash in on their investments, and for President Nursultan Nazarbayev’s administration, waiting eagerly -- and not always patiently -- to reap the benefits of the oil bonanza 70 kilometers off Kazakhstan’s coast, the oil cannot start flowing a moment too soon.

That landmark is expected to arrive in 2013 -- eight years behind the optimistic schedule first set by the oilmen of Kashagan. The field, discovered in 2000, represented the most spectacular oil strike since Alaska’s Prudhoe Bay in 1969. Elated by the find, developers were initially blind to the logistical challenges Kashagan would throw at them -- and the ballooning costs and slipping production schedules that would enrage Astana.

The North Caspian Operating Company (NCOC), the seven-firm consortium developing Kashagan, says it will produce first oil sometime in 2013. It is more circumspect when it comes to Astana’s expectation -- voiced by Oil and Gas Minister Sauat Mynbayev -- of seeing the oil flow in March. Astana hopes first oil here will catapult Kazakhstan -- which sits on 3 percent of global recoverable oil reserves -- into the ranks of the world’s top 10 oil producers. It currently ranks 18th.

Roughly 75 by 45 kilometers in area, Kashagan’s size is “spectacular,” says NCOC Planning Director Alain Guenot. It contains reserves of 35 billion barrels of oil, of which NCOC estimates 8-12 billion barrels are recoverable. In a world where many major oil finds of the past century are depleted, this is a juicy prize.

Bringing Kashagan to the threshold of commercial production has been a rocky road for the seven companies comprising NCOC: ExxonMobil, Shell, Total, Eni, and Kazakhstan’s state energy firm KazMunayGaz (KMG), each holding a 16.85-percent stake); plus ConocoPhillips (8.49 percent) and Japan’s INPEX (7.56 percent).

Kashagan has confronted immense logistical challenges, ranging from its geographical position in the landlocked Caspian -- which has meant shipping equipment thousands of kilometers by canal -- to extreme climatic conditions.