The extraction at the Kazakhstani field Kashagan shall start even under the low oil prices, expert say

Almaty. February 9. Silkroadnews – Extraction works at the Kashagan field shall start even with low oil prices, otherwise its infrastructure may suffer. Olzhas Baidildinov, the independent expert in the oil and gas industry, expressed such an opinion, KazTAG reports.
“Of course, with the current oil prices the Kashagan oil production and sale is not profitable. Yet, there is the second factor coming into focus: the consortium have to start production, as without start-up and ongoing operation of the project its infrastructure can be seriously affected,” - said O. Baidildinov to KazTAG on Tuesday.
Without operation, the pipelines built to transport hydrocarbons will gradually outwear, he said.
“The same situation is with all the other facilities - plants and equipment,” - the expert added.
According to him, in this situation it is important for the state to keep and increase the number of job places, while the direct payments to the budget, the National Fund of Kazakhstan, may be minimum or even zero.
“We can assume the production will start. It will be unprofitable, the volumes will be small, and it is probable that lenders and Kazakhstan will go to another assignment to support the project,”- he said.
At the same time, the expert described the dilemma faced by the Ministry of Energy and oil companies’ consortium.
“Firstly, it is an expensive project, one of the most expensive and ambitious in the world. The last year estimated costs made about $50-55 billion. At present, this figure is likely to get closer to $60 billion. The comfortable price (of extraction - Silkroadnews) voiced earlier was over $100 per barrel. It shall be taken into account that the production sharing agreement (PSA) provides for the revenues from Kashagan only under certain terms of earning above the current expenses and payment of consortium’s debts, that is, the higher the price of oil and revenue, the bigger will be the amount to be received by Kazakhstan. At the specific lower level, Kazakhstan will receive nothing at all. PSA details are not disclosed to the full,” - said O. Baidildinov.
However, in his view, a comfortable price for the Kazakhstani oil companies and state budget can be at the level of $ 80-90 per barrel. With this price, revenue and cash flow would be sufficient for all the needs, including investment for further production performance programs.
“Would like to emphasize once again: the operating costs for mining and transportation are not that high – to cover them it is sufficient to have a price of $20-25 per barrel for the most fields of Kazakhstan. Yet, the companies need investments, funds are needed to pay the debts, and the state needs tax revenues and the National Fund replenishment,” - the expert notes.
Kashagan is a major oil and gas field in Kazakhstan, located in the north of the Caspian Sea. Its geological reserves estimated as 4.8 billion tons of oil. The total oil reserves are 38 billion barrels. According to the experts, its commercial resources are estimated within the range from 9 to 13 billion barrels of oil. The field is also known for its large reserves of natural gas - more than 1 trillion cubic meters. Prior to January 2009, the international consortium Agip KCO developed the field. NCOC became the assignee for Agip KCO.
Oil production at Kashagan started on September 11, 2013. However, on September 24 a routine inspection of the pipeline going from D island to the plant “Bolashak” discovered a leak of the associated gas. Production at Kashagan has been suspended.
After completion of repairs in October, a planned inspection of the pipeline once again showed leakage signs. The pipe crack under the sulfide compounds effect was called to be a leakage cause.