France’s TotalEnergies and Kazakh authorities have agreed to kick-start a stalled plan to proceed with the third development phase of the Dunga onshore oilfield in Kazakhstan.
Speaking this week in the country’s capital of Nur-Sultan, recently appointed Energy Minister Magzum Mirzagaliyev said the decision follows the long anticipated signing of the extension of the field's production sharing agreement to 2039 from the previous deadline of 2024.
In July 2019, the operator — then named Total — said it decided to proceed with the field's third development phase, which will consist of adding wells and upgrading the processing plant to increase capacity.
However, TotalEnergies then became embroiled in long-running talks with Kazakh authorities over technical and commercial aspects of the third phase.
The pace of the project was also delayed by the Covid-19 pandemic and the oil price drop in 2020.
The Dunga development presents higher than usual operating costs because of well flow rates, challenging geology and high paraffin content, which requires the heating of in-field pipelines and connections before produced oil reaches the trunkline network to mingle with lighter oils.
Mirzagaliyev said TotalEnergies has committed to invest an estimated $165 million into the field until 2025 to help increase production by 26% from the current rate to about 17,300 barrels per day.
In 2019, TotalEnergies had estimated that the third phase will require investments of $300 million to reach plateau production of 20,000 bpd.
Despite a lower investment commitment, Mirzagaliyev has confirmed an earlier TotalEnergies plan that the third phase will add about 400 new direct jobs, almost all of them which will be filled by Kazakh nationals.
According to TOO PSA, the Kazakh state authority in charge of production sharing agreements, achieving a higher share of local content and services has been a core requirement for a development decision.
TOO PSA said the operator has met this requirement, with the share of local content at Dunga increasing to more than 71% in the first quarter of this year against 59% in 2020 and 57% in 2019.
Additionally, TotalEnergies has committed to invest $1 million annually to social infrastructure projects in the Mangistau region where the asset is located, until the new expiry date of the PSA — an increase on the social spending in the earlier phases of the development.
TotalEnergies holds a 60% stake in the Dunga project, which it inherited following its acquisition of Denmark’s Maersk Oil in 2017. Oman Oil and Portugal’s Partex each hold stakes of 20%.