Another foreign-led oil and gas development project in Kazakhstan has temporarily suspended production as the country faces long-term export restrictions via the key Caspian Pipeline Consortium export link that transits Russia.
The country’s third largest oil output development, Karachaganak, halted production of gas and condensate earlier this week just as the operating company celebrated the 25th anniversary of the production sharing agreement between its foreign partners and the Kazakh government.
Italy’s Eni and UK-headquartered Shell have equal stakes of about 29.3% in Karachaganak, with smaller shareholdings held by Chevron of the US, Russia’s Lukoil and Kazakhstan’s KazMunayGaz.
Technically, the field facilities have been closed for annual maintenance, with operations due to reopen on 6 October.
According to the Kazakh Energy Ministry, as of Tuesday, this week’s combined oil production for the country had fallen by 13% to less than 1.4 million barrels per day against the previous week, when Karachaganak was still producing condensate.
The ministry includes condensate, which is essentially a very light oil, in its production figures together with more heavier conventional oils that are extracted in Kazakhstan.
The oil industry is Kazakhstan’s key economic sector, directly accounting for about 15% of the country’s gross domestic product, more than 30% of general government revenue, and over half of its exports, according to international ratings agency S&P Global.
At the country’s second largest oil and project, the offshore Kashagan field — which is managed by a group of Western oil majors, similar to the Karachaganak development — full production could not be restored following the end of maintenance work, according to reports in the country’s capital of Nur-Sultan.
Unforeseen technical issues have been reportedly identified with slug catchers and compressors at the Bolashak onshore processing facility, which handles associated sour gas produced with the oil to help Kashagan’s output meet market specifications.
In August, Kazakhstan’s largest oil producer, Chevron-led Tengizchevroil, also lowered its crude production to allow maintenance work to be carried out at the Tengiz project’s facilities, with plans to resume output at normal levels in September.
In July, before Kashagan was shut down for maintenance and with unrestricted loadings at Caspian Pipeline Consortium’s marine oil export terminal on the Black Sea coast, the Kazakh Energy Ministry reported the country’s total oil and condensate output of over 1.7 million barrels per day.
Repair uncertainty
A spokesperson for Caspian Pipeline was unable to provide an update on the operator’s efforts to identify a contractor capable of replacing two buoyancy tanks that stabilise oil supply hoses for the terminal’s offshore tanker loading buoys.
Caspian Pipeline suspended crude shipments in August from two of its three loading buoys near after cracks were discovered in connections between subsea hoses and submerged buoyancy tanks.
The operator said that a Russian contractor servicing the terminal does not possess the required equipment and will have to outsource the work.
Though the US and Europe have excluded Caspian Pipeline from its sanctions against Russia, despite a major part of its network being located inside the country, the operator has reported that its traditional foreign suppliers have refused to continue business with operator.
A preliminary schedule for Caspian Pipeline tanker loadings for September reported a 22% decline in expected oil shipments to about 1 million bpd against the originally approved plan, Reuters reported.
Tengiz, Kashagan and Karachaganak account for most of Kazakh’s oil export shipments in Caspian Pipeline as some of their western shareholders are also stakeholders in the pipeline network.
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