NCOC Confirms Axing Kazakh Project

The consortium behind Kazakhstan’s Kashagan megaproject have confirmed abandoning plans to develop the smaller Kalamkas-Sea field in its vicinity.

Kazakhstan’s energy ministry reported on October 21 that the North Caspian Operating Company (NCOC) had given up on Kalamkas-Sea’s development because of weak commercial prospects.

“The decision is driven by the challenging economics of the project,” a representative of NCOC told NGW, noting it would not impact production and development at Kashagan. “The operator will continue to focus on a safe and sustainable operation at Kashagan to bring value to the Republic of Kazakhstan and to its shareholders.”

According to past statements by Kazakh authorities, NCOC had been in talks to develop Kalamkas-Sea jointly with Khazar, another Kashagan satellite controlled by a separate consortium consisting of Shell, Oman Oil and KazMunaiGas (KMG). Shell, also a shareholder in NCOC, has backed out of developing Khazar as well, according to the energy ministry. The Anglo-Dutch major had commented at time of press, but it is in a closed period as its quarterly results are due soon.

NCOC, whose members also include KMG, ExxonMobil, China’s CNPC, Italy’s Eni, France’s Total and Japan’s Inpex, is discussing with the government a second development stage at Kashagan. But since its launch in late 2016, NCOC have struggled to keep the field’s output stable.

Kashagan scaled down operations on October 6 for unplanned maintenance lasting until October 15, the energy ministry told Reuters.

“The daily production had been slightly reduced during the maintenance window,” the NCOC representative told NGW, adding that the disruption had been factored into production planning.

Output has now been restored to the previous level of above 385,000 b/day, he said, and NCOC’s production target for the full year is 13mn mt (261,000 b/day), down from 265,100 b/day in 2018. The projected decline is largely the result of lengthy scheduled maintenance during the summer.

Despite offering vast swathes of Caspian Sea acreage to investors since the late 1990s, Kazakhstan has been unable to establish offshore production beyond Kashagan, whose development was beset with delays and significant cost overruns as the operator struggled with the high sulphur content. Eni and Russia's Lukoil have recently signed up to explore new blocks, however, raising hopes that new projects will be advanced.