Kazakhstan's Tengiz output crimped by OPEC+ as pandemic slows expansion

Oil production at Kazakhstan's flagship Tengiz field fell by 11% in 2020 to 577,000 b/d, the Chevron-led operating consortium said Feb. 23, as it looks to get back on track with expansion work held up by COVID-19.

In a statement, Tengizchevroil said it had accounted for 35% of Kazakhstan's 2020 oil production, which was reduced by the country's participation in OPEC+ cuts imposed in response to global overproduction and a collapse in demand last year.

Tengiz crude, derived from the world's deepest supergiant oil field on the shores of the Caspian Sea, is the largest contributor to the CPC blend loaded at the Black Sea port of Novorossiisk, with the field having a nameplate capacity of 600,000 b/d.

A $45 billion expansion project, the largest in Chevron's portfolio in recent years, has been held up by coronavirus outbreaks onsite, but is expected to raise crude output capacity to 850,000 b/d and overall hydrocarbon output capacity to 1 million b/d of oil equivalent.

In a call with investors Jan. 29, Chevron noted that Kazakhstan is the main location where it is impacted by OPEC+ curtailments. It said it had experienced holdups in the expansion project, with quarantine restrictions in place at various times, and project workforce numbers currently held at 20,000. A spring remobilization is expected to lift that to 26,000 by the end of the first quarter and the project is now 81% complete. However, the effect on the overall timeline is not yet clear, Chevron CEO Mike Wirth said during the call.

The expansion is scheduled for completion in mid-2023, in turn delivering a boost to CPC volumes.

Commenting on the situation, Wirth said: "There's a lot of work that hasn't been done over the last going on a year now, as this has been impacting us. And so, we're working on optimizing schedules and work plans and understanding what the full impact of that is. It's hard to quantify that until we really are back at work. And, certainly, in the wintertime, things tend to slow down, and in summertime, they'll pick up. And so, we need to see our ability to sustain the workforce there to get work done productively and begin to chew into this backlog."

The industry, including Chevron, has emphasized a pivot to less capital-intensive projects in recent years. However, Wirth said the expansion in Kazakhstan fitted the category of projects "we expect to deliver production and attractive cash flow for years," while also noting the company's debt levels remained favorable by comparison with peers.

Reserves increase

The expansion, as with other Caspian oil projects, has entailed a vast logistics operation to bring pre-fabricated modules through the Russian inland waterway system to the Caspian, and docking facilities have been specially constructed for the current expansion project.

Chevron holds a 50% stake in the consortium alongside ExxonMobil on 25%, state-owned KazMunaiGaz on 20% and Russia's Lukoil on 5%.

Chevron's results statement also said Kazakhstan, along with its acquisition of Noble Energy, had been the main source of an 832 million boe increase in its proved reserves, net of reductions associated with lower oil prices, spending cuts and asset sales, based on preliminary calculations still to be finalized.

The source of the increased Kazakh reserves was not immediately clear as the company also holds an 18% stake in the country's third-largest oil and gas field consortium, Karachaganak.