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Kazakhstan's $1.1 billion Karachaganak project to sustain high output

London — A $1.1 billion investment in the giant Karachaganak field in Kazakhstan agreed this month is aimed at sustaining plateau production levels and creating significant value from the field, a mainstay of CPC oil exports, Shell said Monday.

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Karachaganak, a multi-billion barrel gas and liquids field in northwest Kazakhstan, has until recently been the second largest liquids source for CPC crude flows, which load at Novorossiisk on Russia's Black Sea coast but mostly come from Kazakh oil and gas fields.

Total CPC loadings amount to around 1.2 million-1.4 million b/d, and increasing volumes have been going to Asia -- exports of the blend outside Europe reached a record 14 million barrels in September, according to trading sources.

Within CPC blend, output from Karachaganak is being overtaken by Kashagan, which came on stream two years ago after delays and a development bill of over $50 billion.

The largest source, Tengiz, produced 648,000 b/d in the first half of 2018, with production set to reach around 900,000 b/d from 2022 following expansion work. Kashagan has recently reached levels over 300,000 b/d.

Karachaganak, however, produced 247,000 b/d of liquids last year, according to Shell's main foreign partner at the field, Italy's Eni, which says 91% of the field's liquids output is exported through the CPC crude pipeline.

The production process at Karachaganak involves re-injecting huge quantities of gas back into the field to stimulate liquids production, with about half the gas output re-injected, and half sold via a processing plant across the nearby Russian border in Orenburg.

Last week Kazakhstan's energy ministry said the major investment project would enable the processing and re-injection of up to 4 Bcm/year of additional gas.

Shell said the Karachaganak Debottlenecking Project "aims to extend the duration of the plateau liquid production and will bring significant value creation to both the Republic and the Contractor." Shell and Eni each hold 29.25% stakes in Karachaganak, Shell having got its stake with its purchase of BG in 2016, while Chevron holds 18%, Russia's Lukoil 13.5%, and state-owned KazMunaiGaz 10%.

Last month Shell upstream director Andy Brown described Kazakhstan as the oil major's "No.1 conventional oil and gas country" on the strength of its stakes in Kashagan and Karachaganak, in an interview with S&P Global Platts.

Brown played down media reports of a shake-up in the consortium's composition, reflective of sometimes fraught relations between the country and its partners.

"The use of advanced production technology is enabling the maintenance of output volumes and the export of liquid hydrocarbons at a consistently high level," Murat Zhurebekov, managing director of the KazMunaiGaz holding company responsible for Karachaganak, said in a statement after what he called "rather complex talks" last week.

-- Nick Coleman, nick.coleman@spglobal.com

-- Edited by Daniel Lalor, newsdesk@spglobal.com