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Kashagan operator battles sea level drop with new dredging project

Highlights

North Caspian water level drop risks Kazakh output

‘Marine Access Channels’ project gets go-ahead

Latest hurdle for sensitive Caspian Sea project

London — Kazakhstan and its partners at the giant Kashagan oil field have approved a plan for extensive dredging of the Caspian seabed as the consortium battles falling seawater levels that threaten operations at one of the world's priciest oil projects.

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In a statement to S&P Global Platts, the North Caspian Operating Company, which has Eni, ExxonMobil, Shell and Total as its biggest shareholders, said the plan for 56 kilometers of "marine access channels" to be dug in the seabed had been approved by the consortium and the Kazakh government following environmental assessments and consultations. The work would take 26 months, with completion in 2023, it said.

One of the world's costliest and most complex oil projects, the Kashagan field lies below the shallow waters of the North Caspian in a highly environmentally sensitive setting. It is the second-largest source for Kazakhstan's CPC crude export blend, loaded at Novorossiisk on the Black Sea. With estimated reserves of 9 billion-13 billion barrels, production last year averaged 328,000 b/d, constrained by OPEC+ output cuts.

The Kashagan project has been a major source of economic activity for Kazakhstan, but continues to stretch the industry's capabilities, having finally come on stream in 2016 at a cost of over $50 billion, after an earlier startup in 2013 was aborted.

Dramatic sea level fluctuations in the North Caspian, so far not fully explained, have become a major challenge, with the consortium resorting to hovercraft to access the network of artificial islands from which operations are conducted, and now planning a new network of access channels.

"The falling Caspian Sea level, followed by the sea's shallowing in the area of Kashagan offshore facilities, have limited the use of sea vessels," NCOC said in early April. "It is posing a threat to the safe operation of offshore production facilities that may lead to the complete shutdown of one of the largest fields in Kazakhstan."

The plan to cut two-meter deep channels into the seabed "is the only feasible one of all short-term alternatives considered," the consortium said. "Its implementation will ensure safe evacuation of personnel in the event of emergencies, continuous operation of the offshore facilities, and offshore preventive maintenance in 2022."

Caspian sensitivities

Water levels have dropped by more than a meter in the North Caspian over the last decade, with the landlocked sea particularly shallow near the mouths of the Ural and Volga rivers, contrasting with the deeper-water fields off Azerbaijan's Caspian coast.

Climate change, and agricultural and industrial water use have been advanced as explanations, although the "shallowing" of the Caspian also follows a 2.5 meter increase in water levels in the last quarter of the 20th century, which at the time caused flooding at the Tengiz oil field on Kazakhstan's coast.

Environmental sensitivities around the Caspian, a landlocked sea home to species such as the beluga sturgeon, have been a constraint on industry activity, with the major companies preferring to export oil overland via pipeline to Novorossiisk, rather than by tanker across the sea. The first attempt to start up production in 2013 had to be abandoned as high sulfur levels in the production stream were found to have corroded facilities, leading to gas leaks, in turn leading to a massive pipeline replacement project.

NCOC said the new project followed a "positive" environmental impact assessment and included impact mitigation measures and a program of monitoring and controls.

"There will be some minimal impact on marine biota from noise and vibration. However, these impacts will have a temporary and local nature during dredging operations," NCOC said.

"Impact monitoring will be conducted regularly for all climatic seasons and for all the parameters studied during the background environmental monitoring. Study of the fauna is an integral part of marine environment monitoring," it added, highlighting a system of "specialist watchers" to monitor seals, birds, fish and other wildlife.

"Full compliance with all requirements… will preserve environmental security in the region," NCOC added.

NCOC comprises Eni, Total, ExxonMobil and Shell with 16.81% stakes each, KMG Kashagan B.V. with 16.88%, China's CNPC with 8.33%, and Japan's Inpex with 7.56%.