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Kazakhstan's Kashagan oil output surges to 422,000 b/d in Q3

Highlights

CPC crude exports set to hit 1.5 million b/d in December

Kashagan increase follows major turnaround, new injection well

Majors' Kazakh projects challenged by costs, complexity

London — Kazakhstan's giant Kashagan field hit a record-high crude output level of 400,000 b/d in early September, with oil output including natural gas liquids averaging 422,000 b/d in the third quarter, Italy's Eni said Thursday, fueling expectations of an export surge to come.

In emailed comments, a spokeswoman for the Italian company said Kashagan crude production had reached 400,260 b/d on September 4.

The increase was achieved through the conversion of an additional well to injection operations to support output, following a major maintenance shutdown earlier in the year.

Overall production at Kashagan, including crude, gas and natural gas liquids, had averaged 503,000 b/d of oil equivalent in the third quarter, she said.

A provisional loading program suggested CPC crude exports from Novorossiisk, mainly comprised of Kazakh crude, are set to reach a record 1.5 million b/d in December, after a recent reduction resulting from maintenance at various Kazakh fields.

Kazakhstan is a party to production cuts agreed between OPEC, Russia and other producers, but its largest fields and the CPC blend are not thought to be affected by the commitment, with mature fields bearing the brunt of any cuts.

The seven-company consortium that operates Kashagan has been increasing output since the field came on stream in 2016 after numerous delays and technical problems that helped make it one of the costliest oil projects in the world, at some $55 billion.

Kazakhstan's production growth has recently stalled somewhat due to maintenance at the other two main sources of CPC crude, Tengiz and Karachaganak. Kazakh oil output totaled 1.84 million b/d in September, down from 1.89 million b/d in August, according to the International Energy Agency.

KAZAKH CHALLENGES

The Eni spokeswoman said production from Karachaganak had also "picked up" and reached "new heights" after a maintenance shutdown that lasted nearly a month and was completed on October 11. Exact liquids production levels fromKarachaganak are, however, unclear. The field produced around 234,000 b/d of oil in the first half of the year, a 5%fall compared with a year earlier, according to state company KazMunaiGaz.

Once touted as a major source of non-OPEC production, and still seen as a growing oil province, Kazakhstan's oil prospects have been tainted by major cost over-runs and delays, as well as worries about corruption risks.

Chevron this month announced a 25% cost increase at its Tengiz "third generation" expansion project to $46.5 billion that caught investors unawares. The expansion, which should raise Tengiz output to 900,000 b/d, has also beendelayed and will now only be completed in mid-2023. Explaining the over-run, Chevron's management emphasized the greater-than-expected construction work needed for the project and difficulties associated with its remote location.

Separately, the consortium at Kashagan decided last month not to go ahead with a potential satellite project inthe Caspian Sea known as Kalamkas. "The decision is driven by the challenged economics of the project," a spokeswoman for the North Caspian Operating Company told Platts, adding it had no impact on the Kashagan project itself.

With 9 billion-13 billion barrels of recoverable reserves there is plenty of scope to keep stepping up Kashagan production, but the consortium has so far focused on incremental steps and debottlenecking. It is looking at building a 1 Bcm/year gas processing plant to enable the facilities to handle greater volumes of gas and in turn produce more oil, deputy energy minister Makhambet Dosmukhambetov said last month, according to state media.

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

-- Edited by James Burgess, james.burgess@spglobal.com