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New pipelines for Kashagan to cost up to $3.6 bln

13 October 2014

The Kazakh Energy Ministry has put the cost of replacing corroded pipelines at Kashagan, already the world's most expensive oil project, at between $1.6 billion and $3.6 billion.
Production at the field, which lies in the Caspian Sea off Kazakhstan, started in September last year but was halted a few weeks later after the discovery of gas leaks in the $50 billion project's pipeline network. 

Kashagan - Image: Eni
Kashagan - Image: Eni

The field's oil is 4,200 metres below the seabed at very high pressure, and associated gas reaching the surface is mixed with some of the highest concentrations of toxic, metal-eating hydrogen sulphide (H2S) ever encountered.

The multinational consortium developing Kashagan has identified stress cracking due to sulphur-laden gases as the cause of the pipeline issues at the oilfield. It will have to buy up to 200 km of new corrosion-resistant pipes to replace the entire network of the field's oil and gas pipelines, the ministry said.

The Financial Times quoted people familiar with the project as saying that the likely final cost of replacing the pipelines would be more than $3.6bn.

A delay in testing steel and welding is could postpone the consortium's plans to restart output at the field in the second half of 2016, it said. The consortium is in talks with Italian oil service group Saipem regarding the replacement of oil and gas pipelines at the oilfield, the ministry said.

The Kashagan consortium includes Eni, Exxon Mobil , Royal Dutch Shell, Total, China's CNPC, Japan's Inpex and Kazakh state-run company KazMunaiGas.


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