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Chemicals, Refined Products, Crude Oil, Aromatics
January 24, 2025
By Nick Coleman
HIGHLIGHTS
Ramp-up seen completing in Q2 2025: Chevron executive
Higher CPC Blend shipments could complicate OPEC+ compliance
Chevron hails milestone after delays, cost overruns, coronavirus pandemic
The Chevron-led operator of Kazakhstan's giant Tengiz field has started up production from a nine-year, $49 billion expansion set to add 260,000 b/d of crude capacity and lift crude output to some 950,000 b/d, Chevron said Jan. 24.
The startup is a milestone for Kazakhstan and Chevron, significantly boosting the country's trademark CPC Blend crude oil loaded on Russia's Black Sea coast, much of it then shipped to the Mediterranean and world markets. Overall output at the Tengiz field, including gas, is expected to reach around 1 million b/d of oil equivalent in the coming months.
The Tengiz field on the Caspian seashore, by far the highest contributor to CPC Blend, is currently producing nearly 700,000 b/d of crude, meaning that once the expansion has ramped up -- sometime in the second quarter -- output should reach almost 960,000 b/d, Clay Neff, Chevron's international upstream president, told S&P Global Commodity Insights in a Jan. 24 call.
"We expect that we'll get ramped up in the second quarter of this year -- it'll happen relatively quickly. Right now, we're making nearly 700,000 b/d of crude oil. We'll add the 260,000 b/d on top of that," Neff said.
Asked how long such rates would be sustained, Neff declined to go into detail, but stressed the field is one of the biggest in the world, featuring the largest oil reservoir in a single geological "trap" anywhere in the world.
"This development is not only going to allow us to increase production rates in the near term, but it's going to enable us to extend the life of the field as well. It helps bring this field up to that million barrels a day for some time," he said, referring also to associated gas.
The expansion -- which involved 90,000 workers at the site at its peak, and had to contend with major upheaval due to the coronavirus pandemic -- had "completely revamped" the gathering and processing capacity at Tengiz, Neff said, adding it would generate $4 billion of free cash flow for the partners in 2025 and $5 billion in 2026.
The expansion was divided into two parts -- the Future Growth Project and Wellhead Pressure Management Project -- which together involved work to reduce wellhead pressure levels to release crude more rapidly, and increasing the capacity to reinject sour gas and maintain reservoir pressures.
On stream since 1993, Tengiz is the mainstay of CPC Blend, which is shipped 1,500 km from western Kazakhstan to Novorossiisk on the Black Sea, alongside crude from the Kashagan and Karachaganak fields as well as some Russian fields.
Traders earlier suggested overall CPC Blend loadings would average around 1.25 million b/d in February.
Platts, part of S&P Global Commodity Insights, last assessed CPC Blend at a $3.51/b discount to Dated Brent on Jan. 23, following a recent widening of the price discount. Some traders suggested the price reduction could reopen arbitrage opportunities for shipments to East Asia, previously curtailed by Red Sea shipping attacks.
The expected increase in Kazakh CPC Blend crude supply -- barring maintenance reductions at other fields -- potentially complicates Kazakhstan's efforts to comply with recent production ceilings agreed with the OPEC+ producer group, analysts said.
On Jan. 23, US President Donald Trump urged OPEC and its de facto leader, Saudi Arabia, to boost crude production to lower prices, claiming it could help end Russia's war against Ukraine.
Chevron holds a 50% stake in the Tengizchevroil operating consortium, with ExxonMobil on 25%, state-owned KazMunaiGaz on 20%, and Russia's Lukoil with 5%.