Kazakhstan's Kashagan having 'excellent year,' CPC shipments 'very stable': Total executive

Kazakhstan's flagship Kashagan oil field has overcome problems that marred operations in 2022 to have an "excellent year" in 2023, with the strategic CPC export route also performing "really well," TotalEnergies' chairman for the Central Asian country, Frode Ljones, told S&P Global Commodity Insights.

Speaking on the sidelines of Kazakhstan Energy Week, Ljones voiced confidence in the giant Kashagan project and said work was progressing in response to calls for more gas production that the authorities are making of all three major upstream projects in Kazakhstan.

The Kashagan field, on stream since 2016, suffered reduced production for several months in the second half of 2022 after a gas leak was discovered at an onshore processing plant, prompting comparisons with the major hydrogen sulfide corrosion issues and leaks that dogged the field's startup.

Kashagan is one of the world's most expensive ever oil projects, with a cost at the time of startup estimated at over $50 billion, but vast resources that could enable production into the 22nd century.

The offshore field is generally the second highest contributor to CPC Blend, which loads in the Russian port of Novorossiisk and is a vital supply source for Europe -- currently receiving increased attention due to the Russia-Ukraine war.

Current Kashagan production is "a bit" under 430,000 b/d, Ljones said, adding that production tends to dip in summer as hot weather reduces the capacity of machinery such as turbines -- temperatures reached the mid-40 degrees Celsius range in western Kazakhstan this year.

"Kashagan today is producing very well. This year has been an excellent year," Ljones said.

Prices for CPC Blend have largely recovered since the immediate aftermath of the 2022 Russian invasion of Ukraine. The grade was assessed by Platts at a $1.20/b discount to Dated Brent on Oct. 5, according to S&P Global data.

Despite an attack on a Russian naval vessel close to the CPC loading facilities in August, CPC loading operations are thought to have been largely unaffected.

"CPC has been very stable, no problem at all," Ljones said. "We haven't had any issues transporting oil from the Black Sea -- of course you've seen that it's taking longer time to get through the [Turkish] Straits and Turkey and so on... to get the paperwork done, and bad weather sometimes, but it's not necessarily linked directly to the war in Ukraine," he said, noting that TotalEnergies, though a Kashagan shareholder, holds no stake in the CPC export system.

CPC positivity

The comments echoed the upbeat tone of both Kazakh and international officials at the flagship oil and gas event, as the CEO of state company KazMunaiGaz, Magzum Mirzagaliyev, said there were no "major worries" over the CPC route, and Shell upstream director Zoe Yujnovich described Kazakh assets such as Kashagan as operating at "world-class" standard.

Asked about future liquids production increases at Kashagan, Ljones confirmed these are expected to be linked to planned increases in supplying gas to the country's gas grid, rather than an approach based on reinjecting gas.

Kazakh authorities are emphasizing gas production increases as the solution to power outages that have hit the oil-producing west of the country in particular. Ljones noted TotalEnergies' involvement in a 1 GW wind power project in southern Kazakhstan that will feature major battery storage of energy, in a first for the country, with the project taking place under an inter-governmental agreement between France and Kazakhstan.

The Kashagan operating consortium announced in September the start of work to lay a pipeline that will supply 1 Bcm/year of gas to a third-party processing plant. The gas offtake project will enable an increase in the field's crude production of 25,000 b/d, the consortium said at the time. No timeframe has been given for the output increase, expected to be the next sizable increase in Kashagan crude production.

"The republic has clearly asked for increased gas production -- all the operators," Ljones said. "They are discussing with all the big fields how can we increase the gas supply, that's a general request to the industry and specifically the three mega projects," he said, referring to the Tengiz, Kashagan and Karachaganak field developments that underpin CPC crude.