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Shell gives go-ahead for Kashagan, one of the world’s largest oil projects

Posted: 25 February 2004

Shell Kazakhstan Development BV has taken final investment decision for Kashagan, a giant oil field in Kazakhstan. Separately the Kazakh petroleum authority Kazmunaygaz and the North Caspian Sea production sharing agreement consortium today approved the development plan for the project.

The Kashagan field was discovered in 2000 and is estimated to have 38 billion barrels of oil in place, making it one of the largest discoveries in 30 years. Shell holds 16.67 per cent of the project, a stake which will rise to 20.37 per cent upon completion of the previously announced purchase of part of British Gas’ shareholding.

Walter van de Vijver, Chief Executive Officer of Shell Exploration and Production, said today: “Kashagan is a huge project that will be delivering value to shareholders for decades to come. It is also an important part of our strategic vision for the region. We see the Caspian and the broader Commonwealth of Independent States as a future heartland for Shell. We are making good progress building that heartland. Reaching final investment decision on Kashagan is the third major step we have taken in the past year, following similar decisions for the Sakhalin and Salym projects in Russia.”

Ron van den Berg, Chief Executive Officer of Shell Exploration and Production in the Middle East, Russia and Commonwealth of Independent States, added: “Today’s green light for Kashagan is testament to our confidence in the business climate in Kazakhstan. We welcome progress in improving the legal and regulatory system, and we are also pleased that the government has successfully maintained the stability of the Kashagan production sharing agreement.”

First oil from Kashagan is currently targeted for 2008. Initial production is expected to be 75,000 barrels of oil per day, rising to an estimated 450,000 barrels per day during the first phase of development. Subsequent phases are expected to result in full field production of an estimated 1.2 million barrels per day.

To enhance oil recovery and reduce sulphur handling, the consortium plans to inject produced gas back into the reservoir. Depending on the success of gas re-injection, ultimate recovery from Kashagan is estimated to be up to 13 billion barrels of oil. The total capital investment for full field development is expected to be about $29 billion.
Kashagan reserves were amongst the volumes recategorised on January 9 2004. The booking of Kashagan volumes is expected to commence in 2004, following the final investment decision announced today.

Partners in the North Caspian Sea production sharing agreement consortium and their current shareholdings (prior to the completion of the exit of British Gas) are: Shell (16.67 per cent), Agip Caspian Sea B.V. (16.67 per cent), British Gas (16.67 per cent), ExxonMobil (16.67 per cent), Total (16.67 per cent), ConocoPhillips (8.33 per cent) and Inpex (8.33 per cent). AgipKCO is the operator on behalf of the Consortium.

For more information see www.shell.com

Posted by Richard Price, Editor Pipeline Magazine

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