New pipelines to cost Kashagan Oil about $3.6 billion

Kashagan, the world’s most expensive oil project, will have to spend another up to $3.6 billion to replace leaking oil and gas pipelines, which lies in the Caspian Sea off western Kazakhstan. This could also delay the restart of production, the Kazakh energy ministry said.

Production at the Kashagan reservoir, the world’s biggest oil find in recent times, started in September 2013 but was halted just a few weeks later after the discovery of gas leaks in the $50 billion project’s pipeline network.

The multinational consortium developing Kashagan has identified stress cracking due to sulphur-laden gases as “the root cause of the pipeline issues” at the oilfield.

The final cost of the replacement will depend mainly on the resistance to corrosion of the pipes used in laying the new pipelines.

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. “Taking into account the high risks of repeated leaks by choosing pipe material of specification L360 (X52) as envisaged by the basic scenario, there is high probability the contractor will opt for an alternative scenario of using pipes covered with non-corrosive alloys,” it said.

The more expensive alternative is to use carbon-steel pipes of strength L415 (X60) with an internal coating made of non-corrosive alloys, it said.

A current delay in testing steel and welding is likely to frustrate the consortium’s plans to restart output at the field in the second half of 2016.

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.