Oil finally flows from the Kashagan after decades of costly delays

Although delays to a planned pipeline expansion will inhibit exports, the Kashagan oilfield has finally started producing.

Last week, the Kashagan oilfield in Kazakhstan—believed to be the world's second largest—began to produce hydrocarbons after two decades of efforts by numerous international companies.

The breakthrough came just in time for members of the consortium operating the field. Under the terms of their contract with the Kazakh government, they would have been exposed to fines if they had missed an October 1 deadline to begin production.

The initial rate of production was not announced, although the field's operators said they expect output to reach 180,000 barrels per day during the first phase of production, with that figure rising to 370,000 in the near future as new facilities are completed. Ultimately, the oilfield is believed to be capable of producing more than 1 million barrels per day. If this ambitious prediction is realized, the Kashagan would account for more than 1 percent of global oil production.

Delays affecting pipeline expansion may obstruct exports

The international oil companies operating the Kashagan had reportedly hoped that a planned expansion of the CPC pipeline, which runs from Kazakhstan through Russia to the port of Novorossiisk on the Black Sea, would create new export opportunities—currently limited in landlocked Kazakhstan. However, the project to expand the pipeline's annual capacity from 640,000 barrels per day (bpd) to almost 1 million bpd has been delayed, which will likely force the Kashagan's operators to rely extensively on state-controlled Russian pipelines.

The CPC's owners had planned to complete an additional expansion, which would raise the pipeline's capacity to 1.3 million bpd, by 2015. At this time, it remains unclear how much this timeline will need to be pushed back, but the construction problems are already creating another costly obstacle on the long road to the complete development of the Kashagan.

Mikhail Barkov, vice president of Russian pipeline monopoly Transneft, confirmed to Reuters that the pipeline expansion project was running "six months to a year behind schedule." He attributed the delay to "technical reasons" and said that shareholders are scheduled to meet later this month to discuss the project.

Long timeline of Kashagan project underscores importance of technological improvements

The fact that it took this many years for leading companies to develop the Kashagan provides an example of how essential it is for advanced oil production equipment to be deployed at challenging sites. The longer it takes to begin producing hydrocarbons from a reservoir, the more will need to be produced to make the endeavor profitable.

One piece of equipment that is helping today's producers achieve their goals is the hydraulic jet pump. This solution is valued for its versatility. It can be installed in straight, horizontal or deviated wells and can even be deployed successfully at sites where problems with the well casing would limit the effectiveness of other products.

With no downhole moving parts, the jet pump's maintenance needs are minimal. In situations where adjustments are required, the unit can be retrieved easily through reverse circulation of fluids, eliminating the need for a wire-line or work-over unit.