Chevron and partners in the Tengiz oil field in Kazakhstan will help to increase crude oil production in the field by about 260,000 barrels per day with the development of its Future Growth and Wellhead Pressure Management Project. This expansion is estimated to cost $36.8 billion but will increase the field’s total daily production to about 1 million barrels. Multiple companies own portions of this oil field: Tengizchevroil is 50% owned by Chevron and owns and operates the Tengiz field. However, another 25% is owned by Exxon Mobil Corp, 20% by Kazakhstan’s state-owned energy company, KazMunayGas, and the final 5% is owned by a subsidiary of Russia’s Lukoil.
The Tengiz field is one of the world’s largest, and accounts for more than one third of total crude output in Kazakhstan, according to Fortune. This means that they are the biggest former Soviet Oil producer after Russia. While many energy companies feel the need to tighten their belts as a result of low oil prices, this project comes at a great time. Projections show that the Tengiz output will be nearly the same as oil production in Britain. In the past, problems such as pipelines that leaked toxic gas have slowed down Kazakhstan’s ability to keep production levels consistent.
In order to expand the oil field, $27.1 billion will be spent on facilities, $3.5 million will be earmarked for wells, and $6.2 billion will go toward contingency and escalation measures. The statement further describes that the project will maximize the value of existing facilities by “extending the production plateau and keeping existing plants producing at full capacity.” State-of-the-art sour gas injection technology, developed and utilized during the 2008 expansion, will be used to enhance oil recovery, and the first oil from this expansion is planned for the year 2022.
This particular expansion comes as great news to the oil industry since the prices of crude oil began to decline in mid-2014. During this time, crude oil was trading for nearly $115 a barrel and has fallen since, but now has stayed fairly consistent at about $50 per barrel the last six weeks. The Tengis oil field has generated about $70 billion in revenue and $40 billion in profits for Chevron, and is expected to also stimulate the local Kazakh economy since 20% of the field is owned locally.
Kazakh Energy Minister, Kanat Bozumbayev, told reporters that the expansion will generate approximately $120 billion in extra tax payments by 2033 when the contact for the Tengiz field expires. Oil is Kazakhstan’s main export, and output has been tripled since the nation gained independence in 1991. This new project will allow production to increase following years of decreased output and will help it become one of the top 10 producers in the world.