What's new in production

	Vol. 229 No. 9
DAVID MICHAEL COHEN, PRODUCTION ENGINEERING EDITOR, DAVID.COHEN@WORLDOIL.COM

Hot and sour Kashagan has oil firms in the soup

The consortium developing the enormous Kashagan Field got a brief reprieve last month when the Kazakh government agreed to move the deadline for first production to 2013—the fourth delay since oil was struck there in 2000.

The government had originally rejected the new development plan presented in June 2008—which also projected a huge total cost of $136 billion to reach first oil, up from $57 billion originally predicted—but reconsidered after securing a number of concessions from the oil companies. The new agreement, which will be finalized this month, highlights the many technical challenges that have turned the world’s largest discovery of the last three decades into one of the most difficult engineering problems in history.

Even in the exploration stage, the consortium formed in 1997 to develop the northern Caspian Sea faced hurdles. Shell led the effort back then, with partners Statoil, Mobil, Total, Britain’s BP and BG, and Eni subsidiary Agip. But delays associated with the refitting, disassembly, shipping and reassembly of a huge barge Shell used for drilling led the other partners to seek new leadership, even after the group in July 2000 hit the biggest discovery since Alaska’s Prudhoe Bay in 1968, with some 13 billion bbl of recoverable reserves.

For the Kazakh government, the find represented the promise of enormous revenue flows that would enable the former Soviet state to expand its economy to manufacturing and finance, and away from over-reliance on foreign investment in its oil sector. Each delay beyond the original 2005 startup date, and each cost increase, has pushed further into the future the state’s payoff (the bulk of which, under the agreement, it wouldn’t receive until the oil firms recoup their investment), and has frustrated the nation’s goal of becoming a stronger economic player.

This frustration has led the state to occasionally engage in what Exxon CEO Rex Tillerson recently characterized as meddling that increased delays. For example, when Eni, who took over project leadership from Shell, released a plan that called for first oil in 2008 instead of 2005, the state refused for 14 months to accept the plan, leading to a near-freeze of construction in 2002 and 2003.

The structure of the consortium has also caused problems, hindering decision making and fostering division within the group. But the delays stem mainly from causes beyond the control of either the companies or the state, namely the enormous technical challenges of developing this supergiant field.

Consider: The field lies about 50 mi offshore, but in only 30 ft of water, with strong currents, waves and temperature extremes of -37°F in winter to 104°F in summer. This part of the Caspian freezes over for up to five months a year, and huge sheets of floating ice can gather enough momentum to destroy a conventional rig, not to mention make travel to and from the rig perilous.

If the water is shallow, the oil is deep, hot and extremely sour. Located about 16,000 ft deep at downhole conditions up to 250°F and 15,000 psi, Kahsagan’s oil has concentrations of hydrogen sulfide gas that average 18-22% and can reach 33%. At that concentration and pressure, and given the gas’s high corrosiveness, there is grave danger of a leak, which can be deadly if inhaled at concentrations as low as 0.1%.

As Paolo Campelli, Eni’s head of operations in Kazakhstan, told The Wall Street Journal, “We’ve had experience with hydrogen sulfide, low temperatures and high pressure-but never all together.”

The steps taken by development engineers to confront these and other Kashagan challenges have been extraordinary, both in scale and in ingenuity.

Since normal production platforms would collapse in the icy waters, Eni housed them on an archipelago of artificial islands-millions of tons of rock dumped on the seabed, secured with steel piles and covered with concrete slabs. The largest of the two islands completed is the base of operations; it is surrounded by reeflike barriers to protect against ice.

By 2013, six hub islands, each with several smaller satellite platforms, will stretch across the northern Caspian. Oil and gas will be extracted and separated on these islands before being piped to an onshore processing facility.

The danger of H2S exposure has necessitated the use of expensive, corrosion-resistant stainless steel and nickel alloys for production equipment-which itself accounts for a good chunk of the cost run-up. Also, innovative compression tube fittings (eliminating more leak-prone taper-threaded connections) and other high-pressure connections are being used.

Eni also installed the world’s highest-pressure gas injection train, mounted upon twin barges, to divert the toxic gas back into the reservoir. Discharge pressures of up to 11,020 psi are required, which are the highest pressures ever demanded for gas re-injection. With casings and process pipework of corrosion-resistant chromium-molybdenum alloy, each gas train is designed to inject about 6 MMcfd of sour gas, accounting for roughly half of the field’s expected sulfur production.

In case a leak does occur and workers need to flee, Eni procured four high-tech, ice-breaking emergency evacuation vessels. Workers carry oxygen canisters and gas detectors and do daily evacuation drills.

Of course, not every scenario can be planned for, and the extreme conditions at Kashagan make it more likely that unexpected dangers will arise. Beyond that, other challenges remain.

For one thing, what do you do with all that sulfur (110 kg per metric ton of oil, according to one estimate)? Yellow mountain ranges of inert sulfur have become commonplace near Kazakhstan’s oil projects, and indeed, around the world sulfur disposal has become a huge deferred cost of hydrocarbon production as operators turn to sourer fields and are unable to find a market for the byproduct.

But the Kazakh government is losing its tolerance for huge sulfur mounds, which can become toxic when exposed to the elements. Last year, the state ordered the Chevron-led group developing Tengiz Field to move its vast outdoor sulfur stocks to an indoor facility by 2010. The Kashagan group has still not put forward a plan to store its sulfur, which promises to dwarf that of Tengiz.

As the field’s production ramps up-presumably in 2013—this issue will likely form a new focus for continued negotiation and mutual recrimination among all parties.