Face wrapped in a thick scarf against clouds of blinding dust, the electrician gazed at a maze of pipes and pumps teeming with 15,000 workers and compared his work to building the Tower of Babel.
He was speaking casually. But for the oil industry Kashagan, the world’s biggest discovery since 1968 with reserves locked amid lethal, high-pressure gases beneath the north Caspian Sea, is a challenge of biblical proportions.
“There are people from 30 different countries working here,” said electrician Leonid, asking not to be identified because he was not authorized to speak to the media. “But we do try to find a common language.”
Kashagan, developed by oil majors including Eni and Exxon Mobil, represents all the challenges Western countries face to secure energy supplies as Asia becomes more energy-hungry and Russia seeks to dominate resources on its borders.
The field’s difficult geology, remote location, harsh climate and environmental challenges make it one of the world’s most complex and, at US$136 billion so far, expensive energy projects.
As state-owned companies now control most global reserves, Kashagan shows how Western majors that once dominated the industry now have to take what chances they can to produce oil.
With an estimated 9 billion barrels of recoverable oil, Kashagan is an almighty undertaking.
In temperature swings from minus 40ºC to plus 40ºC, the oil in the Kazakh field is heavy in sulphur — a hazard to health and the environment.
“It’s a project of immense difficulty,” said Eduard Poletayev, an independent analyst who closely watches Kashagan.
Due onstream in three years, Kashagan is one of a dwindling group of giant oilfields as cheaper and more accessible sources dry up. Only 11 such giant fields were found in the 1990s, down from 29 in the 1960s, investment bank Simmons & Co said.
“All the big oilfields have now been gobbled up and Kashagan is the last pearl in the crown of the world oil industry. That’s why oil companies are fighting for it so stubbornly,” Poletayev said.
Expected to produce the equivalent of 10 percent of Europe’s energy needs once at the height of its production, Kashagan can make Kazakhstan a new global source of non-OPEC energy.
It is at the heart of a tussle between Russia, China and Europe, reflecting the challenges faced by the West in maintaining its place as the market of choice for oil producers, and Europe’s battle to reduce its reliance on Russia for energy.
The main question is where the oil will go.
One option is to ship it by tanker across the Caspian Sea to the Baku-Tbilisi-Ceyhan oil pipeline that runs to Europe. BP leads that pipeline, but is not a partner in Kashagan.
Such a route is likely to irritate Russia: Moscow wants to boost its role as Europe’s leading energy supplier by persuading operators to feed the oil into a separate, Russia-bound line run by the Caspian Pipeline Consortium, for transit to Europe.
But the oil could also flow east to energy-hungry China, or — a more controversial possibility — to southern markets via Iran. No single operator holds a deciding majority.
The consortium’s media department in Kazakhstan said it could not comment on possible export routes.
“Kashagan isn’t producing any oil yet so they are being very careful,” Poletayev said. “Because otherwise it’s like selling the bear’s skin before the bear has been caught.”
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