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Sun, Aug 30, 2009 - Page 12 News List

Caspian oilfield is Big Oil’s new energy frontier

As global powers tussle for output routes, thousands of workers aim to put a huge oilfield in Kazakhstan onstream in 2012

By Maria Golovnina  /  REUTERS , KASHAGAN, KAZAKHSTAN

An hour’s helicopter flight over the emerald green waters of the north Caspian reveals a field of magnificent proportion.

Forming the heart of drilling operations is a scattering of artificial islands encircled by huge man-made reefs designed to prevent shifting ice from destroying drilling rigs in winter.

Onshore, an oil processing facility the size of Washington DC is a swarm of construction activity. In stifling summer heat, that is where Leonid and hundreds of others work.

Once at full capacity, Kashagan will produce 1.5 million barrels of oil per day — enough to power Italy.

Three onshore tanks will contain 2 percent of global daily crude consumption. Electricity will be carried to the field via 6,000km of cable — roughly the distance between London and Kabul.

“This is where the oil will flow from,” said one Kashagan official, who, like most, spoke on condition of anonymity. Where it flows to is “for the politicians to decide.”

Further up the Caspian shore near Kashagan, people in the village of Dossor see no need for anonymity in discussing their experience of oil wealth.

“We have been producing oil for 100 years here,” said Bakhyt Smatullin, an official in charge of local oil production in Dossor, which is home to Kazakhstan’s oldest deposit.

“This village should be made of gold by now,” Smatullin said.

Oil was discovered by Swedish investors 100 years ago, but the village is a ramshackle collection of huts around a few creaking oil rigs. Herds of camels graze nearby.

Up to a quarter of the Kazakh population still lives in poverty despite the oil and metals wealth.

Kashagan became a source of particular tension in 2007 when the Kazakh government accused its operators of allowing costs to spiral and missing the original 2005 production start target.

The row unnerved investors and sparked concerns that the government could embark on a course of resource nationalism, potentially denying the multinationals access.

Adding to its complexity, Kashagan lies at the heart of a delicate ecosystem, home to many species unique only to these waters, such as the rare Caspian seal.

Local campaigners say thousands of dead baby seals have washed ashore since 2000, suggesting the deaths may be linked to oil drilling — a charge denied by Kashagan operators who say they are strongly committed to protecting the environment.

Sulphur is another point of contention. Yellow piles the size of several soccer fields produced elsewhere in Kazakhstan are a common concern.

Ecologists say biodiversity eroded when the Caspian Sea became the subject of mass industrial exploration in Soviet times.

“After the Soviet Union collapsed, all industrial activity stopped and nature became clean,” said Fyodor Sarayev, a local photographer who is documenting disappearing wildlife. “But now the steppe is empty again. The steppe is full of grass but there are no animals to eat it.”

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