NORTH CASPIAN SEA PROJECT: fROm vISION TO REAlITy

NORTH CASPIAN SEA PROJECT: from vision to reality
CONTENT
Introduction ....................................................................................................................................................................................2
Project challenges ........................................................................................................................................................................3
Development concept ...............................................................................................................................................................6
Technical breakthroughs and innovations .........................................................................................................................8
Operating model .......................................................................................................................................................................11
Sustainable development .......................................................................................................................................................12
Conclusion ....................................................................................................................................................................................16
1
Introduction
The Republic of Kazakhstan is the largest country in Central Asia and the biggest landlocked country on earth. It
occupies a land mass equivalent to Western Europe.
The Caspian Sea, the world’s largest enclosed body of water, defines the country’s western frontier. Hidden deep
below it are prolific energy resources, which figure prominently in Kazakhstan’s plans to become a major supplier
of the world’s growing energy needs.
Kazakhstan supports an open climate for foreign investment and for joint projects between international and domestic companies.
One such project covers all activities under the North
Caspian Sea Production Sharing Agreement (NCSPSA).
Signed in 1997, the NCSPSA provides a framework for
the exploration and production of oil and gas in a 5,600
square kilometre area in the northern part of the Caspian
Project challenges
Sea. One of the world’s biggest and most complex industrial projects, it includes the giant Kashagan field, the largest find since oil was discovered in Alaska’s Prudhoe Bay
some 40 years ago.
Atyrau
Kashagan
With around 35 billion barrels of oil in place, and with
a production life of decades, Kashagan is expected to
contribute billions of US dollars in taxes and royalties
to the Republic of Kazakhstan. Other discoveries within
the NSCPSA contract area include Kalamkas, Kashagan
SouthWest, Aktote and Kairan.
North Caspian Operating Company B.V. (NCOC) is operator of the project, working on behalf of seven international
energy companies, KazMunaiGas, Eni, Shell, ExxonMobil,
Total, ConocoPhillips and INPEX, pooling their expertise
and experience in exploring, developing, and producing
hydrocarbons.
Kairan
Kashagan SW
Aktoty
Kalamkas
The Kashagan reservoir is located some
4,200 metres below the seabed and is
highly pressured. Because of its low
salinity due to the inflow of fresh water from the Volga River, very shallow
waters of only three to four metres,
and subarctic temperatures, this part
of the Caspian freezes over for nearly
five months a year. Drifting ice and ice
scouring (a narrow ditch on a seabed
caused by the movement of ice) put
heavy restraints on construction, production, and logistics, calling for innovative technical solutions.
NCSPSA contract area
45
200 km.
Development of the Kashagan field
represents a unique combination of
technical complexity and supply-chain
coordination, in a harsh offshore environment where temperatures can drop
below -30 degrees Celsius in winter and
rise to 40 degrees Celsius in the summer.
.
km
75
.
km
Reservoir pressure: > 750 bars
Sour gas content: 15% H2S and 4% CO2
Perspective of the Kashagan reservoir
2
3
Project challenges
The light crude oil to be produced from the
Kashagan field has a high sour gas content
of 15% hydrogen sulfide (H2S). Bringing onstream a high pressure, high sour gas field is
not new: the Lacq field in France, which started producing in the late fifties, is still going
strong. What is new is bringing a high pressure, high sour gas field on-stream in a harsh
operating environment, which requires many
more precautions and a much larger investment to manage the safety risks.
H2S & Pressure
800
Kashagan
700
Ekofisk North Sea
Pressure [bar]
600
South-Western Lacq
Tengiz
Karachaganak
North Sea
500
Hassi Messaoud
400
North Carolina
Jumping Pound
300
200
La Barge
Ural delta
Volga delta
Kashagan
Ras Gas
100
0
The sensitive environment in the northern
part of the Caspian Sea poses challenges,
too. Located at the confluence of the Ural and
Volga rivers, the sea and its surroundings are
a rich and diverse depository of flora and fauna, and 60% of the species are unique to the
Caspian. While the Sturgeon is often considered the most commercially valuable species,
the Caspian Sea is also home to seals, while
its coastal wetlands attract a variety of birds,
some of them listed in the Red Data Book of
Kazakhstan. The Sea is also a major migration
route for birds flying from Asia to Siberia. On
the semi-desert shores of the Caspian Sea, the
saiga, a rare species of antelope, migrates over
ancient routes.
0
5
10
15
20
H2S [%]
25
30
35
40
Kashagan: pushing the limits
The Caspian Sea: a sensitive environment
Reservoir conditions are not the only challenge that needs to be managed. The northern part of the Caspian Sea has very shallow
waters which, due to sub-arctic winter temperatures, freeze for nearly 5 months per year.
This places a heavy constraint on construction
and logistics.
There are major transport challenges, too. Because the Caspian Sea is landlocked it is difficult to supply essential equipment to project
locations. Logistical challenges are amplified
by limited access to waterways, such as the
Volga Don Canal and Baltic Sea-Volga, which
are only navigable for around six months of
the year due to thick winter ice.
Norway
United Kingdom
Atyrau
Volgograd
Rostov
Astrakhan
Italy
Istanbul
Malta
Volga-Baltic 3 700 km
(April - October 2,7 m of water)
Dubai
Volga-Don 1 200 km
(April - October 3,2 m of water)
Ice walls face an artificial island
4
The Caspian Sea: landlocked area
5
Development concept
General concept
The scope and massive scale of the Kashagan field and its many challenges effectively ruled out using traditional development approaches: concrete or jacket platforms were not suitable due to the shallow waters and the subarctic climate. To
protect the oil and gas infrastructure from drifting ice, an innovative concept was used: building artificial islands on which
offshore facilities are located.
Two types of islands are being constructed:
small, unmanned drilling islands, and larger,
manned, hub islands to house accommodation, drilling and production facilities. Hydrocarbons will travel from the drilling islands to
hub islands by pipeline. The hub islands will
contain processing facilities, gas injection and
power generation systems. Except during the
initial production phase, it is expected that
about 80% of the unprocessed sour gas will be
reinjected into the reservoir to boost recoverable reserves. During Phase I of the project
dedicated pipelines will transport the non-reinjected sour gas and unprocessed liquid (oil
and water) to the Bolashak onshore processing plant.
Kashagan development: the concept
Located at Eskene West in Atyrau oblast, the
Bolashak plant will process gas and liquids.
Some of the gas from the plant will be used
to generate power onsite and offshore. Oil will
be exported by rail and by pipeline and sales
gas will be exported by pipeline.
ISLAND A
EPC4
HUB1
EPC2
EPC3
Phase I EP development
D Island, May, 2011
Phased development
Kashagan will be developed in phases. The first phase,
known as the Experimental Programme or EP, is currently
being executed. The EP will be followed by the Phase II
development programme, and then Further Phases of Development. Collectively all phases are known as Full Field
Development.
It is anticipated that drilling and hub islands will be built in
all phases, with development progressing from the eastern and central parts of the field to the west.
D Island, June, 2010
With its current configuration, Phase I will have a nominal
oil production capacity of 370,000 bopd. This can increase
to 450, 000 bopd when additional gas injection capacity
becomes available.
The Experimental Program is currently under construction, and subsequent phases are being planned.
D Island, October, 2009
6
7
Technical breakthroughs and innovations
1. Transported rock placed
on sea bed
Pre-assembled barges
Barges fabricated in various parts of the world are transported to the
Caspian Sea through the Volga-Don canal for assembly onshore.
The Kashagan project has been the source of
several technical breakthroughs and innovations.
Artificial islands
2. Surface levelled
3. Piles driven around
perimeter
4. Impermeable geotextile
membrane
5. Service lines installed
and covered
The larger artificial islands span several square
kilometres and will function like offshore
towns integrating a number of facilities and
accommodating thousands of workers during
construction.
Barge in place after lifting
Laying pipes
Hundreds of kilometres of large-diameter pipe will be laid between drilling islands and hub islands or between a hub island and an onshore
processing plant.
D island, also called Hub 1, is currently being
built and will accommodate the offshore processing facilities of Phase I.
Sand and lime extracted from quarries are ferried offshore using large barges. The islands
will be built with natural limestone from Mangistau in southwestern Kazakhstan. Each island is contained by a metallic perimeter.
After laying pipes
A special technique to trench, lay, and backfill simultaneously was developed, which reduces disruption to the seabed by limiting activity
to directly above the pipe laying operation. The conventional method
leaves trenches open over the three stages, which can cause harm to the
environment. The new technique allows the environment to recover in a
matter of weeks.
Icebreaking vessels
In the unlikely event of a spill, the sea and seabed are protected by an impermeable geotextile membrane deployed over the entire surface of the island.
D Island houses a fleet of ice-breaking emergency evacuation vessels
referred to as ‘IBEEV’s’, which provide an emergency evacuation to a safe
haven for every worker on the island.
Two months later
The Ice Breaking Emergency Evacuation Vessel (IBEEV) is unique. It was
developed specifically for Kashagan and in an emergency can safely take
340 people out of harm’s way, whatever the atmospheric conditions outside.
Due to the shallow waters in which it operates, the IBEEV cannot function like an ordinary icebreaker which cuts through the ice. Instead the
bow of the IBEEV crushes the ice in front of the vessel in order to make
its way through.
6. Concrete foundation
slabs
IBEEV
8
Each facilities module, which can house everything from gas injection
equipment to emergency generators, is then towed to the artificial island where it is positioned between four steel support piles, which are
some 80 metres high. Once in place, the barge is hoisted by jacks, and
welded in place onto the support piles. Installation is completed within
24 hours.
The vessel’s powerful engines can force the vessel through up to a meter
of ice while those inside can breathe a self-contained air supply.
9
Technical breakthroughs and innovations
Operating model
Managing sulphur
Processing sour gas and managing sulphur safely and effectively, especially in Phase I (during future phases it is
anticipated that the majority of gas will be re-injected),
is of vital importance to the project. Sour gas will be desulphured at the Bolashak plant, which will generate an
average of 1.1 million tonnes of sulphur per year.
The venture plans to sell all sulphur that is produced.
Depending on market conditions and rolling stock, sulphur will be stored temporarily. Unlike conventional practice, it will be stored in covered conditions and isolated
from the environment. Liquid sulphur will be poured into
sealed containers for storage purposes, then re-melted
and reformed into solid pellets prior to being sold, to
avoid creating dust.
To manage a project of such massive scope and complexity, an innovative operating model is needed. In January
2009, a new operating company was set up, the North
Caspian Operating Company B.V. (NCOC), to oversee activities related to the North Caspian Sea Production Sharing Agreement (NCSPSA). NCOC is delegated to act on
behalf of the seven shareholders in the NCSPSA.
NCOC defines and steers the overall development strategy, and plans, coordinates and integrates all development
activities. NCOC manages geosciences and conceptual
studies, appraisal plans, early development plans, and
engages stakeholders, including project partners, government bodies and the Authority.
The execution of operations is delegated to four agent
companies. Agip KCO is responsible for delivery of the Experimental Programme (including drilling); Shell Development Kashagan (SDK) and Agip KCO have been delegated
to deliver Phase II surface facilities of the Kashagan project. SDK will manage the Phase II Front End Engineering
Design (FEED), and then planning, development and construction of the offshore parts of the project. Agip KCO is
responsible for the planning, development and construction of the onshore elements; ExxonMobil Kazakhstan Inc.
(EMKI) is responsible for Appraisal and Phase II drilling
activities; and finally, a KMG Kashagan B.V. and Shell Kazakhstan Development B.V. (SKD) joint venture (NCPOC)
will manage production operations of all phases.
CONSORTIUM PARTNERS
H2S sensor
Temperature
sensor
Sand
PROJECT DEFINITION
Sulphur pouring
10
Concept
Definition
PROJECT EXECUTION
FEED Basic
Engineering
Development
Onshore
PRODUCTION
Development
Offshore
Drilling and
drilling cluster
Shell Development
Kashagan B.V.
ExxonMobil
Kazakhstan Inc.
Production
Operations
Blocks fully covered
Phase II
Phase I
Evaluation
Acid run-off
monitoring
Sulphur storage technique
AUTHORITY
Shell Development
Kashagan B.V.
NC Production
Operations
Company B. V.
11
Sustainable development
Beyond the main benefits to Kazakhstan from the production of oil and gas, creating local jobs and bringing
greater prosperity, activities performed under the NCSPSA offer many opportunities to sustainably develop
the local and national economy. To offer other long-term
benefits to the citizens of Kazakhstan and meet the longterm expectations of stakeholders, NCOC is collaborating
closely with national and local authorities and with local
communities.
NCOC takes its social, corporate, and environmental responsibilities seriously. The Company complies with all
applicable laws and regulations while fulfilling its responsibilities as Operator.
Hub Island
Koshanai
Bautino
Waste management facilities
Protecting the environment
Health and Safety
A sustainable industrial activity means first of all safeguarding the health and safety of personnel. NCOC and
its Agent Companies treat health and safety as a top priority. No business decision is made until a rigorous health,
safety, and environmental (HSE) assessment is completed.
The venture has launched numerous safety initiatives, including installing safety rangers on site.
NCOC places the utmost importance on environmental
responsibility.
The venture extensively monitors the environment. It
collects offshore data and analyses water and sediment
chemistry and performs fish, benthos and plankton studies. Annual studies are conducted of birds and seals. A total of 20 state-of-the-art air quality monitoring stations in
Atyrau oblast measure various gases and collect weather
data. Baseline environmental surveys are done with outside experts and institutions. An environmental sensitivity
map has been published to promote more effective management of the Caspian coastline.
Oil spill prevention and response
The venture’s first priority is the safety of its people and
the protection of the environment through the robust design, construction and operation of its facilities. All NCOC
procedures are compliant with Kazakhstan law and good
international oilfield practice and take account of drilling and production conditions in the northern part of the
Caspian Sea.
However, recognizing the risks inherent in the development and production of oil and gas, the venture retains
a dedicated Oil Spill Response organization with facilities,
equipment and trained personnel located on all offshore
facilities and in both Atyrau and Bautino.
12
To anticipate potential risks, the venture regularly updates
environmental impact studies and action plans and has
systems and procedures to respond effectively to unplanned and undesirable events. NCOC and its Agent
Companies have adopted non flaring and zero water
discharge policies. All drilling cuttings are collected and
transported to a cuttings and oil water treatment facility
near the Bautino logistics base. Oil used for drilling mud
is recovered and recycled.
Oil spill response base in Bautino
13
Sustainable development
Local content
Social and Infrastructure Projects
NCOC is committed to developing a world-class project
that maximises the use of local goods and services, while
developing the skills of local people and the capacity of
local companies. This strategy provides the venture with
better knowledge and understanding of the local environment, helps to build better relationships with the community, and can lower costs. In the four years to 2010,
the Operator conducted seminars for more than 400 local
companies, helped 52 local firms take part in certification
programs, and supported the startup of over 51 joint ventures.
Social and Infrastructure Projects are an important part
of the corporate and social responsibility of the Operator.
Substantial financial resources are devoted to building social infrastructures covering education, healthcare, sport
and culture as well as gas and water supply lines.
Funds are equally split between Atyrau and Mangistau
Oblasts. Many projects, including gasification, electrification and water supply to distant locations, construction of
roads, schools, kindergartens, hospitals have been completed in Atyrau and Mangistau Oblasts. In close collaboration with the local authorities, which propose projects
for implementation, NCOC focuses on long term social
infrastructure projects and sustainable development of
local communities.
To help national companies meet the venture’s prequalification critieria for safety, and for providing goods and
services competitive in price, quality, and availability, a local content development process identifies and supports
local companies. From 2005 to 2010, payments for local
goods and services reached US$7.0 billion.
Over time, a variety of approaches and procedures will
substitute foreign specialists with skilled local workers.
In 2010, NCOC and its four Agent Companies employed
around 4,000 people, over half of whom are citizens of
Kazakhstan. More broadly, the project employed over
35,000 people, including contractors and subcontractors,
of whom more than 80% are Kazakh – an outstanding ratio for this type of project.
Above and beyond offering employment, NCOC is committed to expanding the local talent pool. A special projects training programme launched in 2002 selects, recruits and trains Kazakhstani graduates to staff future
14
Supporting local communities
Through its donations and sponsorships programme,
NCOC responds to the aspirations of local communities.
So far, the venture has bought equipment and vehicles for
schools and kindergartens and supported sport, education, and cultural initiatives.
operations and to work in business support activities.
The venture’s training centre in Atyrau is home to the
programme, and houses 11 classrooms, electrical, instrumental, and mechanical workshops, a library, and an auditorium. A chemical laboratory in the centre is working
towards meeting ISO standard 17025 to monitor air, soil,
and water quality and analyse drilling fluid.
Financial contributions are made in a transparent manner,
in accordance with the laws of the Republic of Kazakhstan
and best international practice.
15
Conclusion
Kashagan will have a production life of decades. Over the
life of the field, Kazakhstan is forecast to receive billions of
dollars in revenues from the project.
Kashagan also offers Kazakhstan a way of meeting crucial technical, environmental, and societal objectives. As
a good corporate citizen, NCOC will face the challenges
ahead, together with its Agent Companies and joint venture partners, to support the robust economic growth
and sustainable development of the people and industrial
base of Kazakhstan.
NCOC office, Astana
16
www.ncoc.kz
ASTANA
PARIS
ATYRAU
2 Kunayev St.,
Left Bank of the River Ishim,
010000,
Republic of Kazakhstan
Le Newton
9 place des Vosges
92 924 Paris-La Défense cedex
France
Kussayin Building
6 Valikhanov Street
Republic of Kazakhstan
060002
Tel.: +7 7172 35 50 01
Fax: +7 7172 59 16 41
Tel.: + 33 1 47 75 53 00
Fax: + 33 1 47 75 55 57
Tel.: +7 7122 92 39 00
Fax: +7 7122 92 22 55
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