Checking in on the Caspian

January 1, 2017

Melissa Sustaita charts the progress of two of the Caspian region’s famed oil and gas projects, NCOC’s Kashagan and BP’s Shah Deniz.

Last year (2016) had its share of peaks and valleys; however, it was a year of excellent progress for two huge projects in different sectors of the Caspian Sea. The Kashagan field, offshore Kazakhstan, made its stakeholders proud awakening from its deep slumber after pipeline leaks shut production in 2013. The Shah Deniz 2 project, off Azerbaijan inched closer to completion with the sailaway of its Stage 2 platform jacket.

The Kashagan development off Kazakhstan. Photo from Eni.

Kashagan awakens

Kashagan, discovered in 2000, is one of the largest oilfields discovered in the past 40 years, has been referred to as one of the most complex projects ever undertaken due to its location, size, and technical complexity. Thought to contain some 35 billion bbl of oil in place, Kashagan is some 80km southeast of Atyrau, in 4200m of water, and extends over a surface area of about 75km x 45km.

The field achieved a huge milestone in late 2016. Kashagan restarted production, finally shipping the first batch of export crude oil in October. Production is expected to target a 180,000 b/d plateau, eventually achieving 370,000 b/d by the end of 2017, according to Italy’s Eni – a partner (16.81%) in the consortium (North Caspian Operating Co. [NCOC]) that operates Kashagan. Other members of NCOC are Kazakhstan’s state-owned oil company KazMunayGas (16.88%), France’s Total (16.81%), US supermajor ExxonMobil (16.81%), Anglo-Dutch supermajor Shell (16.81%), China National Petroleum Corp. (8.33%), and Japan’s Inpex (7.56%).

Paving the way to a production restart, NCOC hired Saipem in February 2016 to replace pipeline infrastructure that was damaged in 2013. The US$1.8 billion deal saw Saipem engineer and construct the two 95km pipelines, with 28in diameters, made of carbon steel, that connect the artificial D island in the Caspian Sea, to the Karabatan onshore plant in Kazakhstan.

Past setbacks

The development layout of Kashagan.  Image from NCOC.

Kashagan originally had achieved first oil in September 2013 from eight wells on the artificial island. However, operations came to a halt after two separate gas leaks that occurred in September and October of that year. Prior to the gas leaks in 2013, Kashagan experienced a 10-year delay, and multiple consortium changes.

It wasn’t until November 2014 that the restart of production was in sight. At that time, then-Total President of Exploration and Production Arnaud Breuillac projected that production would resume as early as 2016, and 2017 at the latest.

Previously set to cost $10 billion, Kashagan‘s price kept rising to more than $50 billion. Famously the project was dubbed, “Cash all gone” by The Economist magazine.

Development strategy

The use of conventional drilling and production technologies, such as concrete structures or jacket platforms that rest on the seabed, are not possible due to the shallow water and cold winter climate of the northern part of the Caspian Sea.

To ensure protection from harsh winter conditions and pack ice movement, offshore facilities are being installed on artificial islands. There are two main types of islands: small unmanned drilling islands, and larger manned hub islands. Hydrocarbons will travel from the drilling islands to hub islands via pipeline. The hub islands will contain processing facilities to separate recovered liquid (oil and water) from the raw gas, as well as gas injection and power generation systems, NCOC said.

During Phase I, the consortium said that around half of the gas produced will be re-injected back into the reservoir, NCOC says. Separated liquid and raw gas will be taken by pipeline to the Bolashak onshore processing plant in Atyrau oblast, where export quality oil will be produced. Some of the processed gas will be sent back offshore for use in power generation while some will be used to generate power at the process plant itself.

Challenges

Being that Kashagan is highly pressurized at 770 bar, the crude oil that the field contains has high sour gas content, creating some technical challenges for the project, NCOC said.

In addition, the field has low salinity due to the in-flow of fresh water from the Volga River, combined with shallow waters. Winter temperatures in the area can hit below -30° C, which causes the northern part of the Caspian Sea to freeze for nearly five months out of the year. This results in ice drifts and ice scouring that place heavy constraints on construction activities.

The location of Kashagan also makes it difficult to supply essential project equipment, NCOC said. Logistical challenges are amplified by limited access to waterways, such as the Volga Don Canal and Baltic Sea-Volga waterways, which have thick winter ice for about six months out of the year, making them difficult to reach.

The Kashagan field contains around 52 Tcf of associated gas, most of which will be re-injected offshore to improve oil recovery rates, according to NCOC. However, for Phase I, not all the associated gas is injected offshore. Some of the gas will be sent to the onshore processing facility where hydrogen sulfide is removed, or sweetened. The processed/sweetened gas will be used for onshore and offshore power generation and some will be marketed as sales gas. Phase I is expected produce an average of 1.1 million tons of sulphur per year due to the removal of the hydrogen sulfide.

Shah Deniz 2 platform jacket preparing for sailaway. Photo from BP.

Shah Deniz: The king of the sea

Shah Deniz is undoubtedly the king of the sea, holding some 40 Tcf of natural gas in place, making it one of the world’s largest gas-condensate fields, and one of BP’s largest discoveries to date.

The Shah Deniz field, spanning approximately 860sq km, is about 70km offshore Baku, Azerbaijan, in 50-500m water in the Caspian Sea.

The project consists of Shah Deniz Stage 1, with the capacity to produce some 10 Bcm/yr of gas, and about 50,000 b/d of condensate; Shah Deniz Stage 2, which will add an additional 16 Bcm per year of gas production; and the Southern Gas Corridor pipeline system that will help deliver 6 Bcm/yr of gas to Turkey and a further 10 Bcm/yr of gas to markets in Europe.

In 2016, the BP-led project saw several updates, from a subsea installation contract, to the reflecting of the Khankendi newbuild, to jacket sail away, and a $1 billion investment.

Shah Deniz Stage 1

Night view of Shah Deniz. Image from BP’s Flickr.

The first stage of the giant project, Shah Deniz Stage 1, began operations in 2006, and took seven years to develop. According to BP, there were several complexities involved including drilling the wells, building a platform, constructing an onshore terminal and laying the 700km South Caucasus pipeline (SCP) through Azerbaijan and Georgia to the Turkish border.

During the first three quarters of 2016, the field produced some 8 Bcm of gas and 1.9 million-tonne (about 15 MMbbl) of condensate.

The existing Shah Deniz facilities’ production capacity is currently 29.5 MMcm/d of gas or around 10.8 Bcm/yr. 

During the same time period, approximately $334 million was in spent in operating expenditure for the Shah Deniz project, and about $2.77 billion in capital expenditure, of which the majority was associated with Shah Deniz Stage 2.

In Q3 2016, the Shah Deniz existing (Alpha) platform completed the deep hole drilling of the SDA09 well and started completion operations, which were currently ongoing as of Q4 2016.

The Istiglal semisubmersible upgrade and commissioning was completed in mid-September, and followed with the rig beginning completion operations on the SDC04 well, which are currently ongoing.

The Heydar Aliyev semisubmersible rig drilled the SDG03 well, and is now drilling the SDG02 well reservoir section.

Together, the Istiglal and Heydar Aliyev have drilled 10 production wells in preparation for the start-up of Shah Deniz Stage 2 and subsequent production ramp up. Drilling operations will continue to deliver all wells required to reach the planned plateau level, BP said.

Shah Deniz Stage 2 

Shah Deniz 2 platform sailaway. Photo from BP’s Flickr.

BP’s Shah Deniz Stage 2, or full field development, is a giant project that is designed to add a further 16 Bcm/yr of gas production to the approximately 9 Bcm/yr produced by Shah Deniz Stage 1.

According to BP, the concept for Shah Deniz Stage 2 includes two new bridge-linked offshore platforms; 26 gas production wells, which will be drilled with two semisubmersibles; 500km of subsea pipelines, which will link the wells with the onshore terminal; upgrading the offshore construction vessels for the project; and the expansion of the Sangachal terminal to accommodate the new gas processing and compression facilities.

According to BP, as of Q3 2016, the Shah Deniz 2 project is about 83% complete in terms of engineering, procurement and construction, and remains on target for first gas in 2018.

In December, Manila’s Asian Development Bank made a $1 billion investment for the expansion of Shah Deniz Stage 2.

In September, the Shah Deniz Stage 2 platforms sailed away from the Heydar Aliyev Baku Deepwater Jackets Factory for offshore installation.

The Israfil Huseynov pipelay barge completed installation of all four North Flank and West Flank flowlines and is currently making progress on the remaining 32in gas export lines, in which this scope of work will continue through into Q1 2017.

Khankendi will be used for the construction of the subsea structures at Shah Deniz 2.  Photo from BP.

In addition, BP announced that the Khankendi subsea construction vessel started up its main engines in September. Once completed, the Khankendi will be deployed to the Shah Deniz 2 area for the construction of the subsea structures between 2017 and 2027.

The vessel is 155m x 32m and has a 13m main deck. It will be equipped with dynamic positioning to allow working in 2.5m significant wave height, a 900-tonne main crane for 600m subsea operation, an 18-man two-bell diving system, two work-class remotely operated vehicles, a strengthened moon pool, two engine rooms with 6x4.4 MW + 2x3.2 MW generators and has a total weight of 17,600-tonne and a carrying capacity of 5000-tonne at 6.5m draft.

Meanwhile, at the ATA yard, construction of both Shah Deniz 2 platform topsides is well above 90% complete and commissioning is progressing. The flare tower has been safely installed on the production and risers platform.

Shah Deniz participating interests are: BP (operator, 28.8%), TPAO (19%), Petronas (15.5%), AzSD (10.0 %), Lukoil (10%), NICO (10%) and SGC Upstream (6.7%).