Kazakhstan Finally Sees Kashagan Oil Field Come On-Line

As with so many things in this eternally star-crossed country, bringing one of the largest oil reserves in the world on-line has been plagued by squabbles, acts of God, misfortune, and regional politics; but at long last, Kazakhstan has seen the Kashagan oil field come on-line, heralding (slowly but surely) that a delayed dream may finally be coming true.

The proven reserves in this field make it the largest outside the Arabian Peninsula, and its strategic proximity to developing economies in Turkey, China, and Southeast Asia promise a lucrative reward for the delays, cost overruns, and technical feats required to effect this Caspian source. According to the New York Times,

The oil is under tremendous pressure as it comes out of the ground, amplifying the possibility of a significant spill. The sea is home to endangered sturgeon and a rare species of seal. The crude is also mixed with poisonous natural gas, so workers carry gas masks in case of leaks.

As part of a series of a safety conditions, the companies piled up artificial islands for drilling pads and laid pipelines on the seabed, which has added to the delays and expenses. The project is already five years behind schedule and has cost $41 billion.

This is unfortunately not the unalloyed good that new petrochemical discoveries in Ukraine and elsewhere in the former Soviet Union augur, as Kazakhstan is a member of the Eurasian Customs Union (though it is resisting joining a full Eurasian Union). Because of prevailing Customs Union (read: Russian) export duties and Customs Union (read: Russian) interests in preserving national petrochemical concerns’ strength, the direct supply of this field to Europe will likely remain limited.

Nevertheless, this is a hopeful sign for energy security in the region, as the increase in nearby oil reserves makes reliance on Middle Eastern states almost as unnecessary as it is undesirable. The Kazakhs are traders at heart; they’ll happily work with large integrated majors to go where the money is.

That’s a win for everyone.

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