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The history of the Kashagan oil field

By Stuart Elliott in London

The giant Kashagan oil field in Kazakhstan's sector of the Caspian Sea commenced production September 11.

Here is a timeline of the main developments over the course of the project's history.

1993: A consortium, named Kazakhstancaspiishelf, is established to explore in the northern Caspian. It comprises Italy's Eni, the UK's BG Group, Norway's Statoil, BP, Mobil, Shell and France's Total.

1997: The consortium signs the North Caspian Sea Project Sharing Agreement (NCSPSA) covering exploration of a specific 5,600 sq km block.

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1998: The US' Phillips Petroleum and Japan's Inpex buy into the consortium, and the Offshore Kazakhstan International Operating Company (OKIOC) is formed.

August 1999: OKIOC starts drilling the first exploration well under the NCSPSA.

May 2000: First oil is found at Kashagan with initial estimates suggesting an oil field with reserves of no less than 11 billion barrels. The Kazakh government says the reservoir at Kashagan is likely a continuation of the giant Tengiz oil field on the east coast of the Caspian Sea.

July 2000: Kazakhstan's president Nursultan Nazarbayev says the field could hold at least 50 billion barrels of crude. "Today I can tell you that this is the largest recently discovered field in the world," Nazarbayev says.

December 2000: OKIOC members argue over which company will become operator of Kashagan.

February 2001: Partners finally agree to give Eni operatorship of Kashagan, agreeing to begin commercial output by the end of 2005.

June 2001: BP and Statoil announce they want to leave the project, and Total agrees to buy BP's 9.5% stake and Statoil's 4.8% stake in OKIOC.

August 2001: Eni forms a new operating company, Agip Kazakhstan North Caspian Operating Company (Agip KCO).

June 2002: The Kashagan partners all exercise pre-emption rights over the sale of BP and Statoil's stakes to Total. As a result, Kashagan operator Eni, BG, Shell, Mobil (now ExxonMobil) and Total all see their interests increase from 14.29% to 16.67%. The remaining stake shared by Phillips (now ConocoPhillips) and Inpex also increases to 16.67%.

June 2002: Kashagan is declared commercial after a two-year appraisal program. Preliminary estimate of the recoverable reserves said to be in the range of 7-9 billion barrels.

July 2002: BG says recoverable reserves are more likely in a range of 9-13 billion barrels.

March 2003: BG agrees to sell half of its 16.67% stake to China's CNOOC and half to Sinopec for a total of $1.23 billion, set to mark BG's exit from the field. May 2003: All Kashagan partners -- bar Inpex -- agree to exercise pre-emption rights over BG's sale to CNOOC and Sinopec. The operating consortium becomes: Eni, ExxonMobil, Shell and Total (20.372% each), ConocoPhillips (10.186%) and Inpex (8.33%).

November 2003: First commercial oil delayed to 2008. Kazakhstan says it will seek compensation of up to $150 million from Agip KCO for the delay in bringing Kashagan on stream.

February 2004: Agip KCO takes final investment decision for Kashagan, while the Kazakh government approves the development plan for the project. Initial production is expected to be 75,000 b/d in 2008, rising to an estimated 450,000 b/d during the first phase of development. Subsequent phases are expected to result in full field production of an estimated 1.2 million b/d.

March 2004: The Agip KCO members agree to pay Kazakhstan cash compensation for the late startup of Kashagan.

June 2004: The Kazakh government says it should have exercised pre-emption rights over BG's former 16.67% stake and notifies the Agip KCO partners it wants to buy the stake, effectively reversing BG's original sale.

January 2005: State-owned KazMunaiGaz agrees to buy half of BG's stake from the consortium partners for the same price as it was sold -- $615 million.

March 2005: After negotiations, BG agrees to a revised sale plan. It agrees to sell the whole 16.67% stake to the original five buyers -- Eni, ExxonMobil, Shell, Total and ConocoPhillips -- for $1.8 billion.

April 2005: BG closes the sale to the five partners.

May 2005: KazMunaiGaz agrees to buy half of the former BG stake from the consortium partners for half of $1.8 billion ($900 million). The partners are now: Eni, ExxonMobil, Shell and Total (18.52% each); ConocoPhillips (9.26%); KazMunaiGaz (8.33%); and Inpex (8.33%).

March 2006: Eni says the project is facing cost overruns of up to $5 billion, but first production is still expected in 2008. Official estimates for full field development are put at $31 billion, up from an estimated $29 billion in February in 2004. Unofficial estimates suggest the final figure might exceed $50 billion.

July 2006: Eni says first output could be delayed until 2010.

February 2007: Eni says Kashagan could produce more than 1.5 million b/d after it comes onstream, up from a previous target of 1.2 million b/d.

June 2007: A major setback as estimates suggest the full-field development budget has blown out to $136 billion.

September 2007: Kazakhstan's government says it wants KazMunaiGaz to become co-operator with Eni, and wants a bigger stake in the consortium. Kazakh authorities say they also want to raise the country's share of profit from oil produced at the field to 40% from 8.33%.

December 2007: KazMunaiGaz reaches agreement with all but one of the partners in the Kashagan project on increasing its stake in the project. ExxonMobil is said to be blocking a deal.

January 2008: KazMunaiGaz agrees with the entire Kashagan consortium on increasing its stake in the project to 16.81% from 8.33%. Startup of oil production at the field is also postponed to late 2011. The new ownership structure is: KazMunaiGaz, Eni, ExxonMobil, Shell and Total (16.81% each), ConocoPhillips (8.39%), and Inpex (7.56%).

May 2008: Kazakhstan says the consortium wants to push start-up back to 2012-2013.

June 2008: All parties agree to delay first oil from the project by two years until late 2013. According to a memorandum signed on June 27, if production does not begin by October 1, 2013, then the expenses incurred by the consortium in the development of the field will not be compensated.

July 2008: Kazakhstan and the consortium agree to appoint Shell as project operator for the second phase of the field's production.

July 2008: It is agreed to transfer operatorship of the project to a new joint company, with work to be performed by ExxonMobil, Shell, Total and Eni.

September 2008: Commercial production is expected to be pushed back by one year to 2014. September 2008: Kazakhstan's energy minister Sauat Mynbayev says KazMunaiGaz would form a new company -- North Caspian Production Operating Company (NCPOC) -- with Shell to operate Kashagan production after the start of commercial operations. NCPOC will manage production operations of all phases.

October 2008: New agreements are signed covering operatorship and development of the field, including confirmation of KazMunaiGaz's 16.81% stake. Under the deals, commercial production will start at 75,000 b/d in December 2012 and gradually rise to 370,000 b/d. An add to phase one would see output rise to 450,000 b/d. In a second phase output would be boosted to 730,000 b/d by 2016 and then to a plateau of 1.5 million b/d later in the decade.

January 2009: The new consortium is renamed the North Caspian Operating Consortium (NCOC) and formally becomes operator, taking over the role that was formerly held by Agip KCO.

May 2011: Phase two is effectively frozen as the government is not satisfied with the proposed cost of the first stage.

January 2012: NCOC submits to the Kazakh government a proposal to boost the project's phase-one budget to $46 billion from $38 billion, which is ultimately approved despite some reluctance.

November 2012: ConocoPhillips agrees to sell its 8.39% stake to India's ONGC Videsh for some $5 billion.

July 2013: KazMunaiGaz says it will exercise its pre-emption rights to buy ConocoPhillips' stake.

August 2013: KazMunaiGaz agrees to sell an 8.33% stake in Kashagan to China's CNPC, leaving the Kazakh company with a slightly higher shareholding than before: 16.88%.

September 2013: First production at Kashagan commences.

Map: Export options for Kashagan crude

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