Kazakh oil rivalry heats up

MOSCOW/ALMATY - Reuters

File photo of an artificial island in the Kashagan field in the Caspian sea. REUTERS photo

Russia has emerged as the surprise favourite to ship the bulk of crude from Kazakhstan’s Kashagan field, capitalising on a regional pipeline bottleneck that is adding to headaches for the world’s most expensive oil development.

Costs for Kashagan have soared because the Eni-led consortium developing it revised expenditures up fivefold in the last decade - to almost $50 billion - as a result of building artificial islands and infrastructure in the Caspian Sea.

Production is due to start later this year almost 10 years later than planned and ultimately reach 1 million barrels per day (bpd), or more than 1 percent of global oil output.

Debates about oil-evacuation options from the landlocked sea have run on for a decade, with Russian pipeline monopoly Transneft initially among the outsiders.

Other routes considered by Eni and its partners Exxon Mobil, Royal Dutch Shell and Total included a BP-led Azeri-Turkish link, a Chevron-led Russian-Kazakh CPC pipeline to the Black Sea and a route to China.

Over the past few years, several of those options have become less likely, making Transneft the unexpected frontrunner to ship the bulk of oil from Kashagan, at least during the first years, industry sources said.