It has been described as the world’s most expensive energy project.
Finally, nearly a decade late and five times over budget, the Kashagan oil field in Kazakhstan’s Caspian Sea has begun production.
A consortium including Shell, Total, Exxon Mobil and ENI once promised new riches for the former Soviet country with huge profits for shareholders.
That was before cost overruns, delays, government interference and internal disputes.
One energy analyst says it will be years yet before it makes a profit.
“A lot of money has been spent already, so in order to get a return on their expenses, companies will have to keep producing without investing a lot, maintaining the current level of about 400,000 barrels per day, for 10-12 years at least. Only after that will they probably be able to make a profit,” said Alexander Nazarov from Gazprombank.
The cost of developing the oil field was estimated at 10 billion dollars a decade ago but spiralled to 50 billion.
The Caspian’s icy and stormy waters meant several artificial islands had to be built instead of rigs. Gas and chemicals added to the technical problems.
Kazakhstan’s government is already making spending cuts due to the lower-than-expected oil revenues.