REUTERS/Anatoly UstinenkoAn aerial view shows artificial islands on Kashagan offshore oil field in the Caspian sea, western Kazakhstan, April 7, 2013. Picture taken April 7, 2013.
WHEN it was discovered in 2000, the Kashagan oilfield in Kazakhstan’s waters in the northern Caspian Sea was the world’s biggest oil find in three decades. By now it was supposed to be pumping out 1.2m barrels a day (mbd), enough to meet Spain’s entire consumption.
But the project, whose name sounds unfortunately like “cash all gone”, went spectacularly awry. A year ago, when the first trickle of crude briefly flowed, it was already eight years behind schedule. Having cost $43 billion, it was $30 billion over budget. And production lasted only a few weeks before leaks of poisonous gas forced its suspension. Earlier this month a government minister admitted it would not restart until at least 2016.
Undeterred by the Kashagan fiasco, this week the government said it would approve a plan to expand the onshore Tengiz oilfield, another huge budget-buster. Tengiz was first expected to cost $23 billion but the government said this week that the bill had risen to $40 billion.
Each of the two oilfields is owned by a different consortium of foreign firms and the state oil company, KazMunaiGaz. In Kashagan’s case they include Exxon, Shell, Total and ENI. In part the project’s setbacks are due to unexpected technical problems. Corrosive and poisonous hydrogen sulphide gas, pumped up from the seabed along with the oil, has eaten through pipes bringing it onshore.
REUTERS/Leon NealA general view shows the Bolashak oil plant on the Kashagan offshore oil field near Atyrau in Kazakhstan June 30, 2013.
It may cost another $5 billion to fix the problem. But insiders say privately that with so many companies involved, the project has lacked clear leadership and suffered from government meddling.
Investors of all kinds worry about “the declining predictability of Kazakhstan’s regulatory and legal environment”, says Mariyam Zhumadil of Halyk Finance, an investment bank in the commercial capital, Almaty.
In 2010 the government filed a $1.2 billion tax claim against the consortium that operates another field, Karachaganak, while making noises about breaches of environmental rules, not long after expressing an interest in buying a stake in the field. Later the consortium gave it 10% in return for it agreeing to expand the field.
Likewise, at Kashagan, environmental officials have fined the field’s operators $737m for burning off the poisonous gas, which the consortium argues was an emergency measure. Ms Zhumadil reckons the fine is a “tool for future negotiations, perhaps to strengthen the national oil company’s presence in the project.”
This may not be the best way to encourage foreign firms to pump in the tens of billions of dollars more that are still needed to develop Kazakhstan’s oilfields.
Plantagenet on Mon, 13th Oct 2014 10:06 pm
Thanks for the link on Shale Oil vs. Oil Shale, Nony. However, I doubt it will help. I posted a similar link for NWR awhile back, and he still doesn’t get it. It appears his brain is so full of four letter words there is no room left for any kind of more sophisticated thought.
Nony on Tue, 14th Oct 2014 12:50 am
Frak that, P-man!
Can’t make post with four mark word only?
Northwest Resident on Tue, 14th Oct 2014 1:09 am
Plant, congratulations on thoroughly confusing the issue.
“EROI for oil shale falls between 1:1 and 2:1 when internal energy is counted as a cost.” That’s a quote from the article, and one I’m sure you won’t be pompous enough to argue with. If you do choose to argue that point, please contact the experts who made that scientific assessment and argue with them, not me.
Now, what about shale oil? What is the net energy returned from shale oil extraction?
The internet is packed full of scientific and financial articles related to the poor financial and net energy performance of shale oil extraction. I don’t have time to sort through them all to find an exact quote that demonstrates my position, but I’ve read them before, they are there and I do know what I’m talking about. Even shortonoil has told you via a post on this article that shale oil extraction is a net energy loser. Why don’t you direct your silly arguments and absurd comments at shortonoil? Because he’ll rip you a new asshole? That’s why.
Shale oil extraction is the endeavor of big time money losers, scammers, liars and frauds. Not the oil workers who are just doing their jobs, but the financial interests promoting and bankrolling them and seeking to lure a continuous supply of investment without which they would all go belly up. Which they will soon enough anyway.
Given the nature of fracking and oil shale and shale oil, it is no surprise to see you doing the cheerleading routine for them and attempting to confuse and distort and downplay any opinion that irritates your illusion of shale grandeur.
Don’t worry Plant. Shale oil and oil shale and the whole fracking business is a short term bust that has nearly run its course. I’m looking forward to the day when the whole shale bubble blasts wide open for a number of very good reasons. But added to that list of really worthwhile reasons I’ll add one more trivial one — I can’t wait for your signature field of “expertise” (cough, hack) to meet its well-deserved and imminent demise because I will get a little amusement out of knowing how shattered your illusions will be.
But until then, Plant, please continue your cheerleading routine. Enjoy your illusions while they last. Go on pretending you’re some kind of scientific expert on shale oil related topics. Never mind how absurd you appear in doing so. And by all means, keep a daily count of how often Obama goes golfing — that is an activity well suited for your “brilliant” mind.
Nony on Tue, 14th Oct 2014 1:21 am
NWR: learn the basics. Honestly, this is just embarrassing. Don’t be a palooka.
Northwest Resident on Tue, 14th Oct 2014 1:31 am
Nony — I have learned enough of the basics to know:
1) Oil shale and oil shale provide very little if any net energy to the economy
2) Shale oil extraction is a huge money loser
3) Shale oil extraction is dependent on artificially low interest rates and continuous injections of investment to maintain operations
4) Shale oil (and oil shale) is a short term phenomenon that is much more a financial play than an energy play
5) Individuals such as you and Plant who do the shale extraction cheerleading are oblivious to the “big picture”, and that is, neither shale oil or shale oil will make anything other than a tiny and insignificant contribution to solving the world’s energy problems.
Those are facts Nony. You and Plant and your like-minded troll posters are the ones who should feel embarrassed. I certainly don’t, and have no reason to. In my book, you and Plant are the palookas. And that’s not just my opinion, I can’t help but notice, but the majority opinion of other posters on this site as well.
Enjoy your evening, trolls.
Nony on Tue, 14th Oct 2014 3:00 am
NWR, you’ve spent years being an amateur peak oil reader and still don’t know a basic term. When given the info, you STILL ignore the fact.
This has nothing to do with sides in cornie versus doomer. This has to do with an unscientific, unhonest attitude. A true scientist admits errors and learns from everything. You’re just a dude emoting an blabbing on the web.
Oh…and stop, sailor. Don’t fire off a rebuttal. Pipe down and think.
MSN Fanboy on Tue, 14th Oct 2014 6:05 am
Youre both partly right lol
Davy on Tue, 14th Oct 2014 6:39 am
Planter and Noo, you can argue all you like about the geology. I know enough about business to smell cat piss. These fracking operations have the cash flow devil to deal with. They can never slow down with the high initial depletion and high debt service. IMA, current historically low debt service costs. You have a house of cards financially and with the geology. The geology requires a race against depletion in a race to find the sweet spots. There is the big issue of oil quality. Financially the race is to maintain cash flow to service debt and attract new debt. There is also the issue of interest rates and oil prices. Oil prices are unstable and interest rates are repressed. I see nothing to crow about. This market segment is a classic definition of a Ponzi scheme within a greater Ponzi scheme. The infrastructure, low cost debt, and relatively high oil prices all were in place. The repressed financial system is being manipulated by bubble policies the shale oil sector is a bubble within a bubble. It is a perfect period of a financial eye between the economic hurricane.
Plantagenet on Tue, 14th Oct 2014 9:23 am
NWR. You are wrong. You don’t understand the basic science. I suggest you give it a rest now.
CHEERS!
Plantagenet on Tue, 14th Oct 2014 9:28 am
Davi. There is no argument about the geology. NWR was posting nonsense. Hopefully the facts are clear now. That’s the nice thing about science. Some facts are indisputable.
bobinget on Tue, 14th Oct 2014 9:33 am
“WHEN it was discovered in 2000, the Kashagan oilfield in Kazakhstan’s waters in the northern Caspian Sea was the world’s biggest oil find in three decades”.
See…. Yet Another fraccing fail. Who knew?
Don’t rush in to tell me Kashgan is a conventional offshore field. (if there is any meaning now days to the word ‘conventional’.
I’m sure every available oil engineer
is applying every trick they collectively know to save part of the enormous investment.
Northwest Resident on Tue, 14th Oct 2014 10:10 am
Nony — I wasn’t even aware of peak oil until around July last year, so I definitely have not spent “years being an amateur peak oil reader”.
Both you and Plant will do anything to avoid the fact that shale oil extraction is a total loser when it comes to providing net energy to the economy.
Neither you or Plant will discuss or recognize the immense debt that fracking companies have accumulated, or the continued need to accumulate significantly greater debt just to keep operations going.
Both you and Plant avoid any discussion of the fact that fracking companies are facing disaster in the near term with falling oil prices.
Neither of you will discuss or respond to questions directed at you about the fraudulent “reserve” claims made by shale oil companies, or about their deceitful accounting and other gimmicks used to avoid showing how substantial their losses are.
Both you and Plant are here to PROMOTE the illusion that fracking is a viable solution to the world’s energy needs.
And Plant is also here to give us his daily rolling tally of how many vacation days and golf outings Obama has racked up, a very important topic on a peak oil forum.
In the meantime, you both are quick to point out minor errors, “failed” predictions made many years ago about peak oil and any little minor inconsequential mistake you can find.
You won’t respond to or answer the BIG issues related to fracking and peak oil. You just keep harping on the little mistakes and the incorrect predictions, repeatedly bringing them up, refusing to let go of them, all to avoid the BIG ISSUES.
It’s almost as if you and Plant are the right and left hands of the same entity, here to sow discord, to promote the illusion of BAU forever, to cast doubt on very valid peak oil concepts, and in general to be the obnoxious trolls that you constantly succeed in being.
Plant — What am I wrong about? The main point I am making is that fracking provides very little to NO net energy to the economy. shortonoil has posted that fracking is an “energy sink”. Is he wrong too? If so, why don’t you direct your pathetic arguments at shortonoil instead of me, and use your scientific genius and fracking expertise to prove him wrong? Why are you wasting your time on me? Nony — same question for you.
Plant and Nony, two snarling little troll dogs on this forum with an agenda to confuse, to obfuscate, to promote the same illusion that the Forbes and Motley Fools of this world are promoting, to insult and to nitpick and to do whatever they can to disrupt rational discussion on peak oil subjects.
Nony and Plant would have been banned from posting on this forum long ago if it were moderated. Both are obnoxious trolls with an agenda to disrupt. Neither are here to contribute in meaningful ways to the discussion. Both seek only to deny reality and shut down rational discussion.
How are those NG futures looking, Nony?
marmico on Tue, 14th Oct 2014 10:17 am
Bakken rigs have stayed at ~190 through the recent price drop
Down 7 rigs in the Bakken, but up 8 rigs overall through October 10, 2014.
Rockman is an old fart employed by marginal producers. He should have retired in 2007 exercising stock options. Oh, Devon terminated him in 2008. ROTFLMFAO.
Davy on Tue, 14th Oct 2014 10:22 am
Planter, I salute fracking in the extra time it has bought BAU. This extra time has been critical for me and others. You seem to understand the limitations of shale resources. Noo on the other hand is making too much of it. He has bought into the industry spin. Shale will fleece investors and the energy security of the country as a whole by false representations eventually. At some point the shale industry will be parasitic and a liability to the overall sustainability and resilience of the nation. I have reservations about placing a negative value on shale in regards to EROI in a macro sense. My feelings are liquid fuels are so important they have a special category all their own. Even if the argument is over the quality of the liquids they still can be substitutes elsewhere to extend conventional crude. I may get a tongue lashing from short but that is my systematic view. We are in a zone where shale has an economic place in aggregate supply but just barely. The big issue is the influence on the energy sector of the equity markets. If the sector crashes and burns with higher debt cost and lower prices or higher prices with demand destruction the financial system may take a beating. The markets are already volatile for multiple reason this will be like throwing gas on a fire. Supply can never be taken for granted. We are in dangerous times to be playing with our financial and energy security.
marmico on Tue, 14th Oct 2014 10:32 am
Nony and Plant would have been banned from posting on this forum long ago if it were moderated
Huh. I’ll take on (Hills) quart shy of oil any minute of any hour of any day of the week. There is no point in communicating with (westexas) Brown. He just plasters the intertubz with (gibberish) bad data.
Davy on Tue, 14th Oct 2014 10:32 am
Marm, you seem to be cavalier with these price drops. The price drop has been a recent event. Are you willing to dismiss prices remaining low for an extended period of time? Do you believe all that is going on with the central banks and the bearishness in the markets is just temporary? Can you tell me low prices and high debt costs will be managed without difficulty? We both know the answer to my questions. You are at the bar on the Titanic sipping a gin fizz.
PrestonSturges on Tue, 14th Oct 2014 11:00 am
Many popular web sites get to a point where they have to make decisions about their business model – are they going to serve a couple weirdos who are the computer 24/7 or are they trying to get traffic from more than three people?
JuanP on Tue, 14th Oct 2014 11:19 am
I did not read the comments above, other than to notice they were about Oil Shale,
http://en.m.wikipedia.org/wiki/Oil_shale
And Shale Oil, http://en.m.wikipedia.org/wiki/Shale_oil
I have wondered many times who created these terms and why. I find them extremely confusing.
I think most of us go through a period when we can’t tell one from the other in our research until we learn the difference. I know I was confused about it for a while. This is obviously not so for the specialists in related fields, but for outsiders like me these terms seem designed to confuse.
marmico on Tue, 14th Oct 2014 11:52 am
Have you looked at WTI for the last 5 years, Davy-boy? It seems to be range bound. 70-110 WTI. If the price is 110…it’s an extinction level event. If the price is 70…it’s an extinction level event. I say make up your mind. Why doomsteaders would base extinction on such a minor range bound is curious yet pathetic. BTW, only faux extinction level doomsteaders attend MLB playoff games.
In any event, sweet Bakken crude is 40-42 API.
Davy on Tue, 14th Oct 2014 12:52 pm
Fair enough Marm, I am definitely peddling doom which has been the same thing as crying wolf for the last few years. It could be different this time because there are multiple subplots playing out. We may see negative convergence. In any case I hope you are right because I am living the faux extinction level doomsteaders life. Life has never been so good for me. I am in northern Michigan for a few days with the parents. They purchased a summer home on Lake Michigan. Rode up in a private jet full of household goods and furnishings. I guess that qualifies as a faux doomer!
synapsid on Tue, 14th Oct 2014 5:28 pm
Plantagenet,
Kerogen is the precursor to oil–it “releases” (poor choice of word) oil by becoming oil. Kerogen is what turns into oil under high temperature. It is not something that contains oil in the sense that you can open up kerogen somehow and release the oil that is held there, leaving the kerogen behind.