[ROCKMAN]

So risk to reward is looked at differently with mega projects? Like the nearly $1 billion McMoRan estimates they spent on their ultra Deep drilling program along the La coast. Such as the first Davey Jones well that turns out wasn't over engineered. A well that has been abandoned due to technical problems that weren't dealt with in the predrilling engineering planning phase. The latest estimate I've seen for the cost of this one junked hole is around $250 million. In the case of Kashagan Field I wonder how the risk analysis folks will feel about the potential $billions it will cost to fix the problem as well as the approximate $20+ billion in revenue projection short fall the 2 year delay will cause. Wonder if they are still satisfied with their frugality?

Call it risk/reward analysis, over or under engineering or whatever. Poorly designed projects lose money and almost universally more than the money saved on the front end...and often a great deal more. I've sat in many meetings a listened to the "budget minded" roll out their models. And they are tart the same way: "If things go as planned yada, yada, yada." And if a frog had wings it wouldn't bump his ass. LOL. The "IF"bible is a power weapon wielded by many non-engineers.

[sparky]

.
Standards and procedures are the results of repeated failures

like " do not do that , do it like that "
or the getting of wisdom

every times something new is attempted ,
there is less guidance from the past and the engineering is going to the borders

Brunel's was another common problem , scaling up a perfectly good idea to megalomaniac disaster

Back to Kashagan , I guess we will get some report eventually
it certainly highlight the cost factor for new oil

[ROCKMAN]

I was going to assume most would take the leap to put the BP Macondo blowout into perspective. Then thought otherwise: do most realize the accident didn't happen as a result of some huge unmanageable engineering problem? It was a condition seen in tens of thousands of wells in the Gulf Coast Basin alone. And could have been prevented from developing by spending just 1% at most of the total well cost. Even retesting the cement job would have cost just a tiny fraction of 1% of the well cost. And how many $billions will it cost BP before it's over? I'll let someone else monetize the cost of the 11 dead hands.

Sh*t happens when you're drilling a well. Sometimes it's on Mother Earth...often times on human error. In high risk situations I've always tell my hands the same thing: follow the safest process available and if sh*t happens (especially if someone gets hurt) don't dare explain it by saying they were tying so save money. I've been on jobs where others have irked my life to save money. Fortunately I'm in a position now where I don't have to tolerate such foolishness.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'C')all it risk/reward analysis, over or under engineering or whatever. Poorly designed projects lose money and almost universally more than the money saved on the front end...and often a great deal more. I've sat in many meetings a listened to the "budget minded" roll out their models. And they are tart the same way: "If things go as planned yada, yada, yada." And if a frog had wings it wouldn't bump his ass. LOL. The "IF"bible is a power weapon wielded by many non-engineers.

[ROCKMAN]

I imagine the risk/reward analysis showed it well worth going with the low end welding bidder. Probably saved a few million on this $50 billion project. A project that now has to have a significant portion replaced. But I'm sure they saved enough on their other projects to cover more then cover this loss. I mean...the same folks have a lot of other projects underway...right? So they must have saved many $billion...right? Well, maybe not but I'm sure they'll save many $billions on those future projects others are begging them to manage, right? Hmm...now that I think of it I wonder who will be in charge of the rebuild project at Kashagan and if they plan to use the same risk analysis folks?

Reuters - The main problem behind the shut down of Kazakhstan's key Kashagan pipeline relates to the welding, the head of exploration and development at Italy's Eni said on Tuesday. "The problem is worse than we considered," Claudio Descalzi told analysts. He said it was likely that two pipelines at the Kashagan field would need to be replaced.

I wonder if they used graduates of the Harvey School of Welding? Inside joke for any Coonasses out the. LOL.

[sparky]

.

Fresh from the press ,
An ENI statement , from Reuters

It seems I was right to suspect the welds
"
MILAN, April 29 (Reuters) - Italian oil major Eni is not counting on any production from Kazakhstan's huge Kashagan oilfield this year or possibly next due to faulty welding at the $50 billion project, its CEO designate said.

Production at Kashagan, the world's biggest oil find in 35 years, started last September but was stopped in early October after gas leaks were found in the pipeline network.

"It's worse than we considered. We have already put in place contingency plans to cover a possible lack of production in 2015," Claudio Descalzi told analysts in a conference call on Tuesday after Eni reported a drop in first-quarter profits.

Descalzi, the current head of exploration and development who is slated to take over as CEO in May, said the two gas and oil pipelines at the plant would most likely have to be replaced.

"The problem is related to some spot hardness points on the pipes but mainly to the welding," he said.

Recent tests in Britain, France and Italy have shown that the pipes' carbon steel material was fit to withstand the hostile Kashagan conditions, he added.

The Kashagan consortium is considering changing the width of the oil and gas pipelines that run to shore from their current 28-inch diameter to 20 inches, Descalzi said, adding that it may make them easier to fit."


From what I have read on Macondo ,the drilling had been problematic ,the time schedule blown
the drilling contractor was being pushed hard to complete by the BP local rep
who was a bright new man from headquarters with very little on hand drilling .
he was looking at the cost versus results and didn't care about excuses or explanation

the gas detector system was always alarming ,forcing stoppages so got turned off .

there never is just one reason why things go wrong
but always..... always.... always , rushing is guarantee to lead you in trouble

[ROCKMAN]

sparky - "...the gas detector system was always alarming". So many times I've seen safety systems turned off or tied off while working offshore GOM. And you lay in your bunk at might and jump with every loud noise. Many times openned the door and looked down the hallway to see others peeking out of their cabins. And risks always taken for the same reason: to save time/money. Just like the saved money at Macondo.

But now I call the shots on my wells and that crap don't happen...even when I'm not sleeping on location. LOL.

[rockdoc123]

$this->bbcode_second_pass_quote('', ' ')imagine the risk/reward analysis showed it well worth going with the low end welding bidder.

[rockdoc123]

Sparky said:

$this->bbcode_second_pass_quote('', 'I')t seems I was right to suspect the welds

[sparky]

.
@ Rockdoc 123, you are totally correct , kuddos and respect !!!!

I seems to remenber some weld issue on the trans-Alaska pipeline ,
a sharp eyed weld inspector noticed that the radiographies had been duplicated and stacked at interval
he got the pipes re radiographed and found many faulty welds ,
the company was forced to check and fix ,at great cost and greater delays

[Keith_McClary]

Kazakh Kashagan may not resume until 2017
$this->bbcode_second_pass_quote('', 'K')azakhstan's bid to become one of the world's top oil producers has been blown off course by the disaster unfolding around the giant offshore Kashagan field which may not come back on stream until 2017 -- more than 10 years later than initially planned, sources close to the project say, International Oil Daily reported.

Kazakh officials admit that until Kashagan finally starts up, oil production will remain stuck at around 1.6 million barrels per day and may even decline as levels drop off at mature onshore fields. The delays leave a big hole in the Kazakh budget, which had been based around abundant oil flows from the 9 billion barrel reservoir.

After years of missed deadlines, the international consortium overseeing Kashagan began producing first oil in September last year, only to discover to their horror that gas was seeping from one of the offshore pipelines. Operations were suspended pending the results of a full investigation into the leakage, but it soon became apparent that the pipes were defective and needed to be replaced in their entirety. The consortium, known as the North Caspian Operating Co. (NCOC), has not said when production is likely to come back on stream. But Kazakhstan's deputy energy minister, Magzum Mirgazaliyev, speaking at the annual KIOGE conference in Almaty, said he expects that to happen in the second half of 2016.

But industry sources familiar with the project say the timing is optimistic and that the repair work, which is hampered by the extreme cold of the North Caspian and the presence of deadly hydrogen sulfide in the reservoir, is already behind schedule.

"They have to get this one right -- there can't be any more screw-ups," the source says.
Another source involved with Kashagan admitted that the schedule was tight and said meetings would soon be held with the government to assess the progress made so far.
When it finally kicks off, Kashagan Phase 1 is due to produce around 50,000 b/d and then ramp up to around 370,000 b/d of crude within two years. So far, the partners have spent close to $50 billion, making Kashagan the world's most expensive oil project by some distance. There is no indication about the timing of a second phase, which would push production up toward 1 million b/d, and some sources doubt that it will ever go ahead given the project's tortured history.

"It's not going to happen, no way", a source close to the consortium says, although other observers say the Kazakh government will not allow its flagship project to be cut short. They say the government has no choice but to extend the production sharing contract beyond its expiry date of 2041, however reluctant it is do so.

The seemingly endless problems at Kashagan have prompted a restructuring at NCOC, which as of last month was turned into a joint operatorship in which all decisions are made collectively by the seven partners -- Exxon Mobil, Total, Royal Dutch Shell, Eni and Kazmunaigas each with 16.81% and China National Petroleum Corp. and Inpex in junior roles -- and all subsidiary companies are placed under the NCOC umbrella.

[Keith_McClary]

Crude oil prices keep falling. But oil production just gets more expensive.
$this->bbcode_second_pass_quote('', 'C')rude oil prices continue to drop to multiyear lows, but the cost of extracting the crude continues to rise. The Kashagan oil field in Kazakhstan is a case study in cost overruns made only more painful by falling crude oil prices.
...
After NCOC decided the pipelines would need to be replaced in their entirety, they announced that the project would be delayed until at least 2016.

But the Financial Times reported on October 9 2014 that the consortium – led by Royal Dutch Shell, ExxonMobil, Total, Eni, and CNPC – has decided to use a more corrosive-resistant metal for the pipelines. That should help it avoid future problems with H2S, but it also carries a heavy price tag. The replacement could cost at least $3.6 billion, perhaps more. “You can safely bet it’s going to be more than [$3.6bn],” asource told the FT. And now, production may not begin until 2017 at the earliest.
...
And that is the problem for oil majors trying to replace aging and mature fields where production is declining. Old fields with lower marginal costs are being replaced with new expensive oil – whether it is from shale, offshore, or in the Arctic. When averaged across the industry, it becomes clear that the cost to produce a barrel of oil is rising and will probably continue to rise.

Over the past five years, the top three international oil companies spent a combined half-trillion dollars to develop new fields, but for many of the top companies, production has either stagnated or is slightly declining.

That does not bode well for shareholders over the long-term, particularly if oil prices do not rebound.

On the other hand, oil prices cannot stay as low as they are right now if the marginal cost continues to rise. At some point oil prices will force production offline and tighter supplies will bring prices back up. The key point is that the specific threshold for whether or not to bring an additional barrel of oil to market – the marginal cost of production – is rising. In other words, oil prices will always fluctuate, but the floor price for oil over the long-term will only go up.

And you only need to look at the mess with the Kashagan field to realize why that is the case.

[Quinny]

I would be interested to hear a cornie view on this - think oily will chip in?

[Keith_McClary]

$this->bbcode_second_pass_quote('Quinny', 'I') would be interested to hear a cornie view on this - think oily will chip in?

[Keith_McClary]

Astana was counting on a massive boost in output with the launch of the super-giant Kashagan field. Delays there now mean it will not start pumping oil, as well as generating revenue for the treasury, until 2017.