World's Energy

27 February 2008 - Upstream OnLine - The Chevron-led Tengizchevroil group, which operates the giant Tengiz oilfield in Kazakhstan, plans to increase its output sharply this year after new production facilities start up. Chevron has a 50% stake in Tengizchevroil. Its partners include ExxonMobil, Lukoil and Kazakhstan's state-run player kazMunaiGaz. "We will have the capacity to produce 540,000 barrels of oil per day by the middle of 2008," Linsi Crain, a Tengizchevroil spokeswoman, said in a written response to Reuters' questions. "We plan to produce 18 million tonnes of crude in 2008." Tengizchevroil produced 13.9 million tonnes of crude (about 320,000 bpd) last year. This year's output boost will come from a new oil processing plant and a gas injection facility, due to come on stream later this year. The company exported most of its 2007 output - 12.8 million tonnes - through the Caspian Pipeline Consortium (CPC) and shipped another 1 million tonnes by rail. The CPC, however, is running close to full capacity and Russia has been blocking plans for its expansion demanding a higher payout. CPC shareholders, also led by Chevron, made concessions to Russia last year, but its actual expansion is yet to begin. Environmental concerns pose a further problem. The Kazakh government has accused Tengizchevroil of not doing enough to deal with its sulphur stocks. The company says it is doing everything to reduce them by selling the by-product on new markets. The oil from Tengiz contains toxic hydrogen sulphide which is processed into huge piles of inert yellow sulphur and stored near the oil wells before the crude is transported by pipeline. "Sulphur being placed in storage is declining and sulphur pads were reduced five percent (by 457,000 tonnes) in 2007," Crain said. She added the company sold a record 2 million tonnes of the product in 2007, surpassing its 2006 record. "We sold 126% of 2007 production and 24% more than in 2006," Crain said. A Kazakh court slapped a 74 billion tenge ($609 million) fine on Tengizchevroil last year but the fine was later halved. The company has said it may appeal against the decision this year.