PRESS RELEASE
NORTH CASPIAN PROJECT UPDATE ON KASHAGAN PIPELINE ISSUE
09 June 2014
Background:
Following the start of production from the Kashagan field on 11 September 2013, the operations had to be
stopped on 24 September, due to a gas leak in the onshore section of the gas pipeline running from D Island
to the onshore processing facility “Bolashak”. The Department of Emergency Situations and the relevant
authorities were immediately informed in accordance with the regulations. The access to the line was secured
and the respective joint replaced. Production was resumed, but had to be stopped again on 9 October after
detection of a gas leak. Following repair of the affected joint, pressure tests were performed revealing some
other potential gas leaks. There was agreement amongst the NCSPSA Consortium partners that safety of the
operations was priority, hence a thorough investigation was immediately launched.
The affected pipelines transport oil and gas from the artificial production island (‘D Island’) to the onshore
treatment facilities at Bolashak. Each of the pipelines is approximately 90 km long, 28 inch in diameter and of
a design specification to be resistant to the water and H2S content of 15 % found in the Kashagan
hydrocarbons.
The pipeline’s pools were supplied by two Japanese companies, Sumitomo and JFE, while the Italian company
Saipem was contracted for laying the pipes.
Pipeline rehabilitation
After the pipeline incidents in October, dedicated task-forces were established to assess all issues and
consequences involving experts from NCSPSA Consortium partners, the Agent companies and the Operator.
Investigations were launched to identify the scope of the issues: the oil and the gas pipelines were inspected
from inside using Intelligent Pipeline Inspection Gauges (so called ‘Intelligent PIGs’). Two PIG campaigns were
completed for each pipeline, which took more than 100 days of operations, followed by the analysis and
interpretation of the raw data captured in these trials.
Additional investigations are carried out to inspect the pipelines from the outside. 47 km of the onshore part
of the pipelines were excavated for inspection, and 970 welds were inspected by means of non-destructive
testing (ultrasound). Similarly, an inspection campaign of the pipeline segments offshore was started in
March 2014 and is expected to be finalised in May. Overall the works involved more than 500 people.
Another set of investigations aimed to identify the root cause of the incidents that resulted in the leakages.
Material experts at three independent laboratories (Technical Welding Institute (TWI), UK; Center of Materials
Development (CSM), Italy; Institut Français de la Corrosion (France)) were mobilised to analyse samples of the
damaged pipeline and develop a concise root cause analysis.
In parallel, studies were conducted to identify potential production restart scenarios.
Results of the investigation
The immediate cause of the pipeline failures was traced by material experts to be sulphide stress cracking
(SSC) due to unexpected locally elevated hardness in tiny areas of the steel.
Laboratory analyses and simulations of the operational environment with samples from the pipeline
concluded that the specifications for the pipeline were appropriate for the conditions of the Kashagan field.
The specifications meet the requirements of the NACE standards (National Association of Corrosion
Engineers), respective ISO standards, and best practices in international oil and gas field development. As was
previously communicated, the gas and oil pipeline was designed to withstand the expected H2S content and
the presence of water.
The inspections by the Intelligent PIG indicated potential cracks at the welds of the pipeline spools as well as
on some at the pipeline bodies. Some of these indications were later confirmed by non destructive tests..
Conclusion and way forward:
The current assessment, based on investigation results to date, is that both oil and gas lines might have to be
fully replaced, which assessment requires to be confirmed once the ongoing investigation is completed. The
Operator is now developing a full replacement plan, which is expected to be finalized by mid-2014.
The plan includes tenders to select contractors, deciding on the material specifications and incorporating the
availability of key equipment. The intention is to develop an optimized plan to replace the lines taking into
account any potential for early production restart. As a precautionary measure, to avoid losing time, the
Consortium has already initiated the tender process for the purchase of pipeline joints.
The restart of production will depend on the results of the investigation which are due by the end of Q2, but
production is not expected to resume in 2014.
The North Caspian Sea PSA Consortium remains committed to ensuring operations are conducted in a safe
manner and meet the requirements of international good oil field practice, the NCSPSA, and applicable
legislation.
- END -
FOR ADDITIONAL INFORMATION, PLEASE CONTACT:
Gulmira Shalabekova, phone: +77172 59 47 87
NOTES FOR EDITORS:
North Caspian Operating Company B.V. NCOC acts on behalf of seven co-venture consortium partners as the
designated operator appraising and developing the hydrocarbon assets of 11 offshore blocks under the
North Caspian Production Sharing Agreement dated 18 November 1997, as amended and supplemented.
Assets within the 5,600 square kilometre North Caspian PSA Contract Area include the giant Kashagan field,
80 km southeast of Atyrau. Other assets include the Kalamkas Sea, Kashagan South-West, Aktote and Kairan
fields. Equity interests of the consortium partners are: KMG (KazMunayGas) 16.87%, Eni 16.8%, ExxonMobil
16.8%, Shell 16.8%, Total 16.8%, CNPC - 8.33%, and INPEX 7.6%.
The execution of operations is delegated by NCOC to four agent companies: Agip KCO is responsible for
implementation of Phase 1 (E&D Experimental Programme, including the drilling); construction of onshore
facilities for Kashagan Phase II is delegated to Shell Development Kashagan (SDK) and Agip KCO. SDK is also
responsible for Phase II FEED, further planning, development and construction of facilities for offshore
complex. Agip KCO is responsible for planning, development and construction of facilities for onshore
complex; appraisal and drilling as part of Phase II operations is delegated to ExxonMobil Kazakhstan Inc., and
finally, operations management at all stages is delegated to NC Production Operations Company B.V. (a KMG
Kashagan B.V. and Shell Kazakhstan Development B.V. joint venture).
NCOC is also responsible for the Consortium’s Social and Infrastructure Projects (SIP) and sponsorship and
donation (S&D) programmes. Implementation of SIP Projects is delegated to two Agents: NC Production
Operations Company (NCPOC) - SIP projects and Agip KCO - sponsorship and donation projects.