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The development of the Tengiz field is the largest investment in the era of low oil prices

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The development of the Tengiz field is the largest investment in the era of low oil prices

The development of the Tengiz field is the largest investment in the era of low oil prices
July 05
12:30 2016

The Chevron Company and its partners made an official statement about the intention of the $ 36.8 billion investing in the increase in the production of “black gold” in the Tengiz field in Kazakhstan. This will be the largest project since the beginning of the period of low oil prices.
The companies Chevron, ExxonMobil and their partners that are also engaged in the development of the Tengiz field in Kazakhstan will invest $ 36.8 billion to increase oil production, according to the statement on the official website of the company Chevron. The companies’ investment is scheduled as follows: $ 27.1 billion – for equipment, $ 3.5 billion – for new wells, and $ 6.2 billion will be left for unforeseen expenses.
According to The Wall Street Journal, this is the biggest investment in oil production after the collapse in oil prices that occurred two years ago.

“This moment is the perfect time for investment,” – Todd Levy, the head of the Chevron subdivision in Eurasia and the Middle East, claimed. According to Jay Johnson, the senior vice president of Chevron’s Europe, Eurasia, and Middle East exploration and production unit, the investment plan was based on the successful expansion of the Tengiz field, which had been carried out earlier. The company Chevron and its partners, among which is the Russian Lukoil, had already made the investment in the project in the amount of about $ 37 billion.

Last week Chevron said in its presentation that the decision to expand the Kazakhstan project would be made “in the middle of 2016”. From the presentation of the company it was possible to know that a camp for 4.5 thousand builders had been built under the project.

The investments in the Tengiz field in Kazakhstan mark a “point of inflection of the trend,” Jason Gammell, a senior technology equity research analyst at Jefferies, said in the interview with WSJ. He notes that this is the first investment project in the oil industry in the current year, the volume of which is more than $ 10 billion. Over that time when oil quotations have fallen from $ 115 per barrel in mid-2014 to $ 27 in January 2016 the major oil companies were forced to cut costs, reduce their own staff and abandon the investment in new oil projects. So, for example, over three years ExxonMobil has reduced the exploration and production costs from $ 42.5 billion in 2013 to $ 23 billion in 2016. For the same period Chevron has reduced the capital costs from $ 41.9 billion to $ 25 billion. As calculated by Wood Mackenzie, the total reduction in oil and gas production and exploration costs amounted to $ 1 trillion in mid-June of the current year.
The Tengiz field in Kazakhstan was opened in 1979 and it is one of the deepest oil fields on the planet. As noted in the agency Bloomberg, the volume of production from the new fields would be equivalent to the volume of oil that was produced in Libya. Last year the oil production at the field was 595 thousand barrels per day. If the project is expanded, it will allow increasing the production by 250-300 thousand barrels per day.

In May Kazakhstan Minister of Energy Kanat Bozumbayev in the interview with a WSJ journalist said that the project would help to give the country 24 thousand jobs. According to Bozumbayev, General Manager of Chevron visited Kazakhstan and led the discussion on the project with the country’s leadership. On July 5 Bozumbayev said that the expansion of the project in Kazakhstan would be able to bring about $ 120 billion of the additional tax revenue.
The company “Tengizchevroil” is implementing the oil development at the Tengiz field, and, in addition, at the Royal field in Kazakhstan “. Chevron has the largest stake in the company (50%), ExxonMobil – 25%, the Kazakh state company “KazMunayGas” – 20%, LUKOIL’s subsidiary company Lukarco has another 5%.

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