In a decision that may seem counterintuitive, Chevron Corp. (NYSE: CVX) announced Tuesday that it will proceed with a $36.8 billion expansion at the Tengiz field in Kazakhstan. Chevron owns 50% of Tengizchevroil, the affiliate that operates the project.
The Tengiz field holds an estimated total resource of 25 billion barrels of crude and an estimate of the recoverable total, including the nearby Korolev field (about 1.5 billion barrels of total resource), is 6 billion to 9 billion barrels. In 2015 total production from the two fields was 217 million barrels (nearly 600,000 barrels of oil equivalent per day) and Chevron’s share averaged 257,000 barrels of oil a day, 348 million cubic feet of natural gas per day, and 21,000 barrels of natural gas liquids a day.
Most of the planned expenditure — $27.1 billion — is directed at expanding production facilities, while another $3.5 billion will be spent on new wells. The remainder is contingency fund. Chevron’s partners on the project are Exxon Mobil Corp. (NYSE: XOM) with 25%, KazMunayGas with 20% and a Lukoil subsidiary with 5%.
The project is expected to expand production by 260,000 barrels a day, lifting Tengizchevroil’s total production to about 1 million barrels of oil equivalent per day. The facilities expansion is expected to extend the field’s peak production life by keeping plants operating at full capacity. The future growth part of the plan calls for upgrading enhanced oil recovery using state-of-the-art sour gas injection. First oil from the project is expected in 2022.
Tengiz is an onshore field that is the deepest super-giant oil field in the world. The top of the reservoir is about 12,000 feet below the surface. The field was discovered in 1979 and went into production in 1993.