Oil up on Saudi commitment to cut; U.S. output seen rising

Mon Jan 16, 2017 | 3:26 PM EST FILE PHOTO: A worker checks the valve of an oil pipe at the Lukoil company owned Imilorskoye oil field outside the Siberian city of Kogalym, Russia, January 25, 2016. Reuters/Sergei Karpukhin/File Photo Oil up on Saudi commitment to cut; U.S. output... X By Ethan Lou | CALGARY, Alberta Oil prices settled up on Monday, as Saudi Arabia's commitments to reducing production offset a report forecasting U.S. output would again rise this year. The Organization of the Petroleum Exporting Countries (OPEC) has agreed to cut production by 1.2 million barrels per day (bpd) to 32.5 million bpd from Jan. 1 in an attempt to clear a global oversupply that has depressed prices for more than two years. Russia and other key exporters outside OPEC have said they will also cut output. Saudi Energy Minister Khalid al-Falih said on Monday the country will adhere strictly to its output reduction commitment, expressing confidence that OPEC's plan to prop up prices would work. Benchmark Brent crude oil LCOc1 was up 41 cents a barrel, or 0.7 percent, at $55.86 and U.S. West Texas Intermediate crude CLc1 rose 27 cents, or 0.5 percent, to $52.64 a barrel.

Iran unveils upgraded model for oil contracts

Associated Press Ali Akbar Dareini, Associated Press Iran's Oil Minister Bijan Zanganeh, center, Managing Director of National Iranian Oil Company, Roknoddin Javadi, right, head of parliament's energy committee Ali Marvi, left, and participants listen to Iran's national anthem during opening ceremony of Iran Petroleum Contracts Conference in Tehran, Iran, Saturday, Nov. 28, 2015. Iran has unveiled a new model of oil contracts aimed at attracting foreign investment once sanctions are lifted under a landmark nuclear deal reached earlier this year. (AP Photo/Vahid Salemi) syndication.ap.org Iran's Oil Minister Bijan Zanganeh, center, Managing Director of National Iranian Oil Company, Roknoddin Javadi, right, head of parliament's energy committee Ali Marvi, left, and participants listen to Iran's national anthem during opening ceremony of Iran Petroleum Contracts Conference in Tehran, Iran, Saturday, Nov. 28, 2015. Iran has unveiled a new model of oil contracts aimed at attracting foreign investment once sanctions are lifted under a landmark nuclear deal reached earlier this year. (AP Photo/Vahid Salemi) TEHRAN, Iran (AP) — Iran unveiled a new model of oil contracts Saturday aimed at attracting foreign investment once sanctions are lifted under a landmark nuclear deal reached earlier this year, and said U.S. companies would be welcome to participate. The new Iran Petroleum Contract replaces a previous buyback model, in which contractors paid to develop and operate an oil field before turning it over to Iranian authorities. Iran has sweetened the terms, hoping to bring in $30 billion in new investment. The new contracts last 15-20 years and allow for the full recovery of costs. The older contracts were shorter term, and investors complained of heavy risks and suffering losses. Investors who produced more than planned amounts received no compensation for the additional barrels. But under the new model, the more they produce, the more they will earn. Foreign investors will also have an option to extend contracts an additional five years, up to 25 years. Some 50 upstream oil, gas and petrochemical projects are being introduced during a two-day conference in Tehran that began Saturday. Iran will pay foreign oil companies larger fees under the new contracts to provide greater incentives to investors. Oil Minister Bijan Namdar Zanganeh told the conference that under the new contracts, foreign investors will be required to form a joint company with an Iranian partner to carry out exploration, development and production operations. "To continue to play the role (as a major oil supplier), we hope to enjoy working with reputable international oil companies under a win-win situation," he told the conference. Zanganeh welcomed U.S. investment in Iran's energy sector. "We have no objection to and problem with the participation of American companies. The way for the presence of these companies in Iran's oil industry is open," he said. Mahdi Hosseini, a senior official in charge of the new contracts, told the conference that the new model is an attempt to repair Iran's relations with the industrialized world. Iran is hoping to attract over $150 billion in foreign investment in five years to rebuild its energy industry. Iranian hardliners, however, condemned the new contracts as "unconstitutional", saying they will open the way for "infiltration" of the energy sector by Iran's enemies. "Zanganeh today unveiled contracts that effectively transfers the rights of exploration, extraction, exploitation and sale Iran's oil to foreign companies for 25 years," the conservative news website, rejanews.com, said. International sanctions on Iran's oil industry were tightened in 2012 over its controversial nuclear program. Western nations have long suspected Iran of secretly pursuing nuclear weapons, charges denied by Tehran, which insists the program is entirely peaceful. Under the agreement reached in July with the U.S., Britain, France, Germany, Russia and China, Iran will curb its nuclear activities in exchange for the lifting of sanctions. Oil Ministry officials said 137 foreign companies attended Saturday's conference, including Repsol, BP, Royal Dutch Shell, Total, Technip, Schlumberger, Eni, Enel, Rosneft, Lukoil, Gazprom, Inpex, Statoil and Daewoo. Iran, an OPEC member, currently exports 1.1 million barrels of crude oil per day and hopes to get back to its pre-sanctions level of 2.2 million, last reached in 2012. Iran's total production now stands at 3.1 million barrels per day. Iran is hoping to boost oil production to 5.7 million barrels a day by 2021. Zanganeh said last week that Iran will export an additional 500,000 barrels of oil a day after sanctions are lifted — likely in early 2016 — to reclaim its market share despite low prices. Iran plans to begin exporting an additional 500,000 barrels of oil a day six months later in order to double its crude exports. ======================= Fri Nov 20, 2015 | 9:56 AM EST India's Petronet near to winning better gas terms from Qatar-sources India's Petronet near to winning better gas terms...X By Oleg Vukmanovic and Nidhi Verma MILAN/NEW DELHI Nov 20 (Reuters) - India's biggest gas importer Petronet LNG is close to renegotiating a major deal with its Qatari supplier Rasgas, lowering the cost of gas shipments and avoiding a $1.5 billion penalty fee for lifting less gas than agreed, two sources said. The renegotiation is another sign of how falling oil prices and a global gas glut are bringing producing giants such as Qatar to the negotiating table. Petronet, which has a 25-year contract with Rasgas to annually buy 7.5 million tonnes of liquefied natural gas (LNG) has reduced purchases by about a third this year due to high prices -- even though it is only allowed to take 10 percent less, making it liable for a $1.5 billion penalty. Petronet and Rasgas opened renegotiation proceedings during Qatari Emir Sheikh Tamim bin Hamad Al-Thani's visit to New Delhi in March. If India manages to renegotiate a deal with Qatar it would be Prime Minister Narendra Modi's biggest diplomatic win in the energy sector since coming to power last year. Indian oil minister Dharmendra Pradhan reinforced the need to renegotiate prices and quantity under the long term deal with Qatar during his visit to Doha this month. According to the sources the two firms are exploring the possibility of altering the contract's pricing formula, in which the LNG is valued based on a 60-month average of a basket of Japanese crude oil prices. Instead, a 3-month average of Brent crude is being considered, which would be a major coup for Petronet by lowering its LNG costs in line with sharply lower crude oil prices. Petronet currently pays about $12-$13 per million British thermal units (mmBtu) for Qatari LNG under a deal that began in 2004, compared with around $7-$8 per mmBtu for LNG in the spot market. Petronet has been increasingly substituting costly Qatari LNG with spot shipments. But the proposed revision should allow it to step up Qatari imports as prices fall. Under the new deal, Rasgas will also grant relief to Petronet from paying a $1.5 billion penalty on the condition that the Indian firm lifts full volumes in subsequent years, said one of the sources. Rasgas was not immediately available for comment, while Petronet LNG's head of finance R. K. Garg did not respond to a request for comment. (Editing by William Hardy)

Petrodollars: how the 3 will maintain investment levels and meet refinancing obligations ?

Yamal, Russia's gas megaplan, becomes symbol of sanctions defiance Fri, Sep 19 07:09 AM EDT image 1 of 3 By Katya Golubkova and Dmitry Zhdannikov MOSCOW (Reuters) - Dozens of Russian energy ventures are in jeopardy due to Western sanctions on technology and funding. Looming over them all, a giant project the Kremlin is bent on saving no matter what. The Yamal plan, a $27 billion investment to tap vast natural gas reserves in northwest Siberia, aims to double Russia's stake in the fast-growing market for liquefied natural gas. If it stays on track, it will also show the West that the world's largest energy industry is not cracking under sanctions. Russia has said it will make sure Yamal has the resources it needs to keep building. But that pledge will be tested: Yamal's gas is so far in the Arctic North that it requires specialised technology often provided by Western partners - many of which will not be able to operate because of the restrictions. And while Yamal's shareholders have already invested $6 billion in it, U.S. and EU action has now effectively cut off the Russian energy firm's access to Western lending. Nonetheless, bankers and analysts returning from a recent trip to Yamal said they were impressed by the project's status. Some said it was hard to tell that Yamal's controlling shareholder, gas firm Novatek, and its billionaire co-owner Gennady Timchenko were subject to some of the most severe U.S. and EU sanctions targeting Putin after he annexed Crimea in eastern Ukraine and lent backing to pro-Russia separatists. "I was astonished by the pace and amount of work that has been done," said Maxim Moshkov, oil analyst at UBS. Some 6,000 people are currently working on the project and the number will rise to 15,000 next year. "They work day and night... Having been there, I realised the project will most likely become a reality," Moshkov said. Andrey Polishchuk from Raiffeisen bank said: "They are building a new airport, storage tanks. Ships are coming to a nearby port one after another. Some are unloading goods, some are waiting to unload". POWERFUL PARTNERS Yamal has powerful partners - French oil major Total and China's CNPC. Total said this week that despite the sanctions it would not be stopping work on Yamal and has suggested that, given Europe relies on Russia for a third of its gas, it would be risky to slow down the project. Yamal will start exports from 2018 and has already pre-sold most of its future output to buyers in Europe and Asia. It will ultimately export 16.5 million tonnes of LNG a year - equal to 6 months of French gas consumption. Novatek, along with gas monopoly Gazprom, has so far escaped European sanctions, but the fact that it is on the U.S. sanctions list makes it almost impossible for it to raise money for the project. So Total is still clear to participate in Yamal. But its ability to finance its share in it through U.S. or European banks has been drastically limited. "Can we live without Russian gas in Europe? The answer is no. Are there any reasons to live without it? I think - and I'm not defending the interests of Total in Russia - it is a no," Total boss Christophe De Margerie told Reuters. Timchenko, co-owner of Novatek, is also a force to be reckoned with - his closeness to Russian President Vladimir Putin giving him heft even as it makes him a target for sanctions. In March 2014, the United States slapped the first round of sanctions on him, explaining: "Timchenko's activities in the energy sector have been directly linked to Putin". Putin subsequently made Timchenko Russia's point person for business relations - including the development of key gas projects - with China. Timchenko has said China, which has a 20 percent stake in Yamal through CNPC, has agreed to lend $20 billion before the end of 2014. But there is still work to do to win that loan. "We have had communications from higher management over compliances that we shall strictly follow international rules," a Chinese banking executive told Reuters on condition of anonymity given the delicate nature of the negotiations. "Basic principles are - we shall not deal with entities that are sanctioned...We don't want the U.S. to find excuses to give us trouble." SUPPORT FROM HOME If China can't put up the money, Putin is likely to. The Russian government, which has accumulated the world's third largest forex reserves of $460 billion, has said it will invest money in profitable projects which can guarantee hefty payouts to state coffers in the future. Various officials have pledged support to Gazprom, state oil firm Rosneft and pipeline and railway monopolies Transneft and RZhD. And Prime Minister Dmitry Medvedev told Novatek's chief and co-owner Leonid Mikhelson that Russia would support other companies too, irrespective of their ownership structure. "Should (their Chinese lending) plan fail, they can count on state support. The government has made it clear it will not allow it to fail," said a Western oil executive close to the project. The crunch point for Yamal will come next year when France's engineering firm Technip needs to deliver the core liquefaction plant - technology that Russia is lacking. Technip told Reuters this week it was moving forward with the project. It had earlier warned about the risks to its income from sanctions on Russia. If Technip should run into difficulties - the pace at which sanctions have evolved in the past months suggests more could yet be in the offing - Russia might be able to source the technology from China, which has in recent years become able to design and build large LNG plants. "There might be an opportunity lurking in terms of supplying our own gas liquefaction technology," said an engineering executive at CNPC. (Additional reporting by Aizhu Chen, Vladimir Soldatkin, Denis Pinchuk and Sandrine Bradley; Editing by Sophie Walker) ============ Sanctions against Russia could spur $150 oil – Former BP chief Published time: September 15, 2014 08:53 Edited time: September 15, 2014 11:53 Get short URL Reuters/Stefano Rellandini Oil, Russia and the global economy, Sanctions Western sanctions against Russia, coupled with ongoing political instability in Libya and the advance of ISIS militants in Iraq, could leave the global oil supply exposed and push up oil prices to $150 per barrel, former BP chief Tony Hayward has warned.

The former CEO of BP and now chairman of Glencore Xstrata said the recent boom in US shale production has painted an unrealistic image of the world’s global oil supply, and created a false sense in energy security. “The world has been lulled into a false sense of security because of what’s going on in the US,” Hayward said in an interview with the Financial Times. The hydraulic fracturing boom in the US began in 2008 and has increased US crude output by 60 percent, but Hayward warned it could wane. “When US supply peaks, where will the new supply come from?” Hayward said. Instability in oil producing countries in the Middle East, such as Libya and Iraq, in theory would have driven up oil prices to $150 per barrel, had it not been for the new supply from North America.

So far, Brent crude has fallen from about $108 a barrel at the start of the year to about $97 today. Hayward said oil supplies from the North Sea and Alaska are nearing maturity, and the world oil supply is dependent on new wells in places such as Russia, Iraq, and Canada. Rosneft's Bazhenov field may be even larger than the North Dakota Bakken shale shelf, which currently produces 1 million barrels of oil per day and has brought about the shale revolution in the America. Sanctions may stymie output Russia, the world’s second-largest oil producer, outputs about 10.5 million barrels of oil per day, shy of the record from the Soviet era. His comments followed decisions from the EU and US to widen sanctions against Russia on Friday, targeting state-run and private oil and gas companies, including Gazprom, Rosneft, Transneft, and Lukoil. They can no long obtain US or EU technology or equipment for extracting deep water, Arctic, or shale oil. Analysts believe there will be no sudden shock to the Russian oil and gas industry, but that future projects and long-term development are at risk. “Because of financial sanctions, the big gorillas are going to start cutting their activities,” Hayward said, speaking about Russian companies. The sanctions will also create problems for Western companies like Exxon Mobil, BP, Shell and others, who have joint ventures worth billions in Russia. ExxonMobil, for example, has a joint venture with Rosneft to explore Russia’s Arctic, and also owns a 19.75 percent stake in the company. ======== Petrodollars: What do Russian oil companies do in the wake of sanctions? By Rosemary Griffin | September 15, 2014 12:01 AM Comments (0) Sanctions against Russia are moving closer to the country’s big oil companies. In this week’s Oilgram News column Petrodollars, Rosemary Griffin looks at the choices that companies such as Rosneft face. ——————————- EU sanctions introduced Friday limit some state-owned Russian oil companies’ access to European financing in a move that could drive Rosneft, Transneft and Gazprom Neft to look to alternative sources. The US added to the Russian oil sector’s woes later in the day, by further restricting Rosneft’s access to US financing, as well as blocking its four biggest crude producers from accessing technology essential to Arctic, deepwater and shale oil technology. In the short term, analysts see the latest measures as unlikely to significantly change the financial profile of the big three oil companies targeted, as previous sanctions had already seriously restricted Russian companies’ access to Western capital markets. But the measures have fuelled debate on how the three will maintain investment levels and meet refinancing obligations going forward. Company representatives declined initial comment, but analysts’ see Rosneft, with its significant debt portfolio as the most exposed to the latest restrictions. Rosneft has been on something of a spending spree in the past two years, most significantly swallowing up what was Russia’s third largest crude producer TNK-BP in 2013, in a mega-deal which saw Rosneft hand over a combined total of over $30 billion to former shareholders AAR and BP. Analysts estimate that Rosneft needs to refinance around $29 billion over 2014 and 2015. It has around $18 billion in cash to cover refinancing this year if necessary, and is expecting its cash flow to be boosted by pre-payments coming in next year. Rosneft holds a key position in the Russian economy, with the government highly likely to intervene if it seems to be in any kind of trouble, something officials have confirmed in recent weeks. Russian Prime Minister Dmitry Medvedev said that the government is looking into ways to support the company to maintain investment and production levels. Rosneft already asked for a massive Rb1.5 trillion (around $42 billion) injection from the state’s national welfare fund in mid-August, but whether the government will stretch quite so far, or promise to underpin all of the company’s ambitious capex plans, remains to be seen. ——————————- Meanwhile, analysts estimate that Transneft needs to refinance around $3 billion of debt in 2014/2015. The company has around $10 billion on its books, and some analysts have pointed to its smooth repayment schedule of around $1.4-$1.5 billion/year over the next few years, as well as its relative flexibility to cut investment compared to most other majors, as key advantages in dealing with the latest restrictions. If it does get into trouble, Transneft is likely to follow Rosneft’s approach. As the company responsible for crude and oil products shipments across Russia, it is a priority for the Russian government to build out infrastructure, particularly to boost crude movements to China. If the government balks at direct cash injections, it could also grant the company greater flexibility in imposing tariffs on its transportation services, although the government has attempted to limit state-owned companies’ tariffs in recent years. The two state-owned giants could also look to Asian partners to meet any shortfall in financing. Rosneft has already offered Chinese partners a direct stake in its most promising greenfield project in East Siberia Vankor, which analysts see as a direct consequence of financial pressure from Western sanctions. Asian investors are already present in many Russian projects and have said they are interested in opportunities arising from Russia’s shift in focus to Asian markets. They are likely to drive a hard bargain though, if Russian companies seem desperate to sell off stakes in their prize assets in return for financing. For Gazprom Neft the situation is slightly different. Some analysts see the company as less exposed as its refinancing requirements in 2014/2015 are estimated to be the smallest of the three, at $2 billion. The company has an estimated $3 billion in cash. Furthermore Gazprom was planning to scale back its investment program from next year, initially by around 10% year on year in 2015. There are indications that company is concerned about how sanctions could impact its financial operations, however. Gazprom took a significant hit from currency conversion rates this year, suffering a Rb5.3 billion (around $143 million) loss on its dollar-denominated debt in the first half, more than double equivalent losses in the same period of 2013. Some analysts believe restricted access to Western capital markets could drive the company’s bid to raise the proportion of its ruble-denominated debt and turn to domestic lenders. In the summer it was also the first Russian oil company to raise the prospect of shifting supply contracts away from the dollar to other currencies, such as the ruble or the euro if the situation continues to worsen.— Rosemary Griffin in Moscow

Harsh environment Jotun FPSO design taking precedence over haste

European contractors are struggling to batten down costs consumed by North Sea production floaters, but construction schedule overruns are not as bad as rumors suggest. This subject was a major issue at the 14th Annual Floating Production Systems Conference in London, organized by IBC Global Conferences. The negative aspects were touched on by Inge Laskemoen, Senior Vice President for Field Development at Kværner Oil & Gas Norway. He outlined events leading to delivery of the Jotun FPSO to Esso. Jotun is a joint development of three fields in the Norwegian North Sea, called Elli, Elli South, and Tau. For a Norwegian project, the international content is unusually high - operator Esso and Enterprise each own 45%, with the balance held by Statoil, Conoco, and Amerada Hess. Production, which started last October, is derived through wells drilled from a wellhead platform, with oil and gas exported to the floating production,storage, and offloading (FPSO) vessel, which in turn offloads to shuttle tankers. The location is 165 km west of Haugesund, in 126 meters of water. Kværner gained the EPIC contract for the FPSO in April 1997. First oil was achieved 30 months later. New challenges arose each day of those 30 months, according to Laskemoen - but the stiffest emerged before the contract had even been awarded. In 1996, Kværner had been toying with a new hull design developed by its Masa Yard division in Finland, which was about to be deployed in a floating storage unit on Norsk Hydro's Field. Schedule driven Duration of recent FPSO construction projects (in months) from contract award to first oil. Balder execution time includes re-build to meet field requirements. ((In architecture, a turret (from Italian: torretta, little tower; Latin: turris, tower) is a small tower that projects vertically from the wall of a building such as a medieval castle. Turrets were used to provide a projecting defensive position allowing covering fire to the adjacent wall in the days of military fortification. As their military use faded, turrets were adopted for decorative purposes, as in the Scottish baronial style. )) Modifications were required, however, particularly to the turret, in order to convert this concept into a seaworthy FPSO. In November that year, Kværner took the gamble of ordering a vessel based on this design from Masa Yards - in anticipation of winning the Jotun prize. That risk had to be taken, Laskemoen claimed, because of Esso's tight schedule for this project. "It was necessary to start several engineering activities on the topside facilities at this stage prior to award of the FPSO contract, in order to provide interface information from the topside facilities design needed for the detailed design of the vessel." Esso had demanded a 20-year working life for the vessel, with no drydocking in that period. Long discussions ensued between Kværner and Esso over how to interpret this 20-year rule, which differed from the detailed specs in the shipbuilder's tender. Compromises were eventually reached, but these enforced some re-design and changes to the fabrication process. Added complications followed. Late in the conceptual engineering phase, the field partners decided that the FPSO should itself provide saleable gas for direct export into the Statpipe trunkline system (unlike other FPSOs, which deliver their gas untreated for clean-up elsewhere). Accommodating this late change proved to be a struggle. "As a result, we got out of sequence in ordering the topside processing equipment," Laskemoen said. Waves dictate change A further dilemma was the potential impact of severe weather on the hull. Model tests had shown that large waves in this location would deposit green water onto the deck. Further analysis suggested that the quantity and impact could be significant, leading to further very late design changes being imposed. "The cost consequences became more significant than they could have been," said Laskemoen. Major improvements that had to be instituted included protection of cable racks, the deluge skid with bulkheads, more protection wall for the emergency generator and re-routing of the exhaust duct, and structural reinforcement of the escape route and other structures. At the time of construction, many other North Sea gas development projects were also underway, many incurring serious schedule/ cost overruns. Kværner and Esso tried to keep a lid on potential problems by strengthening the Jotun project team. They created an "alignment initiative" to aid staff interaction at all levels and thereby improve execution of the project. However, planning and execution problems continued to surface. As the project progressed, it emerged that the FPSO tender had been based on a concept that was not sufficiently matured. Topsides modification had to be performed at the detailed design phase. In turn, process overlapped into the detailed engineering phase, forcing further widespread modification. These overruns put engineering as a whole out of sequence. The effect of performing so many activities in parallel was to increase the strain on human resources to meet schedules. That situation was exacerbated by the high workload at the time in Norwegian yards, which meant that local pre-fabrication support staff was not readily available. "We had to buy to higher cost and lower quality," said Laskemoen, "resulting in reduced productivity." With delays hitting all main deliveries to the Jotun assembly site in Stavanger, Kvarner decided to insist on earlier arrival of outstanding packages such as the compression unit, "in order to have the major units lifted onboard the vessel for completion under our own control. There was more carry-over work than expected, and too many problems surfaced during completion and commissioning activities. This again resulted in increased workload to the assembly site, and further challenges regarding completion of the vessel." Other challenges Other problems that had to be faced included: •FPSO's mooring anchor chains: These had been installed prior to arrival of the vessel, and were lying on the seabed waiting to be lifted up. After the majority had been pulled in, some twisting of the chain was encountered due to sideways pulling. The chain locked in the guiding system, and as a result, the pulling method had to be modified •Flushing and preservation: The heating and cooling medium systems were flushed and preserved prior to sailaway from the yard, but preservation proved unsatisfactory. Chemical flushing was needed to clean the system properly. Esso, which had global expertise in this field, worked with Kværner to find a chemical medium applicable to the completed system which could be used without destroying gaskets and seals. •Firewater systems: Some vibration was being experienced, which led to significant repair and re-design of some of the firefighting water system components. "For many of the FPSOs built in recent years," Laskemoen concluded in his pre sentation, "the production facilities are more complex and the execution time and investments are at another level compared to the more simple design. The main reasons for these differences are: •Long field life •Environmental requirements - zero emissions philosophy •Production of crude of a quality to achieve the best possible market price •For Jotun, gas production to sales quality Jotun's FPSO, which has a design capacity of 89,000 b/d, plus water treatment at 122,000 b/d, water injection at 190,000 b/d, and gas compression at 53 MMcf/d, was delivered five months later than originally planned. Compared to other recent North Sea FPSOs, this is reasonably good, Laskemoen claimed. In general, floaters are still being produced quicker than fixed platforms of similar capability, he claimed, and at lower cost. ============= UPDATE 1-Chevron-led Kazakh oil venture sees sharp output rise in 2018-19 Mon, Jan 28 07:19 AM EST By Raushan Nurshayeva ASTANA, Jan 28 (Reuters) - Output at Chevron-led Tengizchevroil (TCO), Kazakhstan's largest oil producer, is set to rise by 12 million tonnes per year in the 2018-19 timeframe from last year's 24.2 million tonnes, TCO General Director Tim Miller said on Monday. Data released by TCO project partner Lukoil this month said the venture's production stood at 25.1 million tonnes (about 503,000 barrels per day) in 2012. "Our 2012 production was 24.2 million tonnes. This was 3.7 pct lower than our business target of 25.1 million tonnes," Miller told an enlarged meeting of Kazakhstan's Oil & Gas Ministry. "The primary reasons for this were mechanical problems ... severe weather conditions and transportation restrictions." The huge Tengiz oilfield, located onshore in western Kazakhstan, is one of three main drivers of Kazakhstan's plans to raise its oil output by 60 percent by the end of the decade. Kazakhstan is now the second-largest post-Soviet oil producer after Russia. The vast Central Asian nation of 17 million plans to raise output to 130 million tonnes by 2020 through expansion at the Kashagan offshore field in the Caspian, higher output at Tengiz and the Karachaganak oil and gas field. Kazakh Oil & Gas Minister Sauat Mynbayev said earlier on Monday Kazakhstan's total oil output was set to rise to 82 million tonnes in 2013 from last year's 79.2 million tonnes. TCO's output is set to remain at the current level for a few years as the venture has first to implement the Wellhead Pressure Management Project (WPMP) to install a pressure boost facility and drill additional wells post-WPMP to lay the groundwork for the crucial Future Growth Project (FGP). "The Future Growth Project will expand production capacity by 12 million per year," Miller said. "Start-up of the FGP operation will be in the 2018 to 2019 timeframe." "We are targeting the final investment decision for the fourth quarter of 2013," he said without specifying the sum. Chevron holds a 50-percent stake in the venture, while ExxonMobil owns 25 percent, Kazakh state oil company KazMunaiGas has 20 percent and Lukarco, controlled by Lukoil, the remaining 5 percent. Since TCO's creation in April 1993, the venture's cumulative payments to Kazakhstan had totalled $74.2 billion, Miller said. "In 2012, total payments exceeded $14 billion for the second consecutive year," he said. ================== Product description With subsea tieback projects, what goes on above the surface is just as important as what is happening beneath it. EDG has the topside expertise to support your subsea tieback projects, and we are committed to quality, cost-effective designs. Tiebacks to deep water, floating facilities require a different approach than the traditional topsides projects in shallow water or to fixed platforms. Shallow Water and Fixed Platform Topside Projects Schedule Most projects have a target completion schedule. Depending on the aggressiveness of the schedule, maintaining it could take precedence over cost control and, possibly, quality. Quality Quality, sometimes equated with operability, is a primary consideration during the design and construction phases. Depending on the level of quality desired by the client, adjustments to the project budget and schedule may be required. Cost Cost is always a consideration on any project. Most projects have a cost threshold beyond which it is no longer economically feasible. Cost considerations may also limit factors such as the quality and delivery of equipment. Deep Water Topside Projects When designing for deep water projects, it is necessary to consider three additional priorities. Balancing these six priorities is a complex process and can become even more challenging when one must take precedence over the others as the defining criterion for design. Deep water priorities to consider beyond schedule, quality and cost Location The location (center of gravity) of new equipment is paramount to floating facilities that depend on ballast to return the vessel to an upright, level position. If the location for the new equipment results in a list that cannot be corrected with the available ballast, a new location must be found. Deck extensions, raised decks and mezzanines create more location options for equipment, at the expense of an increase in weight. However, this may be the only way to shift the Center of Gravity of the equipment to a location where ballasting can return the vessel to an even keel. Weight Floating facilities have a maximum weight they can accommodate and still maintain the required freeboard. If initial weight estimates for the tieback project exceed the allowance for new equipment, it may not be practical to complete the project at that location. Equally challenging, retrofitting additional flotation or reducing weight through the removal of other equipment can be prohibitively expensive. Precise weight estimates at the beginning of the project, as well as aggressive weight monitoring and control as the project progresses, are critical to achieving desired weight targets. Depending on the project weight allowance, some or all equipment may need to be selected based on the lowest weight versus the shortest delivery or lowest costs. Space If the available open space does not adequately house new equipment, and the applicable weight budget for the project cannot cover structural steel to allow greater deck space, the tieback may not be completed at a particular host. Choosing equipment that fits within the accessible space, and thereby eliminates the need for deck extensions or mezzanines, may take precedence over the lowest cost and fastest delivery.