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State energy officials in Kazakhstan have announced the production will resume at the giant Kashagan oilfield by the end of this year, putting the largest oil discovery in four decades back on track.
Media have cited the deputy chairman of state-run energy firm Kazmunaygas as confirming that the resumption in production after a halt in 2013.
Kashagan, in the Caspian Sea, started producing in September 2013 and made it only one month before a gas leak in a main pipeline forced it to halt.
Kashagan has an estimated 16 billion barrels of oil reserves, with estimated recoverable reserves of 9-13 billion barrels.
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Low oil prices and slumping production together have hit Kazakhstan hard, but an announcement that production at the giant Kashagan field will resume by the end of this year will further complicate the supply glut.
Kazakh officials have made it clear that they have no intention of waiting for the market to stabilize, and that the taps will be turned on at Kashagan as soon as they are ready. The field could produce as much oil as Libya—in its better days.
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Not only would the field, set to produce as much oil as Libya, attract that much more foreign largesse, but it would allow the government in Astana to further lubricate its hydrocarbon-heavy economy, forgoing necessary reforms for the foreseeable future.
The partners have reportedly invested some $50 billion in Kashagan over the past 20 years and are keen to see a return on their investment. The final price tag is said to have gone $30 billion over initial budget projections, and the pipeline leak that forced a halt in production added to budgetary woes.
Kazakhstan produced 1.6 million barrels per day in 2014. It is the largest landlocked country in the world and it sits right between Russia and China, representing a gateway both to the Caspian Sea and to Europe.
By Charles Kennedy of Oilprice.com
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Charles is a writer for Oilprice.com