Chevron to begin operations in Kazakh oil fields April 1

December 29, 1992|By New York Times News Service

SAN FRANCISCO -- Chevron Corp. said yesterday that it expects to begin full-scale operations April 1 in its joint venture with the Republic of Kazakhstan to develop the immense Tengiz and Korolev oil fields on the northeastern Caspian Sea coast.

Tengiz is regarded as one of the world's top 10 fields, with reserves likely to be as much as 35 billion barrels.

After two years of often tortuous negotiations, Chevron and Kazakhstan agreed in May to a 50-50 joint venture to develop the oil fields, the largest such arrangement to date between a large republic of the Commonwealth of Independent States and a multinational oil company.

The project envisions potential peak production of more than 700,000 barrels a day by 2010. Current Tengiz production is 65,000barrels a day.

Analysts said that while the project's long-term potential was enormous, it still faced many challenges. The Caspian Sea, slushy, muddy and shallow, is not navigable near the oil fields, so oil produced at Tengiz and Korolev will have to be moved through pipelines across neighboring republics or through Iran.

Moreover, the oil has a very high sulfur content, making its refinement costly and difficult. And the existing infrastructure, including roads, pipelines and utilities, needs major upgrading, analysts said.

"This project has a lot of problems associated with it," said William L. Randol of Salomon Brothers. "Until someone figures out how to pipeline this stuff to a warm-water port I just can't get that excited about it.

"The internal Russian price is $3 a barrel," he added, "so this is not a real money-making proposition until you tap the export market."

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