08ASTANA2025, KAZAKHSTAN: KASHAGAN PROJECT UNLIKE ANYTHING ELSE IN THE

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Reference ID Created Released Classification Origin
08ASTANA2025 2008-10-14 10:46 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO5133
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHPOD RUEHPW RUEHROV RUEHSR RUEHVK
RUEHYG
DE RUEHTA #2025/01 2881046
ZNR UUUUU ZZH
O 141046Z OCT 08
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3564
INFO RUCNCIS/CIS COLLECTIVE 0681
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0083
RUEHKO/AMEMBASSY TOKYO 0793
RUEHBS/USEU BRUSSELS
RUEHVEN/USMISSION USOSCE 1967
RUCNDT/USMISSION USUN NEW YORK 1915
RUEHNO/USMISSION USNATO 2252
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 0238
RUEKJCS/SECDEF WASHDC 0160
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL

UNCLAS SECTION 01 OF 02 ASTANA 002025 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/ESC 
 
E.O. 12958: N/A 
TAGS: PGOV EPET EINV KZ
SUBJECT:  KAZAKHSTAN:  KASHAGAN PROJECT UNLIKE ANYTHING ELSE IN THE 
WORLD 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  On October 4, Eurasian Energy Diplomacy 
Coordinator Ambassador Steve Mann visited the offshore and onshore 
facilities of the North Caspian Sea Production Sharing Agreement 
project -- also known as Kashagan -- with Umberto Carrara, Managing 
Director of project operator Agip KCO, a company wholly owned by 
Italy's Eni.  (NOTE:  The revised terms of the Kashagan contract, 
which are currently in final negotiations, envision a new Kashagan 
operatorship model under which operatorship responsibilities will be 
divided among several Kashagan consortium partners.  END NOTE.) 
Mann and his delegation were impressed with the scope, scale, 
complexity, and cost of operations at the single largest oil field 
outside of the Middle East and, with 13 billion barrels of 
recoverable oil, the largest field discovered since the 1968 
discovery of Prudhoe Bay on the North Slope of Alaska.  END 
SUMMARY. 
 
LIMITLESS LANDSCAPE LEADS TO MAN-MADE ISLANDS 
 
3.  (SBU) Seen from a helicopter, northern Kazakhstan's flat, dry, 
limitless landscape, pockmarked by white salt and muddy marshes, 
looks uninviting, even unearthly.  When the unique design of 
Kashagan's offshore installation comes into view, with its 
icebreaking barrier reefs and man-made islands, it becomes even more 
apparent that this is a workplace unique in the world.  Visitors 
arrive at D Island, which provides housing, drilling, processing, 
and treatment facilities for the Experimental Program of the 
project, comprising exploration and production operations at 
Kashagan, Karian, Aktote, Kalamkas, and Kashagan Southwest. 
Kashagan is a "hybrid" operation, combining onshore activities and 
offshore platforms.  This unique combination was necessitated by the 
location, climate, size, pressure, sulfur content, and technical 
challenges of the project. 
 
CUSTOM-TAILORED TECHNOLOGY 
 
4.  (SBU) The field is located offshore in an extremely harsh 
environment, where water is shallow, temperatures drop to 40 below, 
and sea ice is a constant threat.  As a result of this extreme 
climate, Agip KCO commissioned six specially-designed Ice-Breaking 
Emergency Evacuation Vehicles (IBEEVs), built in Poland at a cost of 
$50 million each, to evacuate up to 348 people at a time in case of 
a gas leak or explosion.  The vehicles are water-tight, air-tight, 
ice-class vessels that a crew of two can navigate as a submarine. 
They contain sufficient oxygen supplies to sustain crew and 
passengers for up to six hours, enough time to escape a noxious 
sulfur gas cloud in case of emergency.  Agip KCO conducts extensive 
safety training and drills for all 1,650 offshore employees every 
week and successfully tested the IBEEV's performance during a safety 
drill last winter in two feet of ice. 
 
PRODUCTION AND TRANSPORTATION EXPECTATIONS 
 
5.  (SBU) Agip KCO Managing Director Carrera told Ambassador Mann 
}_Q}iI\nal 
six scheduled to be finished by the end of 2009.  According to Agip 
KCO, the six completed appraisal wells can produce more than 150,000 
b/d, an average of 30,000 b/d per well, which is comparable to wells 
in the Middle East.  Oil services companies Halliburton and 
Schlumberger have brought the latest in directional drilling 
technology to Kashagan, drilling up to 5,000 meters deep and 3,500 
meters horizontally. 
 
6.  (SBU) Drilling, separation, and gas reinjection occur at the 
offshore drilling site, but the high-sulfur gas is treated onshore, 
both for safety and environmental reasons, to minimize the offshore 
footprint of operations.  The Kashagan consortium will export crude 
through a combination of rail and pipeline, including 60,000 b/d 
 
ASTANA 00002025  002 OF 002 
 
 
through the Caspian Pipeline Consortium (CPC) pipeline, a 
custom-built railroad with more than 10,000 railcars, and 
cross-Caspian oil tankers.  Carrera estimates that the pipelines 
from the offshore production and onshore processing facilities, 
which connect to export pipelines in Atyrau, will be completed by 
early November.  He said that the Kashagan consortium will reinject 
all of the natural gas into the reservoir and has no plans to export 
significant quantities of natural gas, even after 2013.  "But the 
gas will still be there after the end of full-field development.  It 
won't go away," Carrera explained. 
 
ENVIRONMENTAL PROTECTION A TOP PRIORITY

 
7.  (SBU) Agip KCO appears extremely protective of the marine 
environment.  The mandatory safety briefing warns visitors not to 
throw anything into the Caspian Sea and signs are posted throughout 
the facility reading, "No discharges to the sea whatsoever."  In 
fact, Kashagan collects, filters, and recycles all of the water it 
uses, including rainwater runoff.  Agip KCO has also invested in 
airtight sulfur storage containers that will ensure that dried 
sulfur blocks are not crushed or come into contact with the 
atmosphere. 
 
KASHAGAN COSTS STAGGERING 
 
8.  (SBU) The cost of Kashagan is quite literally staggering, at 
least until one sees the scope and scale of its one-of-a-kind 
infrastructure, much of it assembled at sea under brutal conditions. 
 As Carrera quipped, "We are really in the middle of nowhere here." 
A guided tour of Kashagan's extensive network of highways and access 
roads, railroads, processing facilities, and power plants helps one 
understand how this complex, remote, uniquely challenging project 
has increased in estimated cost from $2 billion to more than $40 
billion for the Experimental Program alone.  (NOTE:  Kashagan 
consortium partners ExxonMobil and Shell told us that the project 
incurred more than $3 billion in unexpected costs when the islands 
were discovered to have been built too close to the sour gas 
injection plant.  The islands had to be dismantled and rebuilt at a 
safer distance from the processing facility -- much to the chagrin 
of Agip KCO.  END NOTE.) 
 
FACILITY SECURITY ISSUES 
 
9. (SBU) Carrera said that Agip KCO is not concerned about external 
threats to the security of Kashagan's onshore or offshore 
operations.  "We're in good control of the situation," he said. 
Agip KCO has its own internal public safety patrol to enforce 
traffic safety and an employee code of conduct.  They conduct 
rigorous driving tests and issue their own driver's licenses, and 
they work with local Kazakhstani security forces, police, and 
government officials to monitor security threats.  Carrera said 
there have been infrequent reports of minor theft and employee 
fights with locals, but he reassured Ambassador Mann that they have 
learned a lesson from the 2006 riots at Tengiz and are vigilant in 
patrolling their territory and monitoring their employees.  Carrera 
maintained that there are no significant Kazakhstani resources 
dedicated to ensuring the safety and security of Kashagan's 
operations, whether onshore or offshore.  "We are their coast guard 
and their navy," he argued.  "We have helicopters and rescue 
vehicles that they will need in a time of crisis." 
 
10.  (U) Ambassador Mann has not/not cleared this cable. 
 
HOAGLAND

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