Translated material
Sulfur plug
Kazakhstan and Chevron are going to build a chemical production facility at the Tengiz field for the sake of oil production.
In anticipation of the visit of Chevron management to Astana last Friday, Kazakh authorities once again presented environmental claims to the American company, which is the operator of the development of the Tengiz oil field (reserves exceed 3.1 billion tons) and the majority shareholder of this project. As before, she is accused of falling behind the production schedule and having problems with the sale of sulfur produced along with oil. After the scandal with the Italian Eni, which was developing the Kashagan field (which faced environmental claims that led to a halt in work), experts began to doubt Chevron’s prospects in Kazakhstan. But, as it turned out, it was in vain. “Over the years of Chevron’s activity in Kazakhstan, our cooperation has generally been successful. It will serve as an example of cooperation between foreign investors and the government of our country,” said the country’s President Nursultan Nazarbayev following the negotiations. What the parties agreed on is not officially reported. According to a high-ranking source in the Kazakh presidential administration, the Americans will be forced to build a sulfur recovery plant, that is, a chemical production facility.The operator of the Tengiz field development is Tengizchevroil, 50% of which is owned by Chevron, 25% by ExxonMobil, 20% by Kazmunaigas and 5% by LUKARCO, a company controlled by LUKOIL. The production volume is 14.3 million tons of oil per year, which is supplied through the Caspian Pipeline Consortium to Novorossiysk. The main problem in the work of Tengizchevroil is the need to sell sulfur produced along with oil (the oil in the field is high-sulfur and undergoes special purification). In April of this year, the consortium was threatened with a lawsuit from the government in connection with sulfur reserves, which had already reached 9 million tons (the size of two football fields). Tengizchevroil has promised to spend about $300 million a year on environmental programs. But, according to Kazakh senator Gani Kasymov, almost six months later, the environmental situation has not changed. Therefore, last week he sent a request to the government of the country demanding that Chevron be banned (according to Kazakh experts, this was done not without the knowledge of Mr. Nazarbayev). “The republic’s public is closely monitoring the government’s actions to protect the economic interests of the state,” Reuters quotes Mr. Kasymov’s request to Prime Minister Karim Masimov. - This also applies to the issue of development of the Kashagan field, where we all support the active actions of the government. In this regard, I ask you to pay attention to the work of the Tengizchevroil company, which through its actions causes enormous harm to the environment and the population not only of the Atyrau region, but also of the entire western region. If the issue of 9 million tons of emitted sulfur is not resolved, then I ask you to ban the activities of this company in Kazakhstan until the sulfur is completely recycled.”
However, Astana is unlikely to be able to put pressure on Chevron, as was the case with Eni, which was banned from working at Kashagan and demanded to increase Kazmunaigas’ share in the project. Although, of course, he wants to: the cost of a barrel produced at Tengiz, according to experts, is only $2. The problem is the same sulfur, and it seems that no one is yet able to solve it. “Sulfur can be used as a fertilizer, but no one needs it on the market now, and therefore it is simply impossible to sell it, especially in such a huge volume,” says Mikhail Perfilov, development director of the Argus oil agency. Therefore, it is impossible to replace Chevron at this field - no company will go there, since it is unprofitable to take on the responsibility for marketing sulfur. And if you increase the share of the state-owned Kazmunaigas, it turns out that Mr. Nazarbayev’s government itself cannot solve environmental problems. In addition, Chevron is the largest foreign investor in the oil industry of Kazakhstan: in addition to its share in Tengizchevroil, it owns 20% of the development operator of the Karachaganak field. Therefore, the country’s leadership hardly needs unnecessary conflicts with the company.
Nevertheless, the top officials of the American company came to Kazakhstan and decided to study the situation on the spot. Last Friday, Chevron CEO David O'Reilly met with Karim Masimov and Nursultan Nazarbayev. A statement from the press service of the country's president states that "during the meeting, David O'Reilly informed the head of state about the plans of the board of directors of the Chevron corporation to visit Kazakhstan - the company's full management will come to Atyrau this week and get acquainted with the Tengiz field "and the progress of expanding production capacity." In turn, Mr. O'Reilly told Interfax: “The President of Kazakhstan expressed deep satisfaction with the activities of our company at the Tengiz field. Both the President and the Prime Minister expressed their support for our company during our meetings.”
By the way, it is planned to expand production at Tengiz quite significantly - from 14.3 to 20-25 million tons per year next year. It is obvious that if this plan is implemented, the volume of sulfur in the Atyrau region will greatly increase. There is no clear answer to what will happen to the environment in this case. The Kazakh authorities expect Chevron to build a sulfur recovery plant, because, they believe, the project operator should be responsible (that is, pay) for the environmental condition in the oil production area. True, the company still called the sulfur storage conditions in accordance with all standards - both Kazakh and international. Only the average life expectancy of men in Atyrau is now 40 years.