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UPSTREAM
Asia-Pacific
Development The Karachaganak Field is being developed
in phases. Phase 2, which included construction
of natural gas injection and liquids-processing facilities
and an increase in liquids export capability via
the CPC pipeline, was completed in the third quarter
2004. Before the Phase 2 development, production from
Karachaganak was processed in Orenburg, Russia.
In the fourth quarter 2004, the Phase 2 liquids processing
capabilities and CPC pipeline access allowed
daily production of approximately 219,000 barrels of
liquids (41,000 net barrels) and 750 million cubic feet
of natural gas (140 million net cubic feet). In addition,
the project achieved a daily natural gas injection rate
of 442 million cubic feet. Access to the CPC pipeline
accommodates sales of approximately 150,000 barrels
per day of processed liquids (28,000 net barrels) to
world markets. The remaining liquids are still sold into
the Russian market. The first CPC pipeline loading of
Karachaganak liquids out of Novorossiysk took place
in June 2004. Proved developed reserves associated
with Phase 2 have been added over the 2002 to 2004
time period. The Karachaganak operations are conducted
under a 40-year concession agreement that expires in 2038.
The next phase of development, Phase 3, was
under evaluation in early 2005. This project presents an
opportunity to produce larger volumes of raw natural
gas and further extend the duration of the liquids plateau
rate. The third development phase would be linked
to the construction of a natural gas processing facility
by a third party to enable export of processed gas.
Construction of this facility is outside the terms of the
Karachaganak production-sharing agreement and is
dependent upon achieving an acceptable gas sales price
to support the expansion. Timing for the recognition
of Phase 3 reserves and an increase in production are
uncertain and depend on achieving a gas sales agreement.
Tengizchevroil
ChevronTexaco holds a 50 percent interest in TCO,
which is developing the giant Tengiz and Korolev crude
oil fields, located in western Kazakhstan, under a 40-year
concession that expires in 2033.
Production Average 2004 total daily production was
298,000 barrels of crude oil (131,000 net barrels), 453
million cubic feet of natural gas (208 million net cubic
feet) and 27,000 barrels of natural gas liquids (12,000
net barrels). The 2004 production levels represent a
7 percent increase over 2003 production levels on a
total oil-equivalent basis.
Development TCO is undertaking a significant expansion
composed of two integrated projects referred to
as Second Generation Project (SGP) and Sour Gas
Injection (SGI). At a total estimated cost in excess of
$4 billion, these projects are designed to increase TCO’s
total daily crude oil production capacity from 298,000
barrels to between 430,000 and 500,000 barrels by late
2006, depending on the final effects of SGI.
SGP involves the construction of a large processing
train for treating crude oil and the associated sour
gas. The SGP design is based on the same conventional
technology employed in the existing processing trains.
In addition to new processing capacity, SGP involves
drilling and/or completion of 55 production wells in
the Tengiz and Korolev reservoirs to generate the volumes
for the new processing train. Proved undeveloped
reserves associated with SGP were recognized in 2001.
Some of these reserves were reclassified to proved
developed in 2004 based upon completion of certain
project milestones. Over the next decade, ongoing field
development is expected to result in the maturation
of the current proved undeveloped reserves to proved
developed.
SGI involves taking a portion of the rich, sour
gas separated from the crude oil production at the
SGP processing train and reinjecting it into the Tengiz
and Korolev reservoirs. ChevronTexaco expects that
SGI will have two key effects. First, SGI is expected to
reduce the requirement for sour gas processing capacity
at SGP, thereby increasing liquid production capacity
and lowering the quantities of sulfur and gas that would
otherwise be generated. Second, over time it is expected
that SGI will increase production efficiency and increase
recoverable volumes because of the maintaining of higher
reservoir pressure from the gas reinjection. Between
2006 and 2008, the company anticipates recognizing
additional proved reserves associated with the SGI
expansion. The primary SGI risks include uncertainties
about compressor performance associated with injecting
high-pressure sour gas and subsurface response to
injection.
Essentially all of TCO’s production is exported
through the CPC pipeline that runs from Tengiz in
Kazakhstan to tanker-loading facilities at Novorossiysk
on the Russian coast of the Black Sea. The CPC
pipeline, which is expected to be expanded in stages
through the end of 2008, is anticipated to fully accommodate
TCO expansion volumes by the end of 2007. In
early 2005, TCO was pursuing alternate transportation
routes to accommodate expansion volumes prior to the
end of 2007 as necessary.
KUWAIT
ChevronTexaco has a Technical Service Agreement
(TSA) with Kuwait Oil Company (KOC). This agreement,
first established in 1994, was renewed again in
early 2005. ChevronTexaco seconded technical and
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