UPDATE 1-Kashagan oil restart not expected this year

Mon Apr 28, 2014 11:38am EDT

(Recasts lead, adds background)

ASTANA, April 28 (Reuters) - Output at Kazakhstan's huge Kashagan oilfield is not expected to restart this year after an investigation revealed that long stretches of oil and gas pipelines may need to be fully replaced, the project consortium said on Monday.

The Central Asian nation of 17 million relies heavily on oil exports, and the setback in development at its flagship field could be a drag on state coffers.

Production at the offshore deposit, the world's biggest oil find in 35 years, started in September but then halted in early October after the discovery of gas leaks in the $50 billion project's pipeline network.

"The current assessment, based on the results of an investigation, is that both the oil and the gas pipelines might have to be fully replaced," the consortium said.

The possibility that Kashagan's entire oil and gas pipeline network could be replaced was raised by a Reuters article earlier this month.

The field's oil is 4,200 metres (4,590 yards) below the seabed at very high pressure, and the associated gas reaching the surface is mixed with some of the highest concentrations of toxic, metal-eating hydrogen sulphide (H2S) ever encountered.

The multinational group of oil companies developing Kashagan has identified stress cracking due to sulphur-laden gases as "the root cause of the pipeline issues" at Kashagan.

Much of Kashagan is built on artificial islands to avoid damage from pack ice in the Caspian, which freezes for five months a year in temperatures that drop below minus 30 Celsius (-22F).

The North Caspian Operating Company (NCOC) consortium includes Eni, Exxon Mobil, Royal Dutch Shell , China's CNPC, Japan's Inpex and Kazakh state-run KazMunaiGas. (Reporting by Raushan Nurshayeva; writing by Vladimir Soldatkin and Oleg Vukmanovic; Editing by Alessandra Prentice and Jane Baird)

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