Kazakh energy minister says new Tengiz expansion cost too high

FILE PHOTO: Minister of Energy of the Republic of Kazakhstan Kanat Bozumbayev attends a meeting with members of the government in Nur-Sultan, Kazakhstan May 28, 2019. REUTERS/Mariya Gordeyeva

NUR-SULTAN (Reuters) - Kazakhstan believes an increased cost estimate for the Tengiz oilfield expansion is too high and wants oil majors Chevron CVX.N and ExxonMobil XOM.N to review it, Energy Minister Kanat Bozumbayev said on Wednesday.

Chevron, which leads the consortium developing one of the Central Asian nation’s biggest oilfields, said last week that cost overruns would balloon project expenses by 25% to $45.2 billion. It blamed a one-year delay and higher construction and equipment costs..

“Generally, we told them that in our opinion the sum is too high,” Bozumbayev told reporters when asked about Tengiz costs.

“This means poor planning.”

Chevron and ExxonMobil have sent experts to Kazakhstan to review the project and it was too early to talk about the final figures, he added.

Kazakh state energy firm KazMunayGaz KMGZ.KZ and Russia's LUKOIL LKOH.MM are partners in the Tengiz joint venture.

Additional expenses would need to be compensated from future revenue, eating into Kazakhstan’s share of profits. The Kazakh government has repeatedly locked horns with its partners in giant projects such as Tengiz, Kashagan and Karachaganak, with a $1.6 billion dispute regarding the latter in arbitration.

Oil is the former Soviet republic’s main export, the bulk of which comes from three large fields developed mostly by Western energy majors.

The Tengiz expansion is set to increase the field’s output by 12 million tonnes a year by 2025/26 from the current 29 million tonnes a year.

Reporting by Tamara Vaal; Writing by Olzhas Auyezov; Editing by Richard Pullin