Kandym – Khauzak-Shady Mega Project

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The Kandym – Khauzak-Shady Mega Project is being developed by Lukoil Uzbekistan Operating Company (LUOC), a joint venture between Lukoil (90%) and National Holding Company Uzbekneftegaz (10%). The gas and condensate fields are located in the Karakul district of Bukhara Province, Uzbekistan. The project was initiated as a result of the production sharing agreement (PSA) signed between the two companies in June 2004, which came into effect in November that year. An initial term of 35 years was set for the PSA, but this was extended by an additional seven years to 2046 in November 2014. The project is being developed in phases. Drilling activities for Khauzak-Shady sections of the Dengizkulskoye field started in mid-2006 and production from Khauzak began in November 2007. Meanwhile production from West Shady block started at the end of 2011. The development of the Kandym Group of fields is comprised six gas condensate fields. These are Kandym, Kuvachi-Alat, Akkum, Parsankul, Khodzhi and West Khodzhi. Worth in these fields will also be carried out in phases. The first phase is known as the Kandym Early Gas Project. It involves the development of the northern part of Shady field and Kuvachi-Alat fields, which began in October 2013. First production from this phase was achieved in mid-2015. The Khurais oilfield development was the largest of several Saudi Aramco projects intended to boost the production capacity of Saudi Arabia’s oilfields from 11.3 million bpd to 12.5 million bpd by 2009. Khauzak reached its designed gas production rate of three billion cubic metres a year in November 2008. The production rate increased to approximately four billion cubic metres a year in 2012. Production from the mega project in 2013 was 3.74 billion cubic metres of gas and 13,200t of gas condensate. In November 2014, a booster compressor station was started up at Khauzak, which is expected to boost the annual production by an additional 20%. Construction of the facility, along with the upgrade of the gas primary treatment facility, was initiated in May 2013. Over the PSA period, the fields are expected to collectively produce 330 billion cubic metres of gas, including 82 billion cubic metres from the Khauzak-Shady field, and 248 billion cubic metres from the Kandym group of fields. Production from Kuvachi-Alat field of the Kandym Group and Northern Shady site (Dengizkul field) as part of Kandym Early Gas Project began in 2015. Production from the mega project is expected to peak at 11 billion cubic metres a year in the near future. The development of the Kandym Group of Fields Project aims to attain an ultimate gas production rate of 8.1 billion cubic metres a year. Phase 1 of the development, the Kandym Early Gas Project is further being developed in two stages. The first stage of phase 1 aims to produce and treat 2.1 billion cubic metres of gas annually, which will be transported to Mubarek gas processing plant. This phase also involves the development of 21 production wells, two gas primary treatment facilities, a power substation at Kuvachi-Alat field, 130km of field gas pipelines, 150km of power lines, and 170km of roads, as well as 13 bridge crossings. The second stage involves the installation of booster compressor stations, drilling, and completion of 13 new production wells. The remaining fields, Akkum, Parsankul, Khoji and West Khoji will be developed in phase 2. This will expand the complex by adding eight multiple well platforms and 98 producing wells, as well as gas gathering and gas compressor stations, condensate and sulphur prill loading terminals. Three process lines at the Kandym gas processing facility will also be added, as will gathering pipelines and export gas pipelines, transport infrastructure, and water and power supply facilities.The overall project is expected to be completed by 2024. LUKOIL began construction on the Kandym Gas Processing Complex (KGPC) in April 2016. The KGPC comprises a gas treatment plant, a natural gas gathering system, 114 producing wells, 11 well pads and four gathering stations. The development of the fields is estimated to require an investment of more than $3bn. A project financing of $500m is being provided by BNP Paribas (Suisse), Crédit Agricole Corporate and Investment Bank, The Korea Development Bank, Asian Development Bank (ADB) and Islamic Development Bank (IDB). ADB and the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group are providing the political risk insurance for the lenders. The contract for the feasibility study and detailed design of the Kandym gas processing complex was awarded to Hyundai Engineering and its subcontractors, which are Scatra and East-West Engineering. The centrifugal compressors for the booster compressor station at Khauzak-Shady block were supplied by MAN Diesel & Turbo.

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