Giant oil field in Kazakhstan is a ticking time bomb
The Kashagan oil field in the Caspian Sea contains immeasurable quantities of the black gold. However, mining it is highly complicated, with enormous risks for an environmental disaster and minimal gains for the local population. Should an ecological catastrophe happen, the relative political calmness of the Caspian Sea region would be endangered.
Kashagan’s offshore oil field is situated around 5 kilometres under the bottom of the sea, in the sector belonging to Kazakhstan. Measuring 75 by 45 kilometre, it is the biggest oil field to have been discovered in the last forty years. At 80 kilometres, Atyrau is nearby. From this Kazakhstani town, oil multinationals and their numerous expat crews direct the exploitation of Kashagan and other oil fields in the region. The eyes of the world are on Kashagan as well, as shown by the UK’s Prime Minister David Cameron’s visit at the end of June.
Together with President Nursultan Nazarbayev, who has been in power in Kazakhstan for over 20 years, Cameron celebrated the launch of the production facilities in Atyrau. On September 11th, after a delay of more than five years, the first drop of oil was brought to the surface. The initial production should reach 180.000 barrels a day. By 2020, plans are to expand towards 1.5 million barrels per day. It is estimated that the Kashagan oil fields contain at least 35 billion barrels, but due to technical constraints only 13 billion of those can be recovered.
While we’re having breakfast at the hotel in Atyrau, we can’t help but notice a large presence of Italians. This is no coincidence, as the Italian energy corporation Eni owns several buildings close to the hotel. Eni’s subsidiary Agip is involved in the realisation of the Kashagan project, together with other large international actors. Among the shareholders one finds first and foremost large multinationals like Eni, Total, Exxon Mobil, Royal Dutch Shell, Conoco Philips and Inpex, as well as the Kazakhstani KazMunaiGas (KMG), which owns 16.81 percent of the shares. Some voices argue that Kazakhstan got a remarkably bad deal during the division of the shares. Capital also had to be brought in from outside Kazakhstan, as costs during the initial phase rose from 24 to 46 billion dollars due to technical complications. Amongst KMG’s investors, we find banks like BNP Paribas and ING.
International companies pull the strings in this project, but they won’t need to bear the full responsibility in case of an oil leak. “As it is right now, Kazakhstan will have to carry the costs in case of a disaster,” Abdulla Amin points out. He’s working in Atyrau for an American company that analyses environmental risks and plans emergency strategies for several oil companies. “Unfortunately, oil leaks are not rare in Kazakhstan.” He shows us his own pictures of soil covered in oil, and small oil ponds. “Around 600.000 hectares of land in the Kazakhstani part of the Caspian Sea region is covered by a thick layer of oil, which is polluting soil and ground water. Should there be an oil disaster in the Caspian Sea, the existence of this fragile ecosystem will face a serious threat, especially because Kazakhstan has not decided yet on a plan to deal with oil leaks.” That Kazakhstan isn’t prepared yet for dealing with oil leaks has been confirmed by the Minister for the Environment, Nurlan Kapparov. Still, the risks are high, not in the least due to the technical challenges in exploiting the Kashagan field.
Biggest technical challenge ever.
It’s a balmy Saturday night in Atyrau when we meet a 25-year-old Kazakh, who prefers to remain anonymous. He’s employed in the nearby Bolashak refinery, where the crude oil of Kashagan is processed. “The Northern Caspian Sea region is characterised by an extreme climate – with winter temperatures down to -40 degrees centigrade, and summers seeing peaks of 40 degrees. Since the sea is quite shallow in that area (between 4 and 10 meters), it is covered with ice from November until March. On top of that, the water level varies by up to two meters. These are challenging circumstances for oil drilling and the work of the engineers is made even more difficult by the depth at which the oil is situated: more than 4 kilometres below the sea bottom, whereas other oil fields in the Caspian Sea sit around 1.5 km of depth. This depth also causes the oil to be stored under very high pressure (800 bar) and high temperature (125 degrees). These circumstances made it impossible to construct a classical offshore oilrig, which is why a network of artificial islands was designed. The oil is pumped up onto these islands and transported via a pipeline to the Bolashak refinery.”
Another challenge is that the oil is situated in a reservoir that contains between 15 and 20 percent of hydrosulphide – the biggest concentration ever seen in the offshore oil industry. After separating it from the oil, a limited part of the sulphide can be used to generate energy, a second part will be sold, and the last part will be injected back into the soil. Due to the pressure in the sea bottom this is a highly risky endeavour. A part will remain to be stored as well, which could cause a risk to public health. Sulphur itself is not dangerous but when it is stored at high temperature, it’s chemical structure can change and produce toxins which in turn can easily be spread by the wind, end up in local communities and cause acid rain across the continent.
The seal’s birthplace
The Caspian Sea is the world’s largest salt-water lake. Since it is not connected to an ocean, its ecosystem is highly vulnerable. The Northern Caspian Sea used to be a protected area, but Kazakhstan and Russia opened it up for oil and gas drilling after the collapse of the Soviet Union. Nowadays drilling, pipelines and heavy international marine transport threaten the environment. Oil leaks and the release of sulphides are not the only threats as the artificial oilrigs have been constructed right in the middle of the sturgeon’s migration route and the birthplace of the Caspian seal.
In her office in Atyrau, the director of local environmental organisation Center Globus, Galina Chemova, explains the situation: “En route to the Ural river, beluga sturgeon pass through the Northern Caspian Sea, right where the islands have been installed. The beluga is renowned around the world for its roe – the most expensive caviar on the planet. It is facing difficulties though: it is being caught at too high a level, with an illegal fishing sector allegedly as large as the legal one. Another problem is the pollution in the surrounding rivers, including the Ural, the beluga’s breeding place. The exploitation of the Kashagan oil field will place additional stress on the endangered population of this species”.
“It’s not only the sturgeon that are in danger,” Galina states. “The continued existence of the Caspian seal, one of the few seal species living in inland waters, is threatened as well. This species is listed as threatened by the IUCN (International Union for the Conservation of Nature). Its population has dropped from over a million animals in 1900 to 100,000 today. The seal reproduce difficultly and even though the hunting for hides and seal oil has been regulated and limited, roughly 10000 are killed each year by the sturgeon fishing industry. Collateral damage.
The technical challenges for the Kashagan field are so enormous, that the question is not if an environmental catastrophe will happen, but when.
Environmental organisations have discovered an alarming impact on the region’s biodiversity since the start of the test drillings in 1999. Caspian seals and birds have been dying at heightened rates, without a definable cause. The populations of beluga sturgeons and other fish species have plummeted as well. Professor Diarov, who directs the independent Atyrau Institute of Oil and Gas, fears the development of the oil industry in the coming decades will cause the complete biological death of the Caspian Sea, due to the release of high concentrations of toxic sulphides. Remarkable is that not only scientists and environmental organisations voice their concern: the employee of the Bolashak refinery, as well as risk analyst Abdulla state that the technical challenges for the Kashagan field are so enormous, that the question is not if an environmental catastrophe will happen, but when.
Oil boom increases inequality
Not only the environment is under threat, but the population of the Caspian coastal areas as well. Inhabitants are already exposed to toxic sulphides from other oil fields and refineries – to the extent that lung diseases are the most common health problems in Atyrau. In some regions people were forced to move, as happened in a village 64 kilometres away from the Tengiz oil field. Local authorities ordered 3000 people to move because of health problems being caused by a mountain of 6 million tonnes of sulphur stored on the surrounding prairies. At the moment only 80 families have moved, even though the concentration of toxic sulphides in the air is set to rise higher yet when the new Bolashak refinery will start processing Kashagan’s oil at 30 kilometres from Atyrau.
Life is even harder for those employed in the oil industry. While trying to catch a glimpse of the new Bolashak refinery, we meet a taxi driver that worked in the construction of the Kashagan islands. The balding thirty something flashes a golden-toothed grin when we negotiate the price for our ride. Because his job on the drilling islands only lasted for 3 months, he now uses his car as a cab – which is not as easy as it sounds, with the prairie sand clogging up his Lada’s engine a dozen of times during our trip. When we finally reach our destination, we can’t find a trace of the refinery: the surrounding area is closed off hermetically and an imposing checkpoint controls the access to the vast terrain. As we watch trucks and cars enter and exit, the friendly man at the counter informs us that we can’t enter.
On our way back our driver becomes chattier: “I worked on the construction of the artificial islands and also on the Tengiz oil field, which is probably where I got my cataract from.” He points to his glassy eyes and adds, “I got 500 dollars a month for my work on the Kashagan project.” This seems like a decent salary in a country where a lot of people have to make do with less than 200 dollars a month. But in oil-booming Aturay, prices have shot up compared to the rest of Kazakhstan. We find near Western prices in the supermarkets and hotels – which hardly seems sustainable for most of the city’s population. Unemployment and poverty remain high, because the oil industry only needs a limited amount of workers – and often for temporary, low-skill jobs. On top of that, oil corporations hire a lot of foreign workers.
At the same time, there’s a select group of people driving around in huge SUVs, flaunting the latest smart phones and spending their holidays in Turkey. The gap between the rich and the poor is enormous, with the wealth created by the oil boom reserved for a happy few.
Rampant corruption and censorship.
Corruption is hardly a rare occurrence in Kazakhstan, and scandals rear their head regularly in the Kashagan project. Eni has been accused by the court of Milan, for having given a bribe to the son-in-law of Kazakhstani President Nazarbayev. Several people we talked to confirmed what was shown in a recent survey: corruption did not exist in its current scale when Kazakhstan was still a part of the USSR. The country’s independence created loads of opportunities for getting rich quick, both legally and illegally. And things are no different in the oil industry.
At the same time, free speech is under attack in Kazakhstan. Amnesty International criticised Cameron’s meeting with Kazakhstan’s President in June, claiming that the UK’s Prime Minister prioritises economical interests over the population’s right to free speech. Cameron defended his visit in The Guardian, stating that the UK is caught in a global race for jobs and investments, and that Kazakhstan is one of the fastest growing economies in the world. He added that over 30 British companies had joined him on his mission, and that he hoped to close trade agreements worth over 700 million pounds (825 million Euros). He did not bring up human rights issues during his visit, even though police killed at least 14 people in 2011 when oil workers protested for higher wages in Zhanaozen, which lies 200 kilometres from Atyrau. According to an Atyrau-based journalist, the situation in Zhanaozen is still volatile.
Environmental organisations face problems when trying to do their job in Kazakhstan. Galina Chernova of Center Globus told us that her emails sometimes disappear before she gets a chance to read them. Another prominent environmental activist saw all data on her laptop erased remotely last year. A couple of weeks ago she met a greater intimidation when burglars stole her computer and hard disks during her holiday.
In politics, ecological progress is blocked as well. In 2011, the Green party – who denounced the ecological impact of the Kashagan project - was removed from the election lists. Officially this was because it did not fulfil the conditions for taking part in the parliamentary elections. In Almaty, we meet Serikhzan Mambetalin, who at the time was leading the Green party. “Our country went down the drain,” he says. “Our so-called democracy is non existent and multinationals are coming over here and destroy our environment.” He blames Europe as well: “the Caspian Sea is facing an environmental disaster, and Europe is not taking any action, even though the sea is partly European as well.”
Militarising the Caspian Sea
After the collapse of the Soviet Union, the Caspian Sea has suddenly had to be shared by 5 countries: Iran, Russia, Azerbaijan, Kazakhstan and Turkmenistan. The legal state of the Caspian Sea’s division has not been finalised yet, though Kazakhstan, Russia and Azerbaijan have decided on which sectors can be used for the geopolitical and economical development of each country. According to these treaties, the Kashagan field is in the Kazakhstani sector. The Southern part of the sea has been disputed over more than 10 years, with strong disagreement on the ownership of oil fields and the transport of oil and gas. This is part of the reason why all five countries have increased their military presence in the Caspian Sea ever since the fall of the Soviet Union. This means that small disagreements can escalate easily into large-scale conflicts. The strategic importance of the Caspian Sea is not just linked to oil and gas; it’s a key to international water access and an important asset for the fishing industry. An ecological catastrophe caused by the exploitation of the Kashagan field could increase tensions even more.