Kazakhstan and a group of oil companies led by Chevron (cvx) have approved a $36.8 billion plan to boost production at the Central Asian country’s Tengiz field, a rare major investment in an industry hit by low prices and a boost to the local economy.
The field, one of the world’s biggest, already accounts for more than a third of total crude output in Kazakhstan, which is the biggest former Soviet oil producer after Russia.
Under the plan, Tengiz, in which Exxon Mobil (exxonmobil-corp) and Lukoil (lukoil-oil-company) also have stakes, will increase output to 39 million tons a year (850,000 barrels per day) by 2022 from 27 million tons currently, Kazakhstan’s Energy Ministry and its foreign partners said in a joint statement on Tuesday.
The Tengiz expansion is the biggest final investment decision in the oil industry this year and one of just three major projects in recent years, two others being Statoil’s Johan Sverdrup and Shell’s Appomatox.
The move comes at a time when energy companies are tightening their belts due to low oil prices. At its peak, Tengiz output will be roughly the same as the current oil production of Britain.
“Today we are witnessing a historic event not just for the oil and gas sector but for the whole country,” Kazakh Energy Minister Kanat Bozumbayev told reporters in Astana, sitting next to executives of Tengizchevroil, the joint venture operating Tengiz, and partner companies.
Bozumbayev said the expansion would generate about $120 billion in extra tax payments by 2033 when the Tengiz contract expires.
In a separate statement, Chevron said the total project budget included $27.1 billion for facilities, $3.5 billion for wells and $6.2 billion for contingency and escalation.
Tengizchevroil General Director Ted Etchison said the project would be financed by a combination of own funds, contributions from partners and borrowings. He did not provide any details.
Tengizchevroil sent final documents to banks for a $3 billion five- to seven-year loan agreement last week.
Kazakhstan holds a 20 percent stake in the venture via state oil and gas firm KazMunayGaz. Chevron owns 50 percent, Exxon Mobil has 25 percent and Lukarco, controlled by Russia’s LUKOIL, the remaining 5 percent.
Oil is Kazakhstan’s main export and the nation of 18 million has tripled output since gaining independence in 1991, although production has edged down in the last few years due to a natural decline at some mature fields.
Tengiz’s development contrasts with another giant Kazakh project, Kashagan, whose launch has been postponed by many years and which is due to start pumping in the fourth quarter of 2016.
Kashagan’s multiple technical problems – such as pipelines that leaked toxic gas – have slowed Kazakhstan’s ambitious strategy to boost output to 130 million tons a year (3 million barrels per day) and become one of the world’s top 10 producers.
The Astana government had initially planned to achieve that target by last year but has now pushed it back to 2020.