Lukoil brings US$3.4bn Kandym gas complex on stream
Thursday, Apr 26, 2018
Russia’s Lukoil has started operations at a US$3.4 billion gas processing complex at the Kandym field cluster in Uzbekistan’s southern province of Bukhara. The project is viewed as central to the company’s plan to expand gas production to offset declining oil output in Russia.

In a statement on April 19, Lukoil said it had launched the 8 bcm per year gas complex eight months ahead of schedule and exactly two years since the start of construction work. The facility will convert raw gas produced at the six Kandym fields into marketable gas, stable condensate and sulphur. According to Lukoil, the complex will be brought to full capacity within a short timeframe.

“The Kandym gas processing complex is a unique project where the most challenging technical ideas and the world’s cutting-edge technologies were applied,” Lukoil CEO Vagit Alekperov said at a ceremony to mark the plant’s launch. “The project was completed in the shortest possible timeframe and on budget.”

Lukoil entered into a 90:10 production-sharing contract (PSC) with Uzbekistan’s state-owned Uzbekneftegas to develop the Kandym fields in 2004, starting gas production three years later. The company has drilled 77 gas wells at the fields, connected to a central gathering facility.

Lukoil is aiming to ramp up gas production in Uzbekistan to 16 bcm per year by 2020, up from 8 bcm last year. Around 10 bcm of this gas will come from the Kandym project, while the remaining 6 bcm will derive from the company’s other major development in Uzbekistan, the South-West Gissar block in the southern region of Qashqadaryo. Lukoil brought a 4.4 bcm per year gas processing complex on stream at South-West Gissar in September of last year.

Most of Lukoil’s future gas production in Uzbekistan will be sold to China, under an intergovernmental agreement between Beijing and Tashkent. The gas will be pumped along the Trans-Asia Gas Pipeline (TAGP) network and enter China in the northwestern province of Xinjiang.

Lukoil also said on April 19 it raised a US$660 million loan with a 10-year maturity to finance a share of the incurred construction costs at the Kandym gas processing plant. The funds will be borrowed from ING Bank, UniCredit Bank and Deutsche Bank. The Korea Trade Insurance is providing insurance for the loan.

In Russia, Lukoil is targeting a growth in gas production from 18 bcm in 2017 to 22 bcm in 2027, driven by higher yields at fields in the Caspian Sea and in Western Siberia. This should help offset an anticipated drop in oil output at the field’s mature fields.

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