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Stanley Reed

Photos By Nanna Heitmann

TENGIZ OIL FIELD, Kazakhstan – in a windy land of salt flats and wild horses, investors are pouring money into one of the largest and most profitable oil fields outside the Middle East.

Oil has been pumped from this remote plain since the early 1990s at a pace that would have depleted other fields by now. However, it is still whipping and there is much more to come.

The field’s operators, led by us giant Chevron, are challenging traditional industry wisdom with a huge expansion that they hope will increase production by nearly 50 per cent, to the rarefied mark of a million barrels a day. They expect the oil field to be bright for decades.

But the project is complex and global oil demand is flattening. The question hangs over the expanses of workers and heavy machinery: is this a smart way to spend $ 37 billion?

About 48 thousand people are working on the expansion, most of them Kazakhs, many live in hostels. Equipment weighing hundreds of tons – clumsy sections of power plants and oil refineries-arrive daily from factories in Italy, Korea and Turkey. After traveling through Russian waterways to a newly built port on the Caspian, the segments are towed about 40 miles to an oil field, where a 3,200-ton crane lifts them and eases them into place.

Wood Mackenzie, a market research company, describes the effort as the industry’s largest venture of the past decade.

“This is a project that every company would like to have if they could,” said J. Robinson West, managing Director of BCG energy impact Center, a consulting firm.

The expansion is about three years after completion, but the Tengiz oil field already provides nearly a quarter of Kazakhstan’s national income and about a quarter of Chevron’s profits. Chevron approved the project in 2016 at what may have seemed an inopportune time: the world was awash with oil and the industry is still reeling from the price collapse that began in 2014. The expansion of the Tengiz operation has proven to be a good bet because the field has worked so well in the past, and because Chevron attaches great importance to its relationship with Kazakhstan.

“When we looked at it, it was a major capital project that we thought was worthy,” said Todd levy, Chevron exploration and production President for Europe, Eurasia and the Middle East.

Still, expansion remains a calculated gamble.

It all starts with the weather. Ice on the Caspian sea could stop the supply of equipment, idling thousands of workers. Chevron has had luck so far, officials said, and the project is more than half finished.

Making progress in Tengiz also requires maintaining good relations with Moscow, which has not forgotten that Kazakhstan was a Soviet Republic until the early 1990s. Russia loomed over its neighbor along the 4,200-mile border they share, with equipment bound for Tengiz moving through Russian waterways and crude oil from Tengiz being shipped through a Russian port on the Black sea. This suggests that the Russian company LUKOIL is a partner in a joint venture known as Tengizchevroil.

At some point, Kazakhstan may reconsider its relationship with Chevron and Exxon Mobil, the other U.S. company involved in the expansion. Chevron is trying to stay on the side of government officials by engaging in frequent dialogue, but some analysts say Kazakhstan is undergoing a political transition after three decades under the same leader. The new government, analysts say, may decide that the terms of its multi-year agreement are too favorable for oil companies and try to rewrite it.

Hiring and training tens of thousands of new workers is an ongoing challenge. All of them must be fed, housed and transported with performance in mind. “Do you have the ability to manage this effectively, efficiently, safely?””, Said Jim Mayeaux, site Manager assigned to the Exxon Mobil operation.

For young Kazakh specialists, the project is a rare frame in the big time. 29-year-old Togjana Abdeshova started working in Tengiz in 2011, before the expansion began, and is undergoing engineering training from Chevron. “This experience will help us work in any other factories around the world,” she said.

Expatriates like John Omelchenko, 58, a Chevron drilling Executive known as johnny O, are introducing the latest Tengiz techniques. Having arrived from Maryland, Mr. Omelchenko works several weeks: 28 days, 28 days off.

He relishes remote drilling sites where pet dogs scare off foxes and wolves. But he said the long absence from home was tough for his wife. “The car or the fridge always breaks down” in the months he’s away, he said wryly.

Maintaining peace in the isolated workforce of many ethnic groups is another challenge. Kazakh workers complained of low wages and working conditions compared to expatriates, and problems filed in violent fracas in June that left many workers affected.

The Tengiz project is costly and complex, but the most complex risk may be broader concerns about the role of fossil fuels in climate change. In short, whether the demand for oil to decline to profit from the full flood of expansion? With the exception of the recession, global oil consumption tends to grow. But climate problems are accelerating the transition to alternative energy, and may ultimately reduce oil demand.

Carbon Tracker, a nonprofit group that advises investors on risk, argues that future restrictions on oil consumption make it unlikely that Chevron can earn an acceptable return on the billions it spends on Tengiz. Andrew Grant, a senior analyst at the group, said the expansion of oil fields “amounts to a bet on the inability” of the world to keep temperatures within the limits set by the Paris climate agreement.

For Tengizchevroil, which is made up of Chevron, with a 50 percent stake; Exxon Mobil, at 25 percent; Kazakhstan’s national oil company KazMunayGas, at 20 percent; and LUKOIL, at 5 percent, the potential benefits still outweigh the risks.

One simple reason is that oil fields the size of Tengiz, which, including a smaller nearby field, are estimated to have up to 11 billion barrels of recoverable oil, are rare.

“This is the quintessential project in my career and really in the industry today,” said Mick Kraley, a veteran Chevron Manager who is leading the expansion.

But Tengiz, which Soviet geologists discovered in the 1970s, is also more complex than most other areas. Its oil comes out of the ground with a potentially deadly gas, hydrogen sulfide. Local oil workers still talk about a towering well in 1985 that spewed pollution for miles.

The need to create huge installations to safely separate oil from natural gas and hydrogen sulfide gave Chevron the opportunity to open when the Soviet Union collapsed in 1991. Nursultan Nazarbayev, who was Kazakhstan’s leader at the time and remained in the job until retiring in March, wanted to bring in a reliable operator to generate cash to strengthen his young independent country of 19 million people.

“To do it yourself it would be very difficult, says Meiram of Shlenov, head dispatcher of the company “Tengizshevroil”. In 1993, Mr. Nazarbayev signed a 40-year contract with Chevron, which most observers said was mutually beneficial. Tengizchevroil is the largest taxpayer in Kazakhstan.

Mr. Nazarbayev’s successor, Kassym-Jomart Tokayev, now runs the country, and Chevron’s top Manager in the country seems sanguine. Eimir Bonner, who is CEO of Tengizchevroil, said she sees no problem if Chevron continues to deliver on its promises to meet production goals and treat workers well.

“We had a very successful, transparent relationship,” Ms. Bonner said. “I’m not worried at all.”

Others are somewhat more guarded. Francisco Monaldi, a fellow at rice University’s Baker Institute who has worked in Kazakhstan, said “any transition in authoritarian rule” could lead to political instability. This, he added, could push the government to grab a bigger share of the return on investment like Chevron’s.

Ms. Bonner, a native of Northern Ireland, runs the joint venture from offices in Atyrau, the country’s oil capital, while her husband, an oilman, stays at home with his two daughters. She insisted that Chevron’s regular interaction with Kazakh officials and the steps taken by the company to combat corruption, which is a serious problem for business in Kazakhstan, lead the project in the right direction.

“There is always a risk when you are a big business, like our business anywhere in the world, and when you spend the amount of money you spend,” she said.

Because the project is so important to Chevron’s future, the company has assembled a team of expatriate stalwarts to push it over the line. In addition, a team of biologists monitors the impact of earthworks on seals and birds. Although the steppes may seem barren, they nurture wildlife. On the way to Northern Europe, orange clouds of painted butterflies swarm, and herds of wild horses roam among the oil rigs.

For some industry veterans, Tengiz seems like a kind of last hurrah.

“This is our Playground,” said Jay Pence, a construction Manager from Port Arthur, Texas, walking to a giant crane as heavy vehicles rumbled past. “For those who love this stuff, it’s a blast.”

Stanley Reid has been writing from London for The Times since 2012 on energy, the environment and the middle East. Prior to that, he was the London Bureau chief of BusinessWeek magazine. @stanleyreed12 and Facebook

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