The operator of Kazakhstan's Kashagan field, the North Caspian Operating Company (NCOC), faces significant delays in its plans to increase oil production due to global supply chain constraints and project management hurdles. The original target was to boost output to 500,000 barrels per day (bpd) by 2029 through a two-step increase of 100,000 bpd, enabled by constructing two associated gas processing plants to handle rising gas volumes from the maturing reservoir.

Project Delays and Supply Chain Issues

The first gas processing plant, being built by state company Qazaqgaz, is now expected to be commissioned by the end of this year, three years behind its original schedule. This facility will process 1 billion cubic meters per annum (Bcm/a) of gas, allowing oil production to reach 450,000 bpd. However, the second plant, critical for the final 50,000 bpd increase, is facing more severe delays. Following the completion of its preliminary front-end engineering and design (pre-FEED) phase, the project has stalled. High global demand for turbines and industrial equipment, driven by energy projects and data centers, is threatening to push the start-up of this second facility to 2031 at the earliest—nearly two years behind the phase two schedule.

Management and Partnership Challenges

Due to cost concerns among NCOC's international shareholders, responsibility for building both gas plants was transferred to Qazaqgaz in 2020. In 2024, Qazaqgaz signed a preliminary deal with Qatar's UCC Holding to manage and secure investment for the second plant. While Qazaqgaz states that work with UCC continues and plans are being laid to proceed into the full FEED phase, communications have reportedly paused. UCC had been in discussions with a consortium led by Technip Energies' Genesis Energies, as well as Fluor Corporation and Wood, regarding the FEED tender, but no update on the tender announcement has been provided.

Pipeline Construction and Contracting Uncertainties

While Qazaqgaz handles the processing plants, NCOC is responsible for building the connecting pipelines. The operator aims to select suppliers for sour gas pipeline and engineering, procurement, and construction (EPC) contractors later this year. A major offshore pipeline contract from Kashagan's D-Island is of particular interest, with potential bidders including Ersai, Bumi Armada Caspian, and SemArco. NCOC has budgeted up to 615 billion tenge ($1.24 billion) for these pipeline projects. However, final contract awards may be delayed or cancelled due to uncertainty over the second plant's timeline and shareholder concerns about new long-term investments in a project that has yet to return its estimated $50 billion initial outlay.

Broader Context and Shareholder Concerns

These project delays are compounded by tensions between key foreign shareholders (Shell and Eni) and the Kazakh government. An additional concern is a $160 billion international arbitration suit filed by Kazakhstan against the international shareholders for historical delays in starting Kashagan's production. Furthermore, Kazakh authorities have indicated they do not intend to extend the current production sharing agreement beyond its 2041 expiration. A third gas processing facility (6 Bcm/a capacity) is identified as eventually necessary to increase Kashagan's output to a targeted plateau exceeding 700,000 bpd, highlighting the long-term scaling challenges.