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* Corrosion likely crippling giant Kazakh field
* Design "should have been fine," expert says
* Big delay would affect Kazakh economic growth
* Oil companies have invested almost $50 billion
* Repairs could take months
By Stephen Jewkes and Dmitry Solovyov
MILAN/ALMATY, Nov 14 (Reuters) - A pipeline inspection robotis set to join efforts to discover why the biggest new oilfieldin decades is crippled and whether materials, constructionmethods, a design fault or all three are at the root of theproblem.
Its arrival at the Kashagan project on the Caspian Sea thisweek comes after the field's trouble-strewn 13-year, journeytowards commercial production took another twist in September asit delivered its first oil but began leaking toxic gas from aprocessing pipeline.
After costing nearly $50 billion, mostly paid by some of theworld's top oil companies, Kashagan may now be delayed until2015, jeopardising a forecast budget boost for Kazakhstan of $28billion - about a third - between 2014 and 2016.
Even at modest early rates of production, every day it sitsidle costs millions of dollars in lost oil revenue. Industryjokers have nicknamed it 'Cash-All-Gone'.
The robot or "intelligent pig" - device was despatched thisweek, according to an industry source, to take part in aninvestigation officials said would last into December at thefield, named after Kazakh poet-singer Kashagan Kurzhimanuly.
The oil extraction structure has been built on artificialislands about 70 km (40 miles) off the coast in the remote andenvironmentally hostile northern Caspian Sea, which means fixingthe problem may take months.
The Central Asian former Soviet state hopes the field willproduce 1.66 million barrels a day at its peak, double thenational oil output of 2012, and equivalent to the entireproduction of resource-rich Angola.
But the location, high reservoir pressure, and otherchallenges such as high levels of corrosive and poisonoushydrogen sulphide associated with the crude oil have proved tobe major difficulties.
The project is years late and billions of dollars overbudget already. With output at just 70,000 barrels a day, it sprang leaks in a pipeline carrying the associated gas to anonshore processing plant.
SOUR GAS TO BLAME, PIPES LEFT TO ROT?
According to a senior executive at a large oil company with knowledge of the site, the leaks were most likely caused whenthe hydrogen sulphide - known in the industry as sour gas - atethrough the pipeline.
This could be because the metallurgy of the pipes has turnedout to be wrong for the conditions, while welds could also bepart of the problem, he said.
"To solve a question like replacing the pipes could takemonths... the new composition of the tube metals would have tobe studied, transported, tested and installed," said anotherindustry source. "It will take several months for activity torestart at Kashagan."
Some in the industry say the pipes might have deterioratedafter being left in the open for an extended period during thelong delays the project has experienced, making them morevulnerable to attack from the sour gas.
Others rejected this explanation, saying the pipes aredesigned for just such exposure.
Doubt was also thrown on whether the welds could be thetrouble. Unlike the reservoir itself, which is at very highpressure, the gas that comes off the crude as it reaches thesurface is carried at low pressure to the processing plant.
Whatever the cause, a shutdown for a leak just two weeksafter startup on Sept. 11 was followed by a second leak andinterruption in October, backing the view expressed by the headof one project partner Total this week when he said:"It's more than just repairing pipes.".
Corrosion expert Liane Smith said one immediate reactionwould be to blame the welds, "but when you get two leaks in twodifferent places as appears to be the case at Kashagan it meansthere's almost definitely a bigger, more fundamental problem".
Smith, who is managing director of oil services company WoodGroup's asset integrity division Wood Group Intetech,also said that from what she knows of the project, it used theright specifications for the job.
"Every corrosion engineer would have looked at that designand, hand on heart, have said it should be fine," she said.
Nippon Steel & Sumitomo Metal Corp, said it was asupplier of pipe to Kashagan but would not comment further. Itwas not clear whether there were other suppliers, or whether theJapanese group supplied the pipe sections where the leaksoccurred.
Saipem, an oil service company part-owned byproject partner Eni, was involved in onshore andoffshore pipe laying and welding in the project. Saipem alsodeclined to comment.
Total chief executive Christophe De Margerie said at theweekend that there would be no more output this year, andindustry sources say a restart is now unlikely before thespring.
CHALLENGING CONDITIONS
The sea over the Kashagan reservoir freezes between Novemberand March, partly because it is shallow and has low salinity dueto freshwater that pours in from the Volga river.
The resulting ice drifts can damage equipment and hamperconstruction and maintenance work. The conditions also restrictthe ability to bring in equipment.
Kashagan intends to re-inject some of the gas eventually,but at this early stage this is not an option, industry sourcessaid. This is because of the high pressure in the reservoir.
At Karachaganak, a functioning 400,000 barrels-a-day Kazakhgas condensate field with similar sour gas challenges, a 23-daymaintenance shutdown in April and May this year was two and ahalf years in the planning and involved 3,000 people includingalmost 2,000 contractors, according to joint operator BG GroupPlc.
"Realistically, there could be further delays pushingcommercial production at Kashagan closer to 2015. That's aproblem for the Kazakh government, they need revenues from thisfield," said Shamil Yenikeyeff, a research fellow specializingin Central Asian oil and gas at the Oxford Institute for EnergyStudies. "This isn't like fixing a pipeline in Texas."
The leaking gas pipeline is one of three main pipes at thesite, run by the North Caspian Operating Company (NCOC).
Its offshore section is 44 km long, in the "near shore" zoneit is 22 km, and the onshore part where the leaks werediscovered leading to the Bolashak processing plant is 29 kmlong, with all of it buried, an NCOC spokesperson said.
Kashagan is estimated to contain 35 billion barrels of oil,of which 9 billion to 13 billion barrels are recoverable, notfar short of major producer Brazil's 15 billion barrelrecoverable resource.
At peak production and at a $100 dollar oil price, it wouldpump over $60 billion dollars worth of oil a year for the Kazakhgovernment and its oil company partners. It could produce for 60years.
The Central Asian nation of 17 million has pinned its hopeson an early boost for the economy too.
According to political analysts at Eurasia Group, even witha modest 180,000 barrels a day of production planned, theproject was being depended upon to lift economic growth to 6percent in 2014 from 5 percent in 2013.
Repeated delays have infuriated the government, which hasthreatened to fine the NCOC consortium operating the project.
NCOC includes Kazakh state oil firm KazMunaiGas,Italy's Eni through its Agip unit, U.S.-based Exxon Mobil, Anglo-Dutch group Royal Dutch Shell and Totalof France. Each owns 16.81 percent.
Japanese firm Inpex owns 7.56 percent. ChinaNational Petroleum Corp (CNPC) acquired an 8.33percent stake this year as U.S.-based ConocoPhillips exited.
The NCOC, which has run the field since 2009, said the leakypipe sections that had already been replaced were beingexamined.
The spokesperson said it would take "a few weeks" to testthe pipeline. "Until the investigations are completed it will betoo early to discuss any possible remedial actions and timerequired to implement them".
