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Updated communication package on pipeline integrity issue


March 31, 2014

BACKGROUND
Following the start of production from the Kashagan field on 11 September 2013, the operations had to be stopped on 24 September, due to a gas leak in the onshore section of the gas pipeline running from D Island to the onshore processing facility “Bolashak”. The Department of Emergency Situations and the relevant authorities were immediately informed in accordance with the regulations. The access to the line was secured and the respective joint replaced. Production was resumed, but had to be stopped again on October 9th after a detection of a gas leak. Following repair of the affected joint, pressure tests were performed in a fully controlled environment revealing some other potential gas leaks. A thorough investigation was launched at that time.

Management of investigation

The following bullet points intend to provide summary update of the current situation in relation to the management of investigation into the incident:
• As stated in the previous communication, the immediate cause for the leaks, being sulfide stress cracking, has been established. Currently there is an ongoing investigation to establish the cause for the sulfide stress cracking in progress. In response to some views expressed in mass media, Operator states that under no circumstances gas hydrates formation could cause sulfide stress cracking. The hydrates formation occurs when natural gas components combine with water to solidify at temperatures higher than the freezing point of water and may cause partial or complete plugging of gas transportation lines. Operator also states that to date Kashagan production facilities have not experienced hydrate formation.
• Verification of each instance of suspicion of a leak / defect by means of excavations and removal, if necessary, of sections of pipeline is in progress. Previous media reports of number of the defects are pure speculations.
• The inspection by the so called Intelligent PIG (Pipeline Inspection Gauge) has been completed for both the sour gas line as well as the oil line. The raw data from this inspection are currently being reviewed and interpreted. As stated earlier, the results of data interpretation are expected to be available in early 2014. These results will be a part of a report, which will be submitted to RoK authorities as appropriate. More detailed information about the PIG could be found at http://www.ncoc.kz/en/mediacentre/2014/news-06-01-2014.aspx
• Laboratory analysis and simulations of the operational environment with samples from the pipeline have reached a conclusion that the specifications for the pipeline material were appropriate for the conditions of Kashagan field. The specifications fully meet requirements of the NACE standards (National Association of Corrosion Engineers), respective ISO standards, and best practices in international oil and gas field development. As was previously communicated, the sour gas line was designed to withstand the expected H2S content and the presence of water.
• The timing of the restart of production will be dependent on the results of the root cause analysis, the conclusions from inline inspection of the pipelines and the rehabilitation plans. The dates that have recently been circulated in the media are speculations and do not reflect plans and intentions of the Consortium.
• Different quantities of replacement pipeline joints may be required, depending upon the extent of necessary oil or gas pipeline replacement. As a precautionary measure, to avoid losing time, the Consortium has initiated the tender process for the potential purchase of pipeline joints in sufficient quantities for various scenarios.

Current status & timelines

• The results of the tests on the steel samples at TWI and other specialized laboratories in France and Italy are expected in April 2014.
• The inspections of the oil and gas pipelines from D Island to Bolashak plant with an intelligent PIG have been completed, and the data are currently being interpreted. The interpretation of the data sets is a rather complex process which needs to be carried out with high accuracy. Consequently it takes quite some time to derive reliable results that are sufficiently robust to develop a meaningful rehabilitation plan. The results are expected in April 2014. Comments that have recently been circulated in the media about the delays to issue final results are mere speculations.
• In the course of the PIG inspection on 11 January 2014, presence of diesel was detected at the onshore part of the oil pipeline close to Bolashak plant. The respective section of the pipeline was isolated and excavated, confirming the presence of a seep in the area of a weld.

North Caspian PSA Consortium remains committed to ensuring operations to be safe and meeting requirements of best international oil and gas field practices, the NCS PSA, and all applicable legislation.


 
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