In a press conference on 5 July, Chevron (www.chevron.com) announced that it plans to go ahead with a $36.8 billion expansion of the Tengiz oil project in Kazakhstan.

The company and its partners — including Exxon Mobil — will spend $27.1 billion on facilities, $3.5 billion on wells and $6.2 billion on contingency and escalation plans. First oil from the expanded project is scheduled for 2022.

Chevron said that the Tengiz expansion “highlights the willingness of oil explorers to proceed with some of their more promising prospects”, after service and equipment costs fell by some 40%.

A recent report by Morgan Stanley says that “drillers in the USA are increasing the number of rigs exploring in the most productive parts of the best shale plays”.

Allen Good, an analyst at the Morningstar group in Chicago, said: “Despite a relatively high price tag, the project can ultimately ensure returns, and the increased activity may help to cap further rallies in oil prices.”

The expansion will increase crude production in the field by 260,000 barrels a day, or about 13 million tonnes a year. The project’s total hydrocarbon output will rise to about 1 million barrels of oil equivalent per day,
according to Chevron.

Paul Sankey, an energy analyst at Wolfe Research LLC, said: “There is a lack of investment right now, and that’s why Chevron is prepared to take a risk as big as this. Tengiz has undergone extensive engineering and construction planning reviews, and it is well-timed to take advantage of the lower costs of oil industry goods and services.”

Discovered in 1979, Tengiz was too technically challenging for Soviet Union engineers to develop. A blow-out in well T-37 in June 1985 blazed for more than 400 days before it was extinguished by US experts. Chevron won the rights to develop the field in 1993, after the collapse of the Soviet Union.