[Cog]

I would be interested to hear a cornie view on this - think oily will chip in?

Haven't heard from our trolls Cog and Outcaste. They have opinions on everything from Trump to Guns to "Doomers" but are strangely silents on matters that concern this board.

You wouldn't want me to make an uninformed opinion, would you?

[Cog]

Ok I;ve read through the cost overruns and the welding issues. Here is the point. We know that nothing can really replace fossil fuels to power a modern economy. I've seen you in action often enough in Graeme's green hopium threads to know how you feel about the scalability issue.

But here is the deal, every ton of coal and every barrel of oil in the world, that can possibly be produced, will be produced. Until the juice is no longer worth the squeeze. This field is no different in that respect, regardless of the screw-ups that have preceded it. There is simply nothing to replace fossil fuels.

[Keith_McClary]

http://thediplomat.com/2015/12/kashagan ... ite-whale/
Not much new in this.
“Investment bank Goldman Sachs estimates that Kashagan would need oil prices between $120 and $130 per barrel to be profitable.”

[tita]

So, the Kashagan field finally enters production. Time to dig up this topic!
http://www.epmag.com/kashagan-oil-field ... 846#p=full

This is a fine example of a project which investment will be difficult to recover. Of course, it doesn't affect production of the 20 wells that are due to come online and produce 370kb/d in the end of 2017.

But future investment could be subject to cautious decision from the consortium in charge of the field. They don't want to relive the nightmare they had to go through. It will be interesting to follow the development of the last "super-giant" discovery.

Fitch said it is possible that the consortium will delay making decisions on potential expansions. Or, the project may not go forward at all “if oil prices do not rebound more strongly from current levels, given the project complexity and the more conservative approach to mega-projects by the majors.”

[ROCKMAN]

tita - And here's another thought: let's table the discussion of Kashagan Field for 6 months and see what it's producing then. If anything. LOL.

The ordinal projection was to have produced about 400,000,000 bbls by now. Current cumulative production is 25,000 bbls.

[Zarquon]

Just consider the loss in net present value of a two year delay let alone the interest on any borrowed capex.

Newbie question: if you invest $50-100 billion in a megaproject and miss your deadline by 8-10 years... isn't your net present value pretty far south of nothing? Or do you just change the economic modeling to make it highly profitable again?

[ROCKMAN]

Z - "Or do you just change the economic modeling to make it highly profitable again?". They can change the model how ever they want. But if they are using the typical industry discount rate of 10% the NPV of any production will be insignificant after 8+ years from when the bulk of the investment was made. The only way to honestly calculate the ROR of any investment is to use the actual time line. Even worse: besides the time delay the $billions in repair costs are effectively negative cash flow. They'll need to recover thoser monies before they begin earning revenue to count against the original capex.

I read a story long ago about the Chunnel from England to France. Cost overruns always happen. But the real killer was that while the ridership used in the investment model turned out correct it happened only because the drastically lowered the ticket price. So in effect they were never going to payoff the loan principle: just never ending interest payments. Not sure if it happened but they were negotiating just giving the Chunnel to the lenders in perpetuity.