Kazakhstan's former elephant in the room, Kashagan, a giant oil field in the Caspian Sea, is pumping again.

Kashagan, Kazakhstan's giant offshore oil field in the Caspian Sea, started producing oil again in October 2016, after years of delay due to engineering issues. The oil field, which was discovered in 2000 and holds an estimated 16 billion barrels of crude, is considered to be one of the largest in the world and the most important oil field discovery of the past 30 years. The project has always been seen with great enthusiasm as Kazakhstan's biggest hope of achieving the country's long-term vision of being among the top-30 economies, but was plagued by a number of delays and over-budget costs, which reached USD53 billion compared to an originally estimated cost of USD38 billion in 2008. When it finally kicked off oil production in September 2013—eight years behind schedule—the project was halted and had to be shut down only one month later, due to a highly toxic gas corroding and creating leaks in the pipelines connecting the oil field to the processing facility onshore.

In October 2016, however, the field officially started pumping oil again, although this time Kazakhstani officials, including the Minister of Energy, Kanat Bozumbayev, have been much more prudent with their comments. In an official statement to announce the project's re-launch, the minister said: “I checked this morning and production is active from four wells, yielding approximately 90,000bpd." And on March 14, after a decade of delays, Kashagan finally shipped its first batch, destined for export. By January 2017, the field had produced its first million tons of crude, with a second being pumped out by March 2017, on the eve of the Nauryz holiday. In fact, as of the third month of 2017, production capacity of Kashagan had increased to 180,000bpd, according to Arjan van Dijk, director of production operations at the North Caspian Operating Company (NCOC). The company is the operatorship owner for the North Caspian Sea Production Sharing Agreement, within which the discovery of the Kashagan oil field was made, among others. The agreement was signed by the Republic of Kazakhstan and an international consortium of oil and gas multinationals. Eni, KazMunaiGas, Royal Dutch Shell, Total, and ExxonMobil all hold an equal 16.81% stake in the project, while China National Petroleum Corporation (CNPC) and Inpex hold 8.4% and 7.56% stakes, respectively.

After two years of globally low oil prices, the Organization of Oil-Exporting Countries (OPEC), on the initiative of Saudi Arabia, its biggest producer, suggested members as well as non-OPEC oil producing countries including Russia and Kazakhstan, to cut production in an attempt to see global prices climb and put an end to the prolonged recession many oil-reliant economies have gone through. On a meeting in December 2010, an agreement was reached among members and non-members of the oil cartel, and non-OPEC countries agreed to cut their overall production by 558,000bpd, the biggest contribution ever by non-OPEC countries, yet short of the initially set target of 600,000. Kazakhstan also agreed to make cuts to its crude production despite its plans to finally boost production in 2017 after Kashagan resumed operations: in January 2017 production was in fact cut by 30,000bpd (more than the level agreed), compared to its November level. Nevertheless, in February and March output actually increased. In a statement on March 30, 2017, Minister Bozumbayev, said: “In January we over-fulfilled our commitment; the cut was more than 20,000bpd, in February a little less. In March, our production will be a bit higher. In April I expect, with the warmer weather, production will fall." He then made clear that Kazakhstan will no longer be able to further decrease output, and that in fact the country, mainly because of its two giant Kashagan and Karachaganak fields both now fully operating, can only increase production. ENI expects the field to reach a capacity of 370,000bpd in 2017, while Zhakyp Marabayev, deputy managing director at NCOC, told TBY that an ongoing investment into the expansion of Phase I production at Kashagan is able to increase the field's capacity to 450,000bpd.

Low commodity prices, slowdowns in its main trade partners (China and Russia), and a sudden, sever currency devaluation have thrown Kazakhstan into a prolonged reduction of economic activity and weak business sentiment. Despite the country's ambitions to achieve economic diversification, Kazakhstan today remains heavily reliant on its hydrocarbons wealth; therefore, the restart of such crucial project as Kashagan could be a trigger for the country's sustainable economic recovery.

Marabayev told TBY in an interview that, “Kashagan will have a production life of decades and its shareholders are expected to contribute billions of dollars in direct revenue to the Republic of Kazakhstan in terms of taxes and share of production." He concluded that Kashagan will have “a powerful multiplier effect on the economy, creating employment opportunities for Kazakh people and opportunities for local companies."