"Caspian calamity: Kashagan oilfield risks becoming giant stranded asset."
Kashagan is symptomatic of rising capex for diminishing returns … and hence of asset-stranding risk. As we said in our Alert of 7 April, the Kashagan field is estimated to contain 13bn barrels of recoverable oil — for context, annual global oil demand is c.30bn barrels of oil — and as such is one of the largest discoveries in the last 30 years. But so far it has cost the consortium behind it $50bn just to develop the first phase of the project, and it had meant to be producing 370,000 barrels a day by the start of 2015, before rising to 1mbd by the end of the decade. Whether or not the companies in the Kashagan consortium will be willing to make the further capital outlays necessary to boost production to the 1.5 million barrels a day ultimately envisaged by the end of phase three of the project will now most likely depend on how oil prices develop in the next couple of years.