South Korean company Hyundai Engineering has once again been selected as the contractor for the design, procurement, and construction of a major associated gas processing plant at the Karachaganak oil field in Kazakhstan, which ranks third in the country in terms of oil production volume.

Contract Award and Project Details

Hyundai Engineering announced it has received a Letter of Award (LOA) for the implementation of a project that includes the construction of a gas processing plant and related infrastructure with an annual capacity of up to 5 billion cubic meters of raw gas.

Contract History and Project Management Changes

Initially, the company was awarded an EPC contract for the plant’s construction by Karachaganak Petroleum Operating (KPO), the field operator, in 2025. The construction cost was estimated at around $4.2 billion. However, the contract was terminated due to disagreements between the Kazakh government and KPO regarding the project’s timeline. The authorities aimed to accelerate the plant’s development to boost production at Karachaganak and supply the domestic market with processed gas.

In June last year, the government instructed KPO and its shareholders to halt preparations for the plant’s construction. Later, project management was transferred to the state oil and gas holding KazMunayGas, which signed a preliminary cooperation agreement with China’s Citic Construction, and subsequently appointed Qazaqgaz as the project leader.

Other Projects and Concept Changes

Qazaqgaz is also leading the construction of an associated gas processing plant with a capacity of 1 billion cubic meters per year at the Kashagan field and is negotiating the construction of a second plant at the same site with a capacity of 2.5 billion cubic meters per year.

Originally, KPO planned for the Karachaganak plant to have a capacity of 4 billion cubic meters of raw gas per year and had completed the design phase before announcing the EPC contract tender. However, KazMunayGas revised the concept, increasing the capacity to 5 billion cubic meters.

Current Situation and Prospects

The volume of associated gas at Karachaganak continues to grow each year as the field matures. Authorities have repeatedly stated their intention to launch the plant by 2030 to meet the expected peak in domestic demand for natural gas.

In the absence of additional gas processing capacity, KPO plans to commission a sixth compressor to increase the reinjection of raw gas back into the reservoir.

There are concerns about the long-term stability of the Orenburg plant in Russia, which currently processes about 8 billion cubic meters of raw gas from Karachaganak but requires modernization and has been targeted by drone attacks amid the ongoing conflict between Ukraine and Russia.

KPO has not yet agreed on commercial terms for the supply of raw gas to the planned plant. Additionally, infrastructure upgrades will be needed to ensure reliable deliveries to the facility.