Sulphur 398 Jan-Feb 2022
31 January 2022
Sulphur in Central Asia
CENTRAL ASIA
Sulphur in Central Asia
Sulphur processing from sour gas fields dominates regional production, but the geographical remoteness of the area from end use markets and restrictions on sulphur storage means that producers often opt to reinject acid gas into oil and gas wells.
Central Asia – the collection of post-Soviet states clustered around the Caspian Sea, as well as nearby or associated facilities in Russia and Iran, is responsible for around 15% of the world’s elemental sulphur production. It is based around large reserves of oil, gas and condensates, much of sour or highly sour. Processing of sour gas in the region has a long history – last year the Orenburg gas processing plant in Russia celebrated its 55th year of operation. But continued development of oil and gas fields continues to generate additional volumes of sulphur.
At the same time, however, domestic consumption of sulphur in the region is relatively low, aside from phosphate production elsewhere in Russia, and Kazakhstan’s burgeoning uranium mining industry. That, coupled with its location in the centre of the Asian continent, with no nearby ports for long distance export, makes sulphur export logistics challenging, even before the region’s notoriously harsh winters are taken into account.
Russia
Russia has long been the major regional producer of sulphur, from oil, gas and condensate fields in the Orenburg and Astrakhan regions just north of the Caspian Sea. Both are operated by subsidiaries of Russia’s state-run gas giant Gazprom; Gazprom dobycha Orenburg and Gazprom dobycha Astrakhan, respectively.
Orenburg is a huge gas processing complex, able to process 37.5 bcm of gas in three trains, removing hydrogen sulphide and carbon dioxide, and recovering large quantities of helium. Gas from the local Orenburg fields averages around 3% H2 S content. However, Orenburg was also set up to receive gas from the Karachaganak field in Kazakhstan, where H2S content is considerably higher – around 13%, and the plant required modification to handle this when the feed from Karachaganak was first tied in. The facilities were developed together during the Soviet era and still work closely. Orenburg also has a refinery to process oil from the local fields. produces major volumes of oil, some of which is processed at the local Orenburg refinery.
At Astrakhan, meanwhile, gas is taken from the Krasnoyarsky gas and condensate field, where reserves are put at 90 bcm of gas and 260 million tonnes of oil. Annual production is around 11 bcm of gas and 4 million t/a of hydrocarbon liquids. Krasnoyarsky gas is very sour, with a sulphur content of up to 31% hydrogen sulphide, which means that although Orenburg actually processes more gas, the Astrakhan gas plant is the largest producer of sulphur in Russia.
Russian sulphur output from Astrakhan has been stable since the 1990s at around 4.0-4.5 million t/a, with Orenburg contributing another 1 million t/a. Astrakhan’s output is mainly sent to domestic markets, marketed by Gazprom Sera, and Orenburg’s exported via Gazprom Export. The two plants between them represent about 85% of Russia’s sulphur production. Gazprom produced 5.0 million t/a of sulphur in 2020, according to company statistics, down from 5.4 million t/a in 2019. This contributed to Russia’s overall decline in sulphur production to 6.3 million t/a in 2020, a 6.6% fall, with refineries increasing output. Exports of sulphur were 2.6 million tonnes in 2020, down 20% on the previous year, due to difficult market conditions caused by covid. Major export destinations were Brazil, Israel, USA, China, Lithuania, Belarus, and Morocco, as well as some sales to El Salvador, Mexico, Benin and Jordan.
While the Astrakhan and Orenburg fields are mature, there is considerable interest among Russian energy companies in developing offshore fields in the Russian sector of the Caspian Sea, which may have reserves of up to 270 million tonnes of oil and 500 bcm of natural gas. This has been boosted by 2018’s Caspian Sea Agreement, which resolved many issues as to access and ownership of subsea assets that had carried over from the breakup of the Soviet Union. Gazprom has two major developments in the region: the onshore Imashevskoye field near Astrakhan, which crosses the border into Kazakhstan and which is being developed by a joint venture called KazRozGaz; and the Tsentralnoye oil, gas and condensate field in the centre of the Caspian Sea, which is being developed by Gazprom, Lukoil and KazMunaiGaz. Imashevskoye gas totals around 100 billion cubic meters, with a sulphur content of 15-17%. However, development remains at an early stage.
Elsewhere, Lukoil extracts oil from the Vladimir Filanovsky offshore field, to the tune of around 6 million t/a, and is developing the Yuri Korchagin field. Vladimir Filanovsky is the largest oil field in the Russian sector of the Caspian Sea, and had initial recoverable reserves of 129 million tonnes of oil and 32 bcm of gas. Associated gas is processed at Stavrolen, where capacity is being expanded with a second train to 5 bcm per year, but the field is relatively sweet (0.1% sulphur in the oil) and volumes of sulphur are consequently modest.
Azerbaijan
Is a significant oil and gas producer. Oil mainly (ca 80%) comes from the offshore Azeri-Chirag-Gunashli (ACG) field, which produces sweet (0.16% S) oil for export. However, production peaked in 2010, and has dropped by 40% since then. Most oil is exported, with only one significant refinery in the country, at Baku, where state oil company SOCAR has 120,000 bbl/d of capacity. Most of Azerbaijan’s 60 tcf of natural gas reserves, meanwhile, are in the offshore Shah Deniz gas and condensate field in the Caspian Sea, which is being developed by BP. Gas production began in 2006 and increased with the start-up of Phase II in 2018. Gas is brought ashore for processing at the Sangachal terminal 55 km south of Baku, but the H2 S content is only around 500 ppm.
Kazakhstan
As mentioned in the Russia section, above, Kazakhstan’s gas processing was closely connected with the Orenburg and Astrakhan plants in Russia. However, during the 1980s and 90s, the discovery of large onshore and offshore oil and gas fields in and around the Caspian Sea led to domestic developments there, at Karachaganak, Tengiz, and finally Kashagan.
The onshore Karachaganak field, near the Russian border, was the first to be developed, with oil production beginning in 1984. It is operated by the Karachaganak Petroleum Operating (KPO) consortium, with partnership from ChevronTexaco (18%), Agip and BG (29.25% each), Lukoil (13.5%) and KazMunaiGaz (10%). It is the largest gas producing field in Kazakhstan, accounting for some 30% of the country’s total gas production. The field’s total hydrocarbon output stood at 143.9 million barrels of oil equivalent (mboe) in 2020, and KPO achieved its highest ever annual production of 10.9 million t/a of liquid hydrocarbon production that year. However, about 50% of the gas produced (10.4 bcm in 2020) is reinjected to maintain pressure or used as fuel gas, while gas and condensate with a sulphur content of about 0.9%, is routed across the border to be processed at Orenburg in Russia, and hence forms part of Russia’s sulphur output. While work continues on Karachaganak, including the recent Karachaganak Debottlenecking Project and Karachaganak Expansion Project, the latter completed in March 2021, these raise liquids production by additional acid gas reinjection, and do not generate additional sulphur.
During the 1990s and 2000s, most of Kazakhstan’s sulphur came from the Tengiz field, on the northeast shore of the Caspian Sea. Total recoverable oil is estimated at 1 billion tonnes. It is operated by the Tengizchevroil (TCO) joint venture, formed in 1993 between ChevronTexaco and the Republic of Kazakhstan, with the current shareholding being Chevron 50%, ExxonMobil 25%, KazMunaiGaz 20%, and Lukoil 5%. Sulphur output from associated sour gas processing ran at around 1.6 million t/a in the 2000s, initially mainly poured to block storage, until issues with fugitive sulphur dust led to a government about turn on storing sulphur and a major fine, followed by several years of melting down and selling off the sulphur stockpile, which peaked in 2006 at 9.2 million tonnes, but which was essentially depleted by 2015. From 2006 there was also a programme of acid gas reinjection into the reservoir as part of the Second Generation Project to cut flaring and boost output, which also increased output from the sulphur plant to around 2.4 million t/a. TCO sells almost all of the sulphur that it produces these days; around 2.5 million t/a in 2020. Sulphur sales to end-September 2021 were another 1.9 million tonnes. It sells both liquid sulphur by rail car, and granulated and crushed bulk sulphur to customers in Kazakshtan and overseas. Most domestic customers are based around uranium processing. Sulphur travels by rail across Russia to export ports, or east to China. Last year TCO completed a second sulphur granulation facility using Enersul technology with a capacity of 480,000 t/a, to enable it to convert all of its liquid sulphur output into granules as required. In terms of TCO project expansions, there is a long term Future Growth/Wellhead Pressure Management Project, currently about 80% compete, which will boost oil output by another 260,000 bbl/d to 850-900,000 bbl/d, but this will involve 100% sour gas reinjection.
Finally the most recent project to begin operations in Kazakhstan is the offshore Kashagan oil and condensate field, operated by the North Caspian Operating Company (NCOC), which includes ExxonMobil, Eni, Shell, Total and KazMunaiGas (KMG), each with a 16.8% stake, as well as Japan’s Inpex with 7.56%, and the China National Petroleum Corp (CNPC). Kashagan has been a large and complex development, with technical factors complicating the project including high concentrations of H2 S in the oil and associated gas (ca 17%). Corrosion caused by H2 S meeting water in the pipelines led to it being shut down for repairs until 2016. About half of the associated sour gas is reinjected into the wells to maintain pressure, but the rest is processed onshore at the Bolashak gas sweetening plant. Sulphur production at capacity is around 1.2 million t/a. An expansion is in train at Bolashak to increase capacity, allowing for additional oil production from the field – dealing with associated gas is the major hurdle to increased oil production, which was supposed to be 450,000 bbl/d in the first phase, but is running at only around 300,000 bbl/d. The new train is due to be completed in 4Q 2023, and will include an additional 210,000 t/a of sulphur production capacity. Kashagan exports formed sulphur mainly by rail northwards to the port of Ust-Luga near St Petersburg in Russia, a considerable distance.
Of course, at present the major concern for Kazakhstan is the political unrest that has rocked the country at the start of 2022, caused initially by protests over fuel prices. The unrest has led to Russia sending troops to back the government as part of a mutual defence organisation, the Collective Security Treaty Organization (CSTO), in which Kazakhstan partners former Soviet states Russia, Belarus, Tajikistan, Kyrgyzstan and Armenia. The protests have centred on the capital Almaty, in the east of the country, and the Caspian region appears relatively unscathed so far, but the outcome of the protests appears highly uncertain at present.
Turkmenistan
Turkmenistan, south of Kazakhstan, also borders the Caspian Sea. It is a relatively modest holder of oil reserves, and produces only around 220,000 bbl/d, mostly for domestic use. However, it is the world’s fourth largest holder of natural gas reserves, after Russia, Iran and Qatar. With relatively low levels of gas demand, development of natural gas production for export has been seen as a way of monetising those reserves, but disputes with Russia over pipeline access slowed development in the 1990s and 2000s. Turkmenistan turned to gas-based projects which could export more easily transportable solids or liquids instead, including two urea plants and a gas to liquids facility that began operation in 2019. But new money for gas investment ended up being provided by China during the 2010s, and gas production increased to 66 bcm per year in 2016, though stagnating slightly to 60 bcm by 2020, with around half of that exported to China, as well as smaller quantities to Russia and other CIS states.
About half of Turkmenistan’s gas comes from a series of fields that make up the Galkynysh reservoir, including South Yolotan, Osman, Minara and Yashlar. Production from the field began in 2013, and amounts to around 30 bcm per year, with a significant (about 6%) content of H2S. The Galkynysh (formerly South Yolotan) gas processing plant has the capacity to produce 1.8 million t/a of sulphur. Production in 2020 was about 1.1 million tonnes. However, further development of Turkmenistan’s gas has become mired in disputes with China over payment. China takes discounted gas in payment for the loans it made to develop the field, but Turkmen ministers have accused China of “profiteering”, and plans to triple capacity to 95 bcm per year remain in abeyance for now.
Uzbekistan
Uzbekistan, south and east of Kazakhstan, is a relatively minor oil and gas player. Its oil reserves are comparable to Turkmenistan, but its gas reserves are much smaller. They are however, sour, and so processing of gas and condensate from the Kandym, Kuvachi-Alat, Akkum, Parsanal, Khoji and West Khoji is processed at the Kandym sour gas plant in Uzbekistan, which began operations in April 2018. It processes 8 bcm per year of gas and produces about 180,000 t/a of sulphur.
Iran
Finally, mention should be made of the other state which borders the Caspian Sea; Iran. Although Iran has faced crippling sanctions for many years, and poured its gas development efforts into the huge South Pars field in the Gulf, with the winding down of the South Pars development project and the signing of the new Caspian Sea Agreement, Iran has begun to look northwards again. Last year, Iran’s Khazar Exploration and Production Company (KEPCO) said that it was exploring the Chalous structure in the South Caspian, which could be the second largest natural gas block in the Sea, with reserves 25% of South Pars, making it the 10th largest gas field on earth. If the estimates are accurate and the operation to explore the Chalous structure proves successful, the volume of recoverable gas could be 1.5 times total recoverable gas in Azerbaijan and the equivalent of 30% of the total recoverable gas in the Caspian Sea. More recent estimates suggest that the field may even be double that size, with 7.1 tcm of gas in place.
Following a 20-year deal with Russia that covers political, security, military, defence and economic cooperation, Iran has been in discussions with Russia and China over development of the field, with a proposal seeing Gazprom and Transneft taking a 40% share of output, CNPC 28% and KEPCO 25%. The remaining 7% would go to other Iranian firms connected with the Revolutionary Guards Corps. Gas could be fed into the Russian pipeline system for export to Europe, although the currents sanctions regime would probably preclude that.
Sulphur demand
As Table 1 indicates, the main regional sources of sulphur remain Russia, with 5.0 million t/a of production from the Caspian area in 2020, mostly from sour gas and condensate processing at Oren-burg and Astrakhan; and Kazakhstan, with production 3.8 million t/a mostly from TCO and Kashagan. Turkmenistan adds another 1.1 million t/a from Galkynysh. Set against this 10 million t/a or so of sulphur, regional demand remains relatively limited. At the moment there is phosphate processing in southern Russia, mainly PhosAgro, including its subsidiaries Ammophos and Balakovsk, and some industrial sulphuric acid plants which together consume between 2.5 million t/a of sulphur for sulphuric acid manufacture, and these are generally supplied from the Orenburg and to a lesser extent Astrakhan gas plants.
Kazakhstan’s uranium mining industry has also become a major regional consumer, as large volumes of sulphuric acid are required to leach uranium oxide from relatively alkaline carbonate rocks. Kazakhstan’s uranium output increased dramatically during the early 2010s, and stood at 22,800 tonnes U3 O8 in 2020, representing 43% of all uranium mined that year, according to the World Nuclear Association. Production of this amount of uranium consumes about 1.5 million t/a of sulphuric acid. Some of this acid comes from smelter off-gases, but there are also three sulphur-burning acid plants with a combined capacity of 850,000 t/a of acid, representing a potential 280,000 t/a of sulphur consumption.
Kazakhstan also has phosphate deposits, and Russian fertilizer producer EuroChem is building a new plant in the Karatau region which will take sulphuric acid demand to 1.0 million t/a in 2022. Turkmenistan has a 500,000 t/a sulphur burning acid plant to feed DAP production at the Turkmenabat chemical complex, with the sulphur supply coming from Galkynysh. Uzbekistan has 650,000 t/a of acid capacity. However, these plants collectively cannot match the large volumes of sulphur being generated by sour gas production. Even added to regional Russian consumption, this leaves a surplus of over 6 million t/a of sulphur in the Caspian and surrounding region.
Export issues
Central Asia sits at the centre of the largest continent, making it a long trip to deep water ports, mainly via rail across continental Russia to e.g. Ust Luga on the Baltic Sea. Russia is practised in making this long logistical link work, and exported 2.3 million t/a of sulphur in 2020, though this is considerably down on volumes for previous years. The Kazakhstan-based companies use some of the same routes, though also export east into China. However, winter closes river routes with ice and makes overland transport more difficult, and the combination of climate and distance make the costs of transport a significant barrier to exports of sulphur, especially at times of low prices. With the Kazakh government still set against long term block storage, it means that producers often turn to acid gas reinjection in preference to recovering sulphur.
