Chevron Corp. will go ahead with a $36.8 billion expansion of the Tengiz oil project in Kazakhstan as crude’s recovery to near $50 a barrel and a steep drop in costs allows explorers to ramp up.

The company and its partners including Exxon Mobil Corp. will spend $27.1 billion on facilities, $3.5 billion on wells and $6.2 billion for contingency and escalation, Chevron said it a statement on Tuesday. First oil from the expanded project is planned for 2022.

The Tengiz expansion, the largest oil investment to get approval this year, highlights the willingness of oil explorers to proceed with some of their more promising prospects after service and equipment costs came down by some 40 per cent. Drillers in the U.S. are increasing the number of rigs exploring in the most productive parts of the best shale plays, analysts at Morgan Stanley said in a report. The increased activity may help to cap further rallies in oil prices.

"This expansion works right around the $50 level," said Allen Good, an analyst at Morningstar Inc. in Chicago. Despite a relatively high price tag, the project "can ultimately ensure returns," he said.

The expansion will increase crude production in the field by 260,000 barrels a day, or about 13 million tons a year. The project’s total hydrocarbon output will rise to about 1 million barrels of oil equivalent per day, according to the statement.

Last year companies around the globe slashed more than $1 trillion in investments to weather a downturn that saw oil prices tumble 75 per cent from June 2014 to a 12-year low in January.

The slump has reduced prices of some services and rigs required for drilling and Chevron said it’s taking advantage of that.

"There is a lack of investment right now, and that’s why you’re prepared to take a risk as big as this," said Paul Sankey, an energy analyst at Wolfe Research LLC. "It’s pretty unique because there are few of these being approved this year."

Tengiz “has undergone extensive engineering and construction planning reviews and is well-timed to take advantage of lower costs of oil industry goods and services,” Jay Johnson, executive vice president for upstream at Chevron, said in the statement.

The expansion will result in the production of an additional 250 million tons of oil by 2033, when the venture’s contract ends, Kazakh Energy Minister Kanat Bozumbayev said, according to his press service. The partners at Tengizchevroil, the venture that operates the project, haven’t applied for a contract extension, the ministry said.

Exxon owns 25 per cent of the venture, KazmunaiGaz National Co. 20 per cent and Russia’s Lukoil PJSC 5 per cent.

Though the expansion of Tengiz was put on hold last year after cost estimates ballooned amid the plunging oil prices, it was the only major new project Chevron spared from the austerity budget the company imposed in 2016. Tengizchevroil probably will issue bonds or otherwise tap lenders to finance the expansion, Chief Executive Officer John Watson told analysts and investors at Chevron’s annual strategy presentation in March.

The venture will finance a “significant part” of the expansion from its cash flow and had sought to borrow money in the first half of this year, Bozumbayev said, adding the Tengizchevroil will give a breakdown later.

Discovered in 1979, Tengiz was too technically challenging for Soviet engineers to develop. A blowout in a well called T-37 in June 1985 blazed for more than 400 days before it was extinguished by U.S. well-control experts, according to a history of the field published by Tengizchevroil.

Chevron won the rights to develop the field in 1993 after the collapse of the Soviet Union.

"Assuming that the price tag is correct and they run it properly, it will be a big moneymaker," said Sankey. The area "has been a tremendous success for them," he said.-Bloomberg