Kazakhstan may prolong Kashagan suspension

ASTANA - Kazakh Ecology Minister Nurlan Iskakov said on Sunday the government may prolong its suspension on operations at the Kashagan oilfield if a consortium of Western oil majors developing it did not ‘improve its record’.

By (Reuters)

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Published: Sun 2 Sep 2007, 5:16 PM

Last updated: Sat 4 Apr 2015, 11:32 PM

Kazakhstan suspended work at Kashagan, one of the world’s biggest oilfields, on Aug. 27, stepping up pressure on its Western operators led by Eni ENI.MI over delays and cost overruns.

‘According to legislation we will be looking into this issue for three months. They should improve their record in three months,’ Iskakov told Reuters. ‘If they improve, we’ll look into it then.’

Asked if Kazakhstan could then prolong the suspension if that did not happen, he said: ‘Yes’.

The AgipKCO consortium also includes Royal Dutch Shell RDSa.L, Exxon Mobil Corp XOM.N, Total TOTF.PA, ConocoPhillips COP.N, Japan’s Inpex Holdings Inc as well as the Kazakh national oil company KazMunaiGas.

Kazakh officials have accused the group of a host of violations, including environmental issues and fire safety, in a move seen by analysts as an attempt to get higher revenues from the project.

A source close to the talks told Reuters that Kazakhstan was expecting the Eni-led group to come up with a proposal outlining ‘an adequate compensation’ by Sept. 5.

Iskakov said talks on the ecology issue were already under way between his ministry and consortium officials.

‘They are working with our colleagues, they come here on visits,’ he said.

Analysts were quick to draw parallels between the Kashagan case and Russia’s row with Royal Dutch Shell which ended with the oil firm losing control of a major oilfield to the Russian state gas monopoly last year.

Kashagan holds an estimated 38 billion barrels of oil-in-place of which 13 billion are potentially recoverable with the use of gas re-injection.

The field is at the centre of Kazakhstan’s plans to triple its crude output by 2015 as the former Soviet nation fast emerges as a new source of non-OPEC oil.

The start of production has been delayed to the second half of 2010, slipping from an initial 2005 target. Its cost has escalated from $57 billion to $136 billion, according to the Kazakh energy ministry.

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