Thursday, 04 September 2003

KAZAKHSTAN AGREES WITH OIL MAJORS TO DELAY KASHAGAN

Published in News Digest

By empty (9/4/2003 issue of the CACI Analyst)

Kazakhstan has agreed with oil majors to delay the start of production at its huge Kashagan oil field by at least two years until 2007 after months of discussion, a Kazakh official said. \"There is no dispute between the government and investors, we simply have slightly different visions of the field\'s development,\" the head of Kazakh state oil firm Kazmunaigaz, Kairgeldy Kabyldin, told reporters late on Wednesday. \"The government has a firm position that production should start at the end of 2006, while investors propose that it begin at the end of 2007, citing a number of technical reasons,\" he said.
Kazakhstan has agreed with oil majors to delay the start of production at its huge Kashagan oil field by at least two years until 2007 after months of discussion, a Kazakh official said. \"There is no dispute between the government and investors, we simply have slightly different visions of the field\'s development,\" the head of Kazakh state oil firm Kazmunaigaz, Kairgeldy Kabyldin, told reporters late on Wednesday. \"The government has a firm position that production should start at the end of 2006, while investors propose that it begin at the end of 2007, citing a number of technical reasons,\" he said. \"But we don\'t rule out that the date could be put off further if investors agree to compensate us for profits we would get if production started earlier,\" he added. The field\'s operator ENI (ENI.MI) of Italy has said it expects significant Kashagan production to begin in 2006-2007 as the world\'s biggest oil discovery for three decades has proved more difficult to tap than first thought. Kazakhstan initially asked the Kashagan group, which also includes France\'s Total (TOTF.PA), U.S. Exxon Mobil and ConocoPhillips, Royal Dutch/Shell (SHEL.L), Britain\'s BG (BG.L) and Japan\'s Inpex, to begin production in 2005. Kazakh President Nursultan Nazarbayev has repeatedly defended the initial date and has said international majors risk stiff penalties if they fail to keep to contractual obligations. Kazakhstan wants the group to produce one million barrels per day by 2015. By that time the country wants to become a major global oil player, rivalling Mexico and Norway in terms of output. The field contains nine billion barrels of recoverable reserves, but its development is complicated by the depth of the reservoir -- located well below the shallow landlocked Caspian Sea, which freezes in winter. Another problem is the abnormally high pressure in the field, which contains a large amount of poisonous hydrogen sulphide gas. (Reuters)
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The Central Asia-Caucasus Analyst is a biweekly publication of the Central Asia-Caucasus Institute & Silk Road Studies Program, a Joint Transatlantic Research and Policy Center affiliated with the American Foreign Policy Council, Washington DC., and the Institute for Security and Development Policy, Stockholm. For 15 years, the Analyst has brought cutting edge analysis of the region geared toward a practitioner audience.

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