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Kommersant: Home Kazakhstan Applies Sakhalin-2 Methods to Kashagan

Aug. 22, 2007

Kazakh government vows to halt work at one of the biggest fields of the country developed under PSA – the Kashagan field. The bureaucrats blame violation of environmental laws on investors, including Italian Eni. The analysts speculate that Kazakhstan has become particularly pressurizing in time when it attempts to review the terms of PSA, having actually adopted the tactics successfully tested by Russia at Sakhalin-2 project past year.

The work in Kashagan field, Kazakhstan’s area of the Caspian Sea, could be terminated on the breach of environmental laws by Italian Eni, Environmental Protection Minister of Kazakhstan Nurlan Iskakov told the cabinet yesterday.

“We are conducting a scheduled audit and we have all reasons to suppose that the operator doesn’t meet requirements of environmental laws,” Interfax quoted the minister as saying. The content of nitrogen compounds in atmosphere of the Caspian Sea is above the standard, specified Adletbek Bekeev, who is the deputy director at that ministry’s department.

Kashagan, which recoverable reserves exceed 1 billion tons of crude oil, is developed under PSA. Its operator is Agip KSO, where Eni, Total, ExxonMobil and Shell own 18.52 percent each, ConocoPhillips has 9.26 percent and Kazmunaigaz and Inpex – 8.33 percent each.

The authorities of Kazakhstan have been long displeased with the project investors. The launch of production from that field was initially slated for 2005, but Agip KSO put it off several times and today’s deadline is 2010. Moreover, Eni has recently announced the increase in the project costs from $57 billion to $136 billion. According to Kazakhstan, this move could be viewed as the changes in the PSA terms, enabling Kazakhstan to widen the share in profit-raising crude from 10 percent to 40 percent. Judging by Russia’s methods tested at Sakhalin-2, violation of environmental laws is the best way to pressurize investors.

www.kommersant.com

http://www.kommersant.com/p797202/Kashagan_environmental_violation/

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