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Bloomberg: Eni Says Kashagan Field Contract to Be Renegotiated (Update1)

By Tommaso Ebhardt and Steve Scherer

Aug. 24 (Bloomberg) — Eni SpA Chief Executive Officer Paolo Scaroni said he’s prepared to renegotiate an agreement with the Kazakh government to operate the Kashagan oil field because the outlook for petroleum prices is now much higher.

“The conditions are right to negotiate a new contract,” Scaroni said in an interview in Rimini, Italy. “The contract with Kazakhstan includes a series of parameters that will have to be adjusted.”

Each company in the group that owns the rights to extract oil from the Kashagan field, which includes Kazakhstan’s national petroleum producer, will start meeting next week to discuss new terms, he said.

The negotiations will be “friendly” and last about 60 days, Scaroni said, confirming that he would travel to Kazakhstan “after Sept. 4” and that Italian Prime Minister Romano Prodi would go “Oct. 7-8.”

“I’m confident it will be cleared up,” Scaroni said of the dispute.

On Aug. 21 Kazakhstan’s government, which has accused Eni of environmental violations, demanded that the company cede a bigger stake in the Kashagan project or face the prospect of having its work there halted. Kazakhstan is following Russia in using environmental laws to get better terms from foreign investors as oil trades at almost $70 a barrel, more than three times the level of when the Kashagan contract was signed.

Scaroni said that the price of oil was the key to the dispute with Kazakhstan.
The Kashagan field may be larger than originally estimated, Scaroni said today, calling it a “super giant.” Natural gas deposits were barely taken into account when gauging the size of the field, and will produce “a great business in itself,” he said.

The central-Asian country last month said it wants to amend the exploration contract with Eni and its partners to increase its share of profit from 10 percent to 40 percent.

Eni, Exxon Mobil Corp., Total SA and Royal Dutch Shell Plc all hold 18.52 percent stakes in Kashagan, while ConocoPhillips has 9.26 percent. Kazakhstan’s national oil company KazMunaiGaz National Co. and Japan’s Inpex Corp. each own 8.33 percent of Kashagan. Eni is the sole operator of the field.

Scaroni reiterated the Eni’s previous forecast that production on the site will begin in the third quarter of 2010.

Eni shares rose 9 cents, or 0.4 percent, to 24.57 euros at 2:40 p.m. in Milan.
To contact the reporters on this story: Steve Scherer in Rome at [email protected] ; Tommaso Ebhardt in Milan at [email protected] .
Last Updated: August 24, 2007 08:57 EDT

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