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The Guardian: Kazakhs halt Shell oil project

Terry Macalister
Wednesday August 29, 2007

Shell has run into trouble over another big oil project in the former Soviet Union with the government of Kazakhstan halting development of the Kashagan field alleging environmental violations and cost over-runs in a move with ominous similarities to the Sakhalin-2 row.

Shell is one of a number of western partners in the Agip Kazakhstan North Caspian Operating Company along with ENI of Italy and ExxonMobil of America in the Kashagan field – one of the biggest oil discoveries ever with commercial reserves of up to 16bn barrels of oil. A spokesman for Shell said the company could not comment. He added: “It’s a matter for the operator [ENI].”

Kazakh officials have been ramping up the war of words with Shell and its partners alleging that production may not come on stream until 2010, five years later than expected, while costs are claimed to have soared from $57bn to $136bn.

ENI was unable to talk last night but its boss, Paolo Scaroni, said last week that it had 60 days to come up with a plan to allay the government’s fears over alleged breaches of the operating licence.

Nurlan Iskakov, the ecology minister. did not specify the nature of the environmental problems. Ministry officials said concerns were over the death of baby seals and fish in the Caspian Sea.

Shell was harassed before over its environmental record until it handed over a stake in the Sakhalin-2 project to Russia’s state-owned Gazprom.

http://business.guardian.co.uk/story/0,,2157962,00.html

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