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Lloyds List: Kazakhstan puts squeeze on Kashagan partners

Martyn Wingrove, Lloyds List
Published: Aug 31, 2007

KAZAKHSTAN’s government has halted offshore operations at the world’s largest oilfield development to put pressure on a consortium of Western companies, writes Martyn Wingrove.

Work on the giant Kashagan project in the northern Caspian has stopped as Kazakh officials accuse operator Agip KCO of breaking environmental and safety rules.

Analysts believe Kazakhstan has suspended the work permit for three months to force the Agip KCO partners to renegotiate fiscal sections on the production sharing agreements.

International oil groups Italy’s Eni, France’s Total, Royal Dutch Shell, US majors ExxonMobil and ConocoPhillips are involved in the project, which could potentially produce 1m barrels per day by the end of the next decade.

‘Kashagan is one of the world’s supergiant fields with 13bn barrels of reserves. It will be an important producer so delays will affect the medium-term market,’ said Manouchehr Takin, of the Centre of Global Energy Studies.

‘With high oil prices, countries want higher revenues from projects, especially where cost increases means there is less cash from oil revenues, so Kazakhstan will renegotiate to get better terms.’

The country’s President Nursultan Nazarbayev fired the energy minister this week and appointed Sauat Mynbayev to oversee discussions on this key project.

Agip KCO has built four offshore islands at Kashagan as part of the first development phase. Several contractors are working on the project, including Saipem and KCA Deutag, which is drilling the wells.

KCA Deutag has shut down its T47 drilling rig on Island A to undertake ‘rig modifications and island well extension work in preparation for further drilling’ said a spokeswoman for the British company.

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