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The Wall Street Journal: Eni Says Kashagan Talks Are ‘Open, Constructive’

September 5, 2007

ROME — Talks under way between the consortium developing the Kashagan oil field and the Kazakh authorities are “open and constructive,” and all efforts are being made to resolve the dispute, Stefano Cao, head of the exploration and production division at Eni SpA, said in an interview.

The Eni-led Kashagan consortium last week kicked off negotiations with the Kazakh authorities in Astana aimed at resolving a rapidly escalating dispute over the field’s development, which may lead to the Asian country obtaining a greater share of profit from the oil field’s eventual production.

The consortium developing Kashagan, which is estimated to have 13 billion barrels of recoverable oil reserves, includes oil heavyweights such as Exxon Mobil Corp., Royal Dutch Shell PLC and Total SA.

Mr. Cao, who is leading Eni’s Kashagan talks, said he was confident that “all matters will be addressed in accordance with existing PSA terms,” referring to the consortium’s current production-sharing agreement with the Kazakh government. He declined to further comment.

Eni’s Chief Executive Paolo Scaroni said Aug. 24 that the negotiations with Kazakh authorities won’t last more than 60 days, after the consortium received a letter from the Kazakhs to start a “friendly procedure” on the contract.

Other consortium members are ConocoPhillips, Japan’s Inpex Holding Inc. and Kazakhstan’s state-owned KazMunaiGaz.

Last week, the Kazakh Environment Ministry suspended works at the Kashagan offshore oil field for three months over allegations that the consortium has violated environmental legislation. On the same day, the country’s Finance Ministry launched a criminal investigation against a subsidiary of the Eni-led unit that operates Kashagan, for alleged customs-law violations.

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