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Bloomberg: Eni’s Scaroni Says Kashagan Partners Display `Unity’ (Update1)

By Anthony DiPaola

Nov. 13 (Bloomberg) — The Eni SpA-led group developing the Kashagan oil field in Kazakhstan is showing “reassuring unity” in talks with the government to resolve a dispute over delays and cost overruns at the field.

“It’s only natural there are different positions” among the international oil companies developing the Caspian Sea-based field, Eni Chief Executive Officer Paolo Scaroni said in Rome today. “We’re positively surprised at how unified we are.”

Crude producers like Eni and Royal Dutch Shell Plc are struggling to secure new resources as governments seek a higher portion of profit from their fields. This is “a period of renegotiation” with producers over contracts, Scaroni said.

Eni, Italy’s largest oil company, is willing to accept a deal with Venezuela that would allow the Rome-based company to resume output at the Dacion field there, Scaroni said. Venezuela’s government took over the Dacion field in April 2006, cutting Eni’s production by about 60,000 barrels a day.

“If we have an opportunity to move arbitration into an area of cooperation we would be happy,” Scaroni said. “Otherwise we’re ready to go on with arbitration.”

In Kazakhstan, the government is demanding a greater share of profit from the world’s largest crude discovery in three decades. It’s seeking compensation for delays that could extend by up to 11 years the amount of time it will take for the country to see returns from Kashagan.

Boost Returns

The government has asked the Eni group to boost returns the state will gain from the field and increase the national oil company’s stake in the project, located offshore in the northern Caspian Sea.

Eni, Exxon Mobil Corp., Total SA and Shell all hold 18.5 percent of Kashagan, while ConocoPhillips has 9.3 percent. Kazakhstan’s national oil company, KazMunaiGaz National Co., and Japan’s Inpex Corp. each own 8.3 percent.

Exxon CEO Rex Tillerson yesterday said talks were “very active,” declining to give further details. Scaroni said Nov. 11 that negotiations had entered a difficult period.

Eni this year has agreed to pay about $10 billion for oil and gas deposits in the Gulf of Mexico, Africa and Russia to boost production and make up for dwindling output at ageing fields. Output this year should be in line with 2006’s daily average of 1.77 million barrels as assets acquired from companies including Dominion Resources Inc. and OAO Yukos Oil Co. help compensate for stoppages elsewhere.

Scaroni declined to comment on whether the company would make a higher bid than the 1.5 billion pounds ($3.11 billion) it offered for Burren Energy Plc this year. Buying Burren would add production in Congo and Turkmenistan.

When asked whether Eni had signed a confidentiality accord with Burren because the two are in talks about a higher bid, Scaroni responded: “No, no, I can’t say anything because I’ve been asked not to by the London stock exchange.”

A purchase by Eni of a stake in Russian gas company OAO Gazprom is “not on the agenda,” Scaroni said.

To contact the reporter on this story: Anthony DiPaola in Rome at [email protected]

Last Updated: November 13, 2007 09:16 EST

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