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Reuters: UPDATE 2-Kazakh oilfield talks under way as deadline expires

Fri Nov 30, 2007 5:49am GMT
By Raushan Nurshayeva

ASTANA, Nov 30 (Reuters) – Kazakhstan is pressing ahead with closed-door talks with a group of Western oil companies to resolve a row over the huge Kashagan oilfield before the Nov. 30 deadline expires, a senior government official said on Friday.

Kazakhstan has set the deadline for its negotiations with the ENI-led (ENI.MI: Quote, Profile, Research) group to settle a long-running dispute over cost overruns and production delays at the Caspian Sea oilfield, but some officials have said talks may last longer.

“We are continuing our talks. Nov. 30 is not over yet,” Deputy Finance Minister Daulet Yergozhin said, adding that a high-profile consortium delegation was in the Kazakh capital this week for further negotiations.

“I think we still have time. They are still here. … We are discussing many issues.”

Officials from both sides have said that talks on the future of the world’s biggest oil find in three decades might continue beyond the set deadline, possibly until the end of the year.

Kashagan’s development has been plagued by cost overruns and delays which have irked Kazakhstan.

Sources close to the deal have told Reuters that one of the consortium members considered pulling out altogether from the complicated project. Kashagan’s development costs have escalated to $136 billion from $57 billion.

Yergozhin said Kazakhstan was discussing a possible scheme to secure a share of profit from Kashagan earlier than planned and still wanted Kazakh national oil firm KazMunaiGas [KMG.UL] to be co-operator of the field, currently managed by ENI.

“We’ve said that KazMunaiGas should be co-operator,” he said. “Kazakhstan cannot choose the operator unilaterally. The operator is chosen by all consortium companies.”

Asked whether they have proposed to change the operator, Yergozhin said: “The consortium has not officially proposed anyone.”

Kazakhstan has accused ENI and its partners — Royal Dutch Shell Plc (RDSa.L: Quote, Profile, Research), Exxon Mobil Corp (XOM.N: Quote, Profile, Research), Total (TOTF.PA: Quote, Profile, Research), Conoco Phillips (COP.N: Quote, Profile, Research) and Japan’s Inpex Holdings Inc (1605.T: Quote, Profile, Research) — of ecological and other violations at the Kashagan field.

It has demanded a compensation of more than $10 billion and a bigger role for state energy company KazMunaiGas.

Kazakhstan put further pressure on the Eni-led group and alarmed other investors in the oil and gas business by passing legislation allowing the government to break contracts with foreign companies. (Reporting by Raushan Nurshayeva; Writing by Maria Golovnina; Editing by Ben Tan)

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