Financial Times: Exxon blamed for thwarting Kashagan plan

By Isabel Gorst in Moscow
Published: December 5 2007 02:00 | Last updated: December 5 2007 02:00

Kazakhstan yesterday exposed ExxonMobil as the only member of an international oil group led by Eni of Italy unwilling to surrender part of its equity in the giant Kashagan oilfield to Kaz- Munaigas, the Kazakh state oil company.

“ExxonMobil does not share the opinion of other members of the consortium,” Sauat Mynbaev, Kazakhstan’s minister of energy, told reporters in Astana, the Kazakh capital.

KazMunaigas announced at the weekend that all but one member of the Eni group had agreed to dilute their shares in Kashagan to help resolve a dispute about surging costs and production delays at the flagship Caspian Sea development.

Talks, aimed at resolving the row by December 20, are in progress. Mr Mynbaev said: “It would be optimal for KazMunaigas to increase its stake to the level of a large shareholder, but whether it gets this or not is another matter.”

KazMunaigas currently owns 8.33 per cent of the Kashagan project while the biggest shareholders, including Eni, Exxon, Shell and Total, each hold 18.5 per cent. ConocoPhillips and Inpex of Japan are also consortium members.

Exxon said it “could not comment on ongoing negotiations”.

Mr Mynbaev, who was appointed energy minister shortly after the Kashagan dispute blew up, is understood to be a tough negotiator determined to build KazMunaigas as a national oil champion.

Exxon, already embroiled in a lengthy dispute with Gazprom about gas prices at the Sakhalin 1 project in the Russian far east, is known for its unbending negotiating style.

Industry insiders said ExxonMobil might be more ready to allow KazMunaigas additional shares if, as is expected, some consortium members decide to quit Kashagan, freeing up equity for the state oil company.

However, the US company is expected to resist any demand that the group helps finance KazMunaigas’ share of the development, which is now expected to cost $136bn in total.

Kazakh officials have complained that fighting within the Eni consortium has disrupted management of the Kashagan project and slowed progress towards resolution of the dispute.

Analysts have speculated that ExxonMobil’s ultimate goal is to oust Eni as operator and assume management of the project, one of the most complicated oilfield developments ever undertaken.

Kazakhstan earlier threatened to sack Eni, but recently, government officials have said they will abide by rules of the Kashagan contract stipulating that the operator cannot be changed without the consensus of all consortium partners.

Copyright The Financial Times Limited 2007

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