Royal Dutch Shell Plc  .com Rotating Header Image Kazakhstan has right to intervene in key projects

Dec. 6, 2007:
By Maria Golovnina

ASTANA (Reuters) – Kazakhstan will exercise its right to intervene in natural resources projects if one of the investors tries to sell out, Kazakh Prime Minister Karim Masimov said on Thursday.

Kazakhstan is locked in a row with the Eni-led group developing the huge Kashagan oilfield over cost overruns and production delays. Kazakhstan has said one of the members, Exxon Mobil , is against a proposed settlement plan.

Speaking at a business conference in Astana, Masimov stressed Kazakhstan’s commitment to the continuity of existing contracts in the natural resources sector.

“But if an investor has broken a contract, the government has the right to review (the contract). Also, if an investor is selling its natural resource business, then the government has the right to intervene in this case,” he said.

“We are holding talks on Kashagan. I hope that this question will be settled soon,” he added, without specifying in what way the government might intervene.

Kazakhstan has passed legislation this year that allows the government to change or break contracts with natural resources companies if it sees a threat to national security.

Kazakhstan wants the Kashagan consortium members to reduce their shareholdings and significantly raise state oil company KazMunaiGas’s 8.3 percent interest. Kazakhstan’s energy minister said this week that Exxon was against the plan.

The U.S. oil company, which has an 18.52 percent stake in Kashagan, has not commented on the matter and the mechanism of the proposal remains unclear.

Other Kashagan members are Eni, Royal Dutch Shell and Total , who all hold stakes of similar size to Exxon. Smaller stakes belong to ConocoPhilips, with 9.26 percent, and Japan’s Inpex <1605.T>, with 8.33 percent.

Kazakhstan has accused the consortium of a host of violations, including ecological, and blamed its management for allowing costs to spiral and delaying the start of production.

The Caspian Sea field is at the heart of Kazakhstan’s ambition to triple oil output by 2017. It is now due to start pumping oil in 2010, instead of the original 2005 target.

(Editing by Tomasz Janowski)

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