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Reuters: Kashagan oil dispute settled, Kazakhs get equal role

Sun Jan 13, 2008 11:05pm GMT

ASTANA, Jan 13 (Reuters) – Kazakhstan’s KazMunaiGas has finally reached a deal with an Eni-led (ENI.MI: Quote, Profile, Research) consortium over developing the giant Kashagan oil field which will nearly double its stake to equal that of the biggest investors in the project.

In a statement on Sunday, the Kazakh company said all of the companies in the consortium — which also includes ConocoPhillips (COP.N: Quote, Profile, Research) and Japan’s Inpex (1605.T: Quote, Profile, Research) — had agreed to the new terms.

A source close to the talks said KazMunaiGas’ stake would rise to 16.51 percent from a previous 8.33 percent. The largest shareholders in the project would reduce their stakes on a pro rata basis to bring their holdings in line with that of KazMunaiGas.

The largest shareholders in the group — Eni, Royal Dutch Shell (RDSa.L: Quote, Profile, Research), Exxon Mobil (XOM.N: Quote, Profile, Research) and Total (TOTF.PA: Quote, Profile, Research) — each previously had 18.52 percent in the field.

Exxon had previously been the only member of the consortium that had been holding out on agreement to lower its interest in favor of KazMunaiGas, saying it had a different view on the valuation.

Kazakhstan had demanded an increase of its state-owned company’s stake and compensation for cost overruns and the delay in the start of oil output at the field. Talks started last August.

The Caspian field — the largest oil find in the last 30 years — is now due to start pumping oil in 2010 instead of the original 2005 target. Total costs, however, have soared to $136 billion from $57 billion.

According to sources familiar with the talks speaking in December the companies had agreed to pay between $2 billion and $4 billion cash and reduce their share of profits from the project.

KazMunaiGas will hold a press conference on the new deal on Monday, while a statement from the Eni-led consortium is also expected then. No other details were immediately available.

Kazakhstan’s tougher stance mirrors that of oil producers such as Venezuela which have tightened their grip on national resources as prices have surged.

Other countries such as Nigeria and Canada have also changed the terms of previously-agreed contracts or renationalized assets. (Additional reporting by Raushan Nurshayeva in Astana, writing by Jo Winterbottom, editing by Gary Crosse)

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