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Oil & Gas Journal: New consortium formed to manage Kashagan field

Eric Watkins
Senior Correspondent

LOS ANGELES, Jan. 25 — A new managerial consortium consisting of Eni SPA, Royal Dutch Shell PLC, Total SA, and ExxonMobil Corp. has been formed to perform operational management of Kazakhstan’s Kashagan oil field, said Eni Chief Executive Officer Paolo Scaroni. He said Eni will continue to manage the test phase.

In a conference call with financial analysts, Scaroni explained the details of the deal Eni reached several days ago with the Kazakh government (OGJ Online, Jan. 18, 2008).

According to a report in Milan’s Il Giornale newspaper, the consortium will have priority in negotiations on extending the contract for the exploitation of the Kazakh oil field beyond the allotted timeframe.

The consortium also will have the right to match any proposals put forward by other companies negotiating any further exploitation of the project.

Scaroni pointed out that the “lengthy negotiations have delayed the first barrels being produced from the oil field. Now, this will take place in 2011, and the production will be 370,000 b/d.”

Stefano Cao, director general of Eni’s exploration and production division, said the exact amount of investment to be made in the project will not be known until March.

“We have to see what the outcome of the claim will be and then we will do our sums; a few months will be required to draft the budget and the experimental plan,” Cao said.

The manager then dealt with the amount of compensation that the government claims is $5 billion, but other estimates suggest $2.5-4.5 billion.

“The compensation will be the outcome of mechanisms established in the contract: a bonus, a priority payment, and a change in the interest rates that will be applied to the investment and that are linked to oil prices,” he said.

“The combination of these three factors will result in a different transfer value, which will be based on the scenario we face. Anyway, the priority payment will start after the beginning of production, as will the mechanism to calculate the interest,” Cao said.

According to Scaroni, Il Giornale reported, “The bonus relates to a small sum in comparison with the compensation value as a whole, the bulk of which is connected to events within the oil and gas industry.”

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