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Kashagan’s Foreign Partners to Finance State’s Share of Costs

By Nariman Gizitdinov – May 24, 2012 11:02 AM GMT+0100

Eni SpA (ENI), Exxon Mobil Corp. (XOM) and Royal Dutch Shell Plc (RDSA) agreed to shoulder the investment costs owed by Kazakhstan’s state energy producer for one of the world’s biggest oil fields this year and next.

The international partners, which also include Total SA (FP) and ConocoPhillips (COP), will bear KazMunaiGaz National Co. costs in the offshore Kashagan field for 2012 and 2013, the Kazakh oil and gas ministry said in a statement late yesterday.

“The parties agreed that the consortium will finance the share of KazMunaiGaz’s investments in the project in the period in 2012-2013,” it said.

The Kazakh government had considered a request from the international partners to raise the budget for the first phase of Kashagan by 20 percent to $46 billion, a person with knowledge of the matter said at the start of the year. They would bear the extra costs themselves, the person said.

The Caspian Sea field will produce 370,000 to 450,000 barrels of oil a day in the first phase, which may double in the second phase in 2018 or 2019, the government said last year. Production is slated to begin in June 2013 at the latest.

The oil and gas ministry oversees Kashagan’s production- sharing agreement, which allows the investors to recoup costs before the government takes its share of oil revenue.

Eni, Shell, Exxon and Total each hold a 16.8 percent stake in the field, as does KazMunaiGaz, according to the website of the North Caspian Operating Co. venture. Conoco holds 8.4 percent and Japan’s Inpex Corp. (1605) has 7.56 percent. The venture didn’t immediately respond to a request for comment.

Amend Budget

The Kazakh government reached an agreement with the international partners to amend the budget for Kashagan, the Astana-based ministry said in the statement.

In addition to the revised payment structure, the foreign partners won’t be reimbursed for “some costs” in connection with the project, the ministry said, without elaborating.

The gas shipping unit of KazMunaiGaz will buy as much as 83 percent of the gas produced in the first phase of Kashagan to supply the domestic market until 2041, the ministry said.

Kashagan gas will be sold to the state at $80 per 1,000 cubic meters through 2016, Oil and Gas Minister Sauat Mynbayev told reporters in Astana today, according to Novosti-Kazakhstan. Beyond that, 75 percent of gas will be sold until 2020 and 83 percent of gas after 2020 at average domestic prices, he was cited as saying.

The Kashagan partners have invested $33 billion in the development of the Caspian Sea oil deposit, the state-owned Kazinform news service reported in September.

To contact the reporter on this story: Nariman Gizitdinov in Almaty at

To contact the editor responsible for this story: Stephen Voss at


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