FILE: Kazakhstan stops work at Kashagan oilfield

Kazakhstan suspended work at the huge Kashagan oilfield for at least three months on Monday (August 27). Kazakhstan Ecology Minister Nurlan Iskakov said the suspension was due to environmental violations. The project's start-up delays and cost overruns have long irked Kazakhstan. It has threatened to revoke a permit held by an Eni-led group of Western oil majors to exploit the Caspian Sea site, the world's biggest oil find in decades, over ecological concerns. The dispute is reminiscent of Russia's row with Royal Dutch Shell, which ended with the multinational oil firm losing control of the giant Sakhalin-2 oil project to Russia's Gazprom. Italy's Eni and other consortium members were unavailable for comment. The energy ministry in Astana refused to comment. Iskakov said between 2003 and 2005 demands were made on a number of offshore sites to meet ecological requirements. They had not been fulfilled. Eni Chief Executive Paolo Scaroni said on Friday his company and its partners had 60 days to reach a negotiated solution for the Kashagan project. Industry sources in Kazakhstan say some in the government are unhappy with what are now seen as overly generous terms signed with foreign companies in the 1990s, when Kazakhstan needed foreign investment to overcome a post-Soviet slump. Kashagan's AgipKCO consortium also includes Shell, Exxon Mobil Corp, Total, ConocoPhillips, Japan's Inpex Holdings Inc and the Kazakh oil company KazMunaiGas. The consortium has put off the original startup of the world's biggest oilfield discovery in 30 years to the second half of 2010 from an original target of 2005.

ITN Source | August 27, 2007

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