Troubled: the Kashagan development
Astana 'demands $7bn pay-out'
Kazakhstan demanded $7 billion in compensation from the Eni-led AgipKCO consortium today for delays in developing the huge Kashagan oilfield, a source close to the talks said as the deadline for a settlement loomed.
Kazakhstan set today as the deadline for its negotiations with the group to resolve a long-running dispute over cost overruns and production delays at the Caspian Sea oilfield, but some officials have said talks may last longer.
"(We demand) more than $7 billion. That's for the delays," the source, who declined to be identified, told Reuters.
Eni had no immediate comment. Kazakhstan had previously demanded more than $10 billion, according to other sources.
Kashagan, with its estimated 38 billion barrels of oil in place, lies at the heart of Kazakhstan's plans to triple its crude output by 2017 as the former Soviet state fast emerges as a new source of non-Opec oil.
But its development has been plagued by cost overruns and delays which have irked Kazakhstan. It is now due to start production in 2010, instead of 2005 originally. Its costs have escalated from $57 billion to $136 billion.
Officials have said, however, that talks might continue until the end of the year.
Sources close to the deal have told Reuters that one of the consortium members considered pulling out altogether from the complicated project.
Deputy Finance Minister Daulet Yergozhin said Kazakhstan was discussing a possible scheme to secure a share of profit from Kashagan earlier than planned and still wanted Kazakh national oil player KazMunaiGaz to be co-operator of the field, currently managed by Eni.
"We've said that KazMunaiGaz should be co-operator," Reuters quoted him as saying. "Kazakhstan cannot choose the operator unilaterally. The operator is chosen by all consortium companies."
Asked whether they have proposed to change the operator, he said: "The consortium has not officially proposed anyone."
Kazakhstan has accused Eni and its partners - Shell, ExxonMobil, Total, ConocoPhillips and Inpex Holdings - of ecological and other violations at the Kashagan field.
Kazakhstan put further pressure on the Eni-led group and alarmed other investors in the oil and gas business by passing legislation allowing the government to break contracts with foreign companies.