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Kashagan start-up set for 2013


News wires

Kazakhstan and the AgipKCO consortium have agreed to delay first oil from the Kashagan field until 2013, Kazakh Energy Minister Sauat Mynbayev has said.

The agreement paves the way for Kashagan's further development after a year of tension between the consortium and the Kazakh government over production delays and cost overruns at the world's biggest oil discovery in 30 years.

In May, Kazakhstan threatened to impose sanctions should the consortium decide to delay production from the $136 billion project, but on Saturday, Mynbayev struck a more conciliatory tone.

"Yes, we have put it off," he told Reuters.

Earlier he told a government meeting Kazakhstan and the Kashagan group signed a new memorandum on Friday setting out details of Kashagan's future development and fixing the start of its commercial production at October 2013.

"I think this time it will be the last delay," he said.

The stand-off over Kashagan started in August last year when the government accused its shareholders of allowing costs to spiral to $136 billion from $57 billion, and missing the original 2005 production start target.

The AgipKCO consortium unites Eni, Shell, ExxonMobil, Total , ConocoPhillips , Kazakh state oil company KazMunaiGas and Japan's Inpex.

Kashagan holds an estimated 38 billion barrels of oil-in-place and production is expected to increase from an initial 75,000 barrels per day to peak production of 1.2 million bpd in the second half of the next decade.

The Caspian Sea deposit is central to Kazakhstan's plans to triple oil output in 15 years.

Apart from fixing the schedule, Mynbayev said the memorandum stipulated the consortium would not be able to use proceeds from oil production to compensate for costs sustained after October 2013 - a move designed to prevent further cost rises.

He said Kazakhstan also rejected the consortium's proposal to extend its production sharing agreement beyond 2041.

"The final year, 2041, will stay intact," Mynbayev said.

Separately, he said the moratorium mapped out a new floating royalties structure for Kashagan requiring it to pay 3.5% of output to the government at global prices above $45 a barrel, 7.5% to 8% at $130, and 12.5% at $195.

Under a January deal, KazMunaiGas doubled its stake in Kashagan to 16.81% for $1.78 billion and stripped Eni of its leading role in Kashagan. Other shareholders cut their stakes on a pro-rata basis.

Mynbayev said the consortium agreed to the latest changes provided that it will be exempted from new taxes and duties Kazakhstan plans to introduce from next year for its key industries to boost revenues and foster diversification.

"They've agreed to all these changes provided their tax stability is preserved," he said, adding it was up to parliament to decide whether to exempt Kashagan from the new tax code.


Monday, 30 June, 2008, 08:25 GMT  | last updated: Monday, 30 June, 2008, 08:28 GMT

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