Eric Watkins
Senior Correspondent
LOS ANGELES, Sept. 7 -- Kazakh Prime Minister Karim Masimov has invited Eni SPA Chief Executive Paolo Scaroni and European Union Energy Commissioner Andris Piebalgs to visit Kazakhstan to discuss issues related to the development of Kashagan oil field.
Masimov extended the invitation Sept. 6 while addressing delegates at the second annual KazEnergy Eurasian Energy Forum in Astana.
The dispute between Eni and Kazakhstan arose over increased costs and alleged delays in the Kashagan development project's commercial start-up.
Kazakhstan's Environmental Minister Nurlan Iskakov announced Aug. 27 that works on the field had been suspended for 3 months because of alleged violations of the country's environmental laws (OGJ Online, Aug. 28, 2007).
The Finance Ministry's customs control committee also said criminal cases had been opened against several consortium officials over evasion of customs duties payments, which, they said, cost the Kazakh budget $2.5 million.
The fire-fighting service of Kazakhstan's Emergency Situations Ministry also suspended Eni's construction of an oil and gas processing unit in the Makat district, Aturaus region, after finding what it called "gross violations" of fire safety regulations at the facility.
Masimov issued his invitation for further talks even as he said Kazakhstan doubts the ability of the Kashagan oil field developer to honor its commitments under the agreement.
"The actions by the participants in the consortium to develop Kashagan, which we don't understand, have become systemic in the recent years, and make the Kazakh government doubt their ability to execute the terms of the agreement," said Masimov.
"The delay in the beginning of commercial production of Kashagan oil and a more than twofold increase in the expenditure to develop the field threaten serious socioeconomic consequences for Kazakhstan," he added.
In January Scaroni said Kashagan field was more "generous" than expected, indicating that it may have higher production rates than originally expected (OGJ Online, Jan. 26, 2007).
At the time, Kazakh state-owned energy company KazMunaiGaz was already investigating the project to determine the cause of higher costs and delays.
Scaroni dismissed the investigation, saying audits were normal, and that Eni was not worried by the checks. He said Eni within weeks would publish a schedule and cost structure for starting commercial oil extraction at the field.
Contact Eric Watkins at [email protected].
