Uchenna Izundu
International Editor
LONDON, Sept. 4 -- The Kazakh government has threatened to extend its suspension order of work at the Kashagan oil field if the Eni SPA-led consortium does not address the operational issues hindering the project.
Kazakhstan stopped the group from continuing work at Kashagan on Aug. 27 claiming breach of environmental standards, cost overruns, and delays (OGJ Online, Aug. 28, 2007).
Analysts have interpreted the action as a move to gain higher revenues from the project.
Production, planned to start in 2005, has been postponed to 2010. Eni has suggested that operational costs could rise from $57 billion to $136 billion. The group plans to develop the field by drilling about 280 wells and building offshore platforms and artificial islands.
According to media reports, the Kazakh authorities are now pressing the consortium to propose "an adequate compensation" and reforms in the structure of the deal by Sept. 5 to drive its future implementation.
Kazakhstan has said that it is prepared to change the operator if need be, but this does not necessarily mean appointing state oil company KazMunaiGaz as the replacement. However, even if KazMunaiGaz took control, the issue is whether it has the technical experience or financial resources to manage the field efficiently.
Kashagan is an important project for future non-OPEC oil supplies to the West, which is trying to persuade Kazakhstan to direct Caspian oil away from Russia, China, or Iran.
Contact Uchenna Izundu at [email protected].
