Italian Prime Minister Romano Prodi plans to visit Kazakhstan next month in an effort to resolve a disagreement over delays and cost increases in developing the giant Kashagan oil field.
Prodi’s office said the visit, set for Oct. 7-9, was planned but not scheduled long before the dispute arose late last month between the Kazakh government and Italy’s Eni SPA (OGJ Online, Aug. 28, 2007).
Attempting to downplay any sense of crisis, Prodi said that his trip would deal with more than oil and that his country and Kazakhstan enjoy excellent relations.
Kazakhstan wants to increase its share of future profits from the oil field to 40% from 10% as compensation for repeated delays by the Eni-led consortium in developing it.
Kazakhstan also wants state-run Kazmunaigaz to be made a joint operator of the project along with Eni.
The Kazakh government has suspended development of the Kashagan project for 3 months, and it has threatened to extend the suspension beyond October if the two sides cannot come to terms.
Eni executive Paolo Scaroni met with Kazakh Prime Minister Karim Massimov and expressed confidence that negotiations would proceed concerning operations at the oil field. The next day, however, Massimov said a friendly settlement compensating for the delays must be reached by Oct 22.
Eni has delayed twice the field’s start of production; first to 2008 from 2005, and then to 2010.
Kazakhstan also has expressed concern over the rising estimates of the project’s cost, which has more than doubled to $136 billion from the original $57 billion.
Ahead of Prodi’s planned visit, Kazakh lawmakers are in the process of adopting an amendment that will allow the government to annul contracts of strategic importance if the contract conditions are not met and national security or economic interests are threatened.
Kazakh lawmaker Valeriy Kotovich said the amendment, for which the government has already expressed its approval, is likely to be passed by the end of September.
Observers say the amendment could have serious consequences for the current dispute between Kazakhstan and the Eni-led consortium, easing the government’s ability to make legal changes in contract terms.
