Kazakhstan will not revise the terms of its contract with the Eni SPA-led consortium developing Kashagan oil field, according to Kazakh President Nursultan Nazarbayev.
“There is no revising the contract signed 10 years ago,” said Nazarbayev after concluding talks with visiting Italian Prime Minister Romano Prodi in the Kazakh capital, Astana.
But Nazarbayev also warned that if investors break their contracts, Kazakhstan “reserves the right” to take measures envisaged by its laws, i.e., to review contracts with foreign companies on the development of subsurface resources if such contracts are deemed damaging to the country’s strategic economic interests.
The president based the threatened action on a bill the Kazakh parliament passed last month that will become law when Nazarbayev signs it.
Nazarbayev said the disagreement between his government and the consortium arose from increased estimated development costs and a delay in the onset of production. The two changes mean delays in the country’s economic development, which could violate the new law.
“This year Eni, which became the operator with the backing of Kazakhstan’s government, presented a new budget under which the outlays grow by $100 billion and the beginning of oil extraction is put off until 2010,” Nazarbayev said.
“The government has estimated that large funds envisaged in our strategic plans for economic development will thus be lost to Kazakhstan’s budget,” the Kazakh president said, adding that, “For this reason both sides entered the negotiations.”
Nazarbayev said the current negotiations are purely commercial and “have nothing to do either with Kazakhstan’s president or with the Italian prime minister.” Instead, he said, “We will offer the opportunity to carry them through.”
For his part, Prodi expressed hope that the disagreement will be settled in the spirit of friendship and cooperation. The Italian leader said that “specialists are holding negotiations; they are working, and when they sum up the results, we will familiarize ourselves with them and express our views on them.”
Late last month, Prodi and Nazarbayev-meeting informally at the United Nations-agreed that the situation regarding the Kashagan oil project should not be politicized (OGJ Online, Sept. 27, 2007).
The consortium includes ExxonMobil Corp., ConocoPhillips, Royal Dutch Shell PLC, Total SA, and Inpex Corp.