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Kazakhstan reassures Italy over Kashagan oilfield

ASTANA - Kazakhstan reassured Italy on Monday it had no plans to change the terms of a contract signed between Italy’s Eni and the Central Asian state’s government to develop the giant Kashagan oilfield.

Angered by spiralling costs and production delays at one of the world’s most costly oilfields, Kazakhstan has threatened to strip Eni of its leading role at Kashagan in a case that has alarmed foreign investors.

‘We are not talking about revising the contract signed 10 years ago,’ Kazakh President Nursultan Nazarbayev said after talks with visiting Italian Prime Minister Romano Prodi.

‘I am convinced that Eni understands goals set by the Kazakh sides and will be on our side. ... These are commercial negotiations which have nothing to do with the Kazakh president or the Italian prime minister.’

Kazakhstan has softened its stance in the dispute since late August when the government accused the Italian-led consortium of violating environmental legislation at the oilfield.

Eni’s CEO Paolo Scaroni said, however, the consortium may consider raising Kazakh national oil company KazMunaiGas’s 8.3 percent stake in the project. Development costs have escalated to $136 billion from $57 billion.

‘There is a desire on the Kazakhs’ part for a bigger involvement that will get an answer from the overall organisation,’ he told reporters after Nazarbayev-Prodi talks.

Kazakhstan wants to see KazMunaiGas become co-operator of the oilfield whose start-up date has been put off to 2010 from the original target of 2005.

Prodi

Other members of Kashagan—at the heart of Kazakhstan’s ambitious oil production plans—are Royal Dutch Shell, Exxon Mobil Corp, Total, ConocoPhillips and Japan’s Inpex.

Prodi and Nazarbayev, addressing reporters in the Kazakh capital Astana, did not say what form of agreement was being discussed. Kazakhstan has said it expects to see billions of dollars in compensation from Eni for production delays.

Prodi said Nazarbayev had ‘pointed out the long and complicated negotiating steps and Kazakhstan’s conditions’ but called Kazakhstan’s overall attitude positive.

‘I certainly cannot say when the talks will be concluded because the technicians are working on them. The attitude of the president is extremely positive and can be instrumental in reaching an accord in the future,’ Prodi said.

‘Eni has experience about the rights and the roles of concession-granting countries. We know the rules for long-term cooperation and on this you can find extremely profitable grounds for cooperation.’

Putting further pressure on Eni, parliament has passed legislation allowing the state to cancel contracts that hurt national security. Nazarbayev, yet to sign it into law, said the government would get tough on investors breaking local laws.

‘If investors violate contracts the Kazakh side reserves the right to take measures in accordance with our country’s legislation,’ he said.