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Kazakhstan to tie up with Shell for Kashagan oil


UPDATE 1-Kazakhstan to tie up with Shell for Kashagan oil

Fri Sep 19, 2008 6:48am EDT

(Adds details, background)

By Maria Golovnina

ALMATY, Sept 19 (Reuters) – Kazakhstan said on Friday state oil company KazMunaiGas would create a joint venture with Royal Dutch Shell Plc (RDSa.L:QuoteProfileResearchStock Buzz) to handle the production segment of the Kashagan oilfield.

“A joint venture between Shell and KazMunaiGas is being formed so that KazMunaiGas could take the lead in the production sector of the project,” the government said on its website,

Energy Minister Sauat Mynbayev said KazMunaiGas would take over production-related operations at Kashagan in five years and join its new operational structure, according to the government.

KazMunaiGas said earlier this year that Western companies developing the Kashagan oilfield would all get new roles after the completion of the project’s initial development stage.

Kazakhstan and a group of global oil majors, at odds over Kashagan’s production schedule and costs, are due to finalise details of the project’s future development by Oct. 25.

KazMunaiGas is at the centre of state plans to exert more control over its resources following the first post-Soviet decade when Kazakhstan, its economy in tatters, lured foreign investors with tax breaks and sky-high returns.

“KazMunaiGas will be also part of a new operational model which is being created in the project,” the government said, reiterating an earlier agreement.

It did not elaborate and officials were unavailable to clarify the scheme. Shell was also not available for comment.

Apart from Shell and KazMunaiGas, the consortium unites Eni (ENI.MI:QuoteProfileResearchStock Buzz), Exxon Mobil Corp (XOM.N: Quote,ProfileResearchStock Buzz), Total (TOTF.PA: QuoteProfile,ResearchStock Buzz), ConocoPhillips (COP.N: QuoteProfileResearch,Stock Buzz), and Japan’s Inpex Holdings Inc (1605.T: QuoteProfile,ResearchStock Buzz).

Eni said this week it plans to start production at the Kashagan field in 2012, adding it was aiming for production of 150,000 barrels per day (bpd) from the fourth quarter of 2012.

Under an earlier deal, KazMunaiGas is to double its stake to 16.81 percent in Kashagan for $1.78 billion, with other shareholders agreeing to cut their stakes on a pro-rata basis.

The stand-off over Kashagan started in August 2007 when the government accused its shareholders of allowing costs to spiral to $136 billion from $57 billion, and missing the original 2005 production start target.

Mynbayev announced the move after a meeting with senior Eni officials and financial institutions in the western oil region of Atyrau where Kashagan is located. (Writing by Maria Golovnina; editing by Jon Loades-Carter)


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