The head of Ministry of Energy - Kazakhstan government and Agip KCO to agree on industrial oil production in Kashagan not late than October 2013

/INTERFAX-KAZAKHSTAN, Astana, June 28, 08/ - Kazakhstan government and consortium of foreign investors Agip KCO agreed that industrial offshore development Kashagan in North Caspian should start not late than October 2013. "Yesterday morning we signed memorandum. The results of agreement: if production will be postponed after October 1, 2013, expenditures of consortium after this term won't be compensated by Kazakhstan republic" - Sauat Mynbaev, the Minister of Energy and Mineral Resources said on government meeting on Saturday, in Astana. "We think that this time it's the last term of postpone" - he added. After government meeting S. Mynbaev gave explanations to journalists, the main point of which is that if consortium will start Kashagan offshore development after newly confirmed term (October 1, 2013), its participants won't have rights to return their investments, deposited in project after this date. He reminded that according to PShA, all assets invested in offshore development by consortium's participations are compensated by them at the expense of extracted commercial oil. "The main point of PShA is that all these investments, which invested (consortium's participations - IF-K) should be compensated by oil, which will be extracted in future. (...). The have already invested $17 bn., these money should be compensated by extracting oil. But if they continue to spend money after October 1, 2013, these sums won't be compensated by oil. It will be their net losses" - he said. The head of Ministry of Energy on government meeting also informed that Kazakhstan refused Agip KCO consortium in increasing of Kashagan offshore development period, which, according to current between two sides documents, finishes in 2041. As is well known, according to PShA on realization of North Caspian project, signed in1997 on 40 years term, Agip KCO should start industrial Kashagan offshore development period in 2005. However, this growth turned to be unreal and according to sides' agreement, industrial Kashagan offshore development was postponed to 2008. But in the middle of last summer Agip KCO again informed Kazakhstan government on postpone the term of extraction on Kashagan deposit from 2008 to second half of year 2010. Besides, consortium announced on considerable increasing of expenditures on project from $57 bn. to $136 bn. In this relation, Kazakhstan side expressed discontent by the rate of project realization and attained for its national oil and gas company KazMunaiGas the status of major participant of project. According to agreement between Agip KCO and Kazakhstan government, signed January 14, KazMunaiGas receive the status of major shareholder of consortium (16.81%) along with Eni (the current operator of project), Total, ExxonMobil, Shell. The sides agreed that project operator will be new company, which will be created by all participants of consortium, considering increased role of KazMunaiGas in project. In this relation, the head of Ministry of Energy said that the main volume of income, which Kazakhstan received from participation in project "came from our part, as we bought it by prime cost". Actually this part costs in 5-6 times higher. We paid for ti $1.7 bn., and according to current prices on oil, its acute cost makes $7 bn." - S. Mynbaev said. At the current moment, staff participant of Agip KCO formally is the same: Eni, Total, ExxonMobil, Shell has 18.52% of share interest, ConocoPhillips - 9.26%, Inpex and KazMunaiGas - 8.33%.Later, foreign participants of Agip KCO consortium again offered to postpone beginning of industrial extraction on Kashagan deposit to 2012-2013. The Authority of Ministry of Energy, as expected, finished negotiations before June 30. North Caspian project provides the range of offshore development in Kazakhstan sector of Caspian shelf, major of which is Kashagan. There are 4 oil-bearing structures are in contract territory of consortium drilling activity: Kashagan, Kalamkas, Aktoty, Kayran. These structures are consisting of 11 sea blocks, taking territory of 5.6 th. square meters. Extracting oil reserves of Kashagan are estimated in 7-9 bn. barrels as minimum, total geologic oil reserves of this oil-bearing structure - in 38 bn. barrels. [2008-06-30]