Kazakhstan may agree upon postponement Kashagan already today

/REUTERS, Astana, Raushan Nurshayeva, November 21, 03/ - Kazakhstan and consortium headed by Italian company ENI, which develops the giant oil field Kashagan at Caspian shelf, may come to agreement about postponement of extraction within the framework of the project for one year and a half already today, said the minister of power engineering and mineral resources of Kazakhstan Vladimir Shkolnik. "Negotiations are being held at present, which says that beginning of commercial extraction of oil, which is planned in PSA in the end of 2005, is postponed by a number of objective reasons... The point is that there can be delay - extraction will be postponed for one year and a half", - said Shkolnik to journalists on Friday. According to his words, the sides are close to agreement. "I really hope that at present a big group of our comrades in London, all contractual organizations, are consulting. Soon they will start discussions. I hope this question will be solved today", - said the minister. Besides ENI the consortium, which has been founded for development of field, which is one of the largest ones in the world among revealed within the last 30 years, comprises French Total, American Exxon Mobil and ConocoPhillips, and also Royal Dutch/Shell and Japanese Inpex. Negotiations about terms of postponement of the first oil extraction are being held since the beginning of autumn behind closed doors. Major theme of the discussion is monetary compensation, sizes of which, according to Shkolnik's words, have been determined in the production sharing agreement. On Thursday a source in Kazakhstan government said to Reuters that it was the matter of $150 m. Minister Shkolnik evaded direct answer for the question whether it was the truth, but explained mechanism of compensation calculation. As follows from his words, the consortium will pay $50 m. for the first year of postponement, and for the second one - $100 m. more. "Sum of compensation has been provided by PSA. Fifty (million US dollars), then, in ascending order, - $100 m., then - $150 m. I.e. depending for what period the postponement will be made. $50 (million) are added every year, depending on postponement. It means, $50 million plus $100 million", - said the minister, having refused further comments on this theme. According to consortium's data, Kashagan's reserves are equal to nine billion barrels of oil that lets extract about 1.0 m. barrels a day (50 m. tons a year) for long time. Kazakhstan is reaching 2.4-3.2 bn tons of oil (21.6-23.4 bn. barrels). However development of the field is complicated by geological difficulties of the beds, and also by the fact that Caspian Sea freezes in winter. Consortium has already invested $2.2 bn. into the project, and sources in consortium say the first phase of industrial development of the field may cost $9 bn. that will make Kashagan the largest oil project in the world. [2003-11-21]