Astana expects "hundreds of millions of dollars" from Kashagan's investors for delay

/REUTERS, Almaty - Astana, Dmitriy Solovyov, with assistance of Raushan Nurshayeva, February 25, 04/ - Consortium of foreign investors founded for development of the great field Kashagan will pay to Kazakhstan "hundreds of millions of dollars" as the fine for delay of extraction start, a source in the country's government informed Reuters. Kashagan, which is situated in Kazakhstan sector of Caspian Sea shelf is the largest oil field among revealed during the last 30 years. According to the source, which said on conditions of anonymousness, "the final agreement about compensation for delay of industrial extraction at Kashagan has been achieved" and it will be signed on February 25. "In the principle, this is the matter of hundreds of millions of dollars", - he said having added: "We'll not make the sum known till tomorrow". Exact dates of extraction start are not known yet and, as expected, they will be announced on Wednesday. According to the government's source, "most probably, it will occur in 2008 or in following years". At the same time another source, which is close to negotiations, said Reuters that beginning of commercial extraction is planned for 2007-2008, "that will let extract 450,000 barrels a day by the year 2010". Consortium headed by Italian Eni also comprises French Total, American Exxon Mobil and ConocoPhillips, Britich-Dutch Royal Dutch/Shell and Japanese Inpex. Consortium found oil at Kashagan (north of Caspian Sea) in 2000 and, according to the terms of 40-year production sharing agreement with Kazakhstan, it obliged to start industrial extraction no later than in 2005. However the field's development is complicated by geological difficulties of the bed, and also by the fact that Caspian Sea freezes in winter that made the consortium postpone dates of extraction start. Kazakhstan, in response, demanded compensation and since the beginning of autumn of 2003 the sides negotiated behind closed doors. CONSIDERABLE RESERVES According to consortium's data, the extracted reserves of Kashagan are equal to nine billion barrels of oil that lets extract about 1.0 million barrels a day (50 million tons a year) for long time. Kazakhstan estimates the extracted reserves at 21.6-23.4 billion barrels of oil (2.4-3.2 billion tons). The source, which is close to negotiations of Kazakhsatn government and the consortium, informed Reuters on Tuesday that geological reserves of the field were estimated at 4.8 billion tons, and forecasted volume of capital investments for the whole period of PSA acting was $29 billion. Consortium has already invested $2.2 billion into the project, and sources in it say the first phase of industrial development of the field may cost $9 billion that will make Kashagan the biggest oil project in the world. The source, which is close to negotiations of Kazakhsatn government and the consortium, informed Reuters that it was planned to reach maximum extraction level - 1.2 million barrels - by the year 2015. Kazakhstan, which now extracts 1.0 million barrels of oil a day, hopes that after Kashagan's development extraction will treble by 2015. It will let Kazakhstan become one of the leading players at the world oil market. [2004-02-25]