Extraction of the first oil at Kashagan has been postponed for 2007 - 2008 - Kazakhstan

/REUTERS, Astana, Raushan Nurshayeva, February 25, 04/ - Kazakhstan authorities will receive "considerable" compensation from the consortium of investors for postponement of the beginning of industrial oil extraction at the great field Kashagan for 2007-2008, informed government's representatives having kept from telling the sum of the fine. Kashagan, which is situated in Kazakhstan sector of Caspian Sea shelf is the largest oil field among revealed during the last 30 years. 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. International consortium, which was founded for Kashagan's development, has found oil at the field 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, and Kazakhstan, in response, demanded compensation. After negotiations, which lasted since autumn of 2003 behind the closed doors, the long-awaited agreement was signed in Astana on Wednesday. "(This is) the document, which regulates moot points and the plan of the field's development", - said minister of energy and natural resources Vladimir Shkolnik informed journalists answering the question about the size of compensation having said: "The sides have come to agreement about the acceptable sum". One day before the source in Kazakhstan government informed Reuters that it was the matter of "hundreds of millions of dollars" of fine for postponement of extraction start from the planned 2005 to later period. "It doubtless that the achieved agreements satisfy all the sides", - said Kazakhstan prime Daniyal Akhmetov to journalists answering the question about the sum of compensation. On behalf of the state he and Vottorio Minkato, the chief of the Italian Eni heading the consortium signed document named "Addition for production sharing agreement concerning the Northern Caspian Sea of 1997". CONSENTS OF THE SIDES Data about exact period of extraction start is explained in a way. "We presume that 2007-2008 will be the beginning of commercial extraction of oil", - Akhmetov said to journalists. At the same time, Britich-Dutch Royal Dutch/Shell, which is also included in the consortium together with French Total, American Exxon Mobil and ConocoPhillips and Japanese Inpex, informed in the press-release concerning results of agreement signing, that the first oil from Kashagan would be extracted since 2008. "It's expected that initial extraction (from Kashagan) will be on the level of 75,000 barrels of oil a day and will grow to about 450,000 barrels a day during the first phase of project's development. Following stages, as expected, will let reach project capacity - 1.2 million barrels a day", - says the press-release. Before 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. 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. If the consortium succeeds to pump gas into the bed, total volume of extracted oil may grow up to 13 billion barrels. [2004-02-25]