Kazakhstan reportedly demands Kashagan production by July

By bne IntelliNews May 7, 2013

bne -

Kazakh officials are putting heavy pressure on the consortium developing the giant Kashagan oilfield to finally start production in early July, while the international oil companies working at the field maintain the launch of commercial production before September or October is unrealistic.

Delays have plagued Kashagan, the world's largest oilfield discovery in four decades. The start of production has been put back numerous times from the original target date in 2005 due to the technical complexities of the offshore project. The North Caspian Operating Company [NCOC] consortium - featuring Eni, ExxonMobil KazMuniGaz, Shell, Total, ConocoPhillips and INPEX - faces penalties if production is not launched by the end of 2013, but says that early autumn is now more realistic than an earlier projection of June.

However, the Kazakh government wants production to kick off on July 6, the birthday of President Nursultan Nazarbayev and the date that the Kazakh capital was moved to Astana. Newswire KazTAG cites an unnamed government source as saying that Eni - the lead operator for the first phase of the project via subsidiary Agip KCO - could have its role reduced due to the continued delays.

"At the moment talks are under way over a possible merger of the project's operator [North Caspian Operating Company] and NCPOC [North Caspian Productions Operations Company]. There is a probability that the oil processing facility may be taken away from Agip and entrusted to some other company," the source said. A joint venture between state-owned KMG and Shell, NCPOC is currently delegated to manage production operations of all phases at Kashagan.

At the same time, Oil and Gas Minister Sauat Mynbayev is understood to have asked the governor of the Atyrau region, where Kashagan is located, to also put pressure on the consortium to speed up their work. The source added that the foreign companies working at Kashagan were "very stressed" since they are "not accustomed to having jobs accelerated to get everything done by a specific date".

Kashagan, which was discovered in 2000, has reserves of around 4.8bn tonnes. The start of production will considerably boost the Kazakhstan's oil output, with a further leap expected when the second phase output begins. ConocoPhilips, is on the verge of selling its 8.4% stake, with speculation suggesting Astana is to block a deal to sell it to India in favour of a Chinese oil company.

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