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Kashagan oil field '$30 bn over budget, way behind schedule'

WSJ calls Eni joint venture 'elephant in big oil's room'

01 April, 12:56
Kashagan oil field '$30 bn over budget, way behind schedule' (ANSA) - Rome, April 1 - The massive Kashagan oil field in Kazakhstan, in which Italian energy giant Eni owns a 16.81% stake, is years behind schedule and has gone over budget by $30 billion, The Wall Street Journal has reported. "The Caspian Sea-based project isn't working," despite $50 billion in investments from some of the world's biggest energy providers, reports the WSJ, calling the project "the elephant in big oil's room". Kashagan is one of the largest oil fields discovered over the past 40 years, with estimated reserves of about 35 billion barrels of oil in place.

Discovered in 2000 and originally scheduled to be active by 2008, the project's original operator was Eni's Agip KCO, but the project suffered a series of delays, forced cost increases and friction with local authorities.

In October 2008, the Kazakh government came to an agreement with consortium companies to form the North Caspian Oil Company (NCOC), which took over the operator role from Agip KCO.

The co-venturers in the original consortium were made shareholders in NCOC, each holding the same participating interest held in the preceding project agreement.

However, Royal Dutch Shell took control of second-phase development planning from Eni at the start of 2009, according to a 2010 article on Energy-pedia News.

Shell radically simplified second-phase design, slashing $18 billion from the estimated cost, reducing it from $68 billion to $50 billion, the energy giant's website said.

Eni, ExxonMobil, Shell, Total and KazMunaiGas each have a 16.81% stake in the project.

Inpex owns 7.56%, while ConocoPhillips held a 8.4% stake until last year, when the Kazakh government exercised preemptive rights to acquire it.

The Chinese CNPC then bought a 8.33% stake from the government in a deal valued at about five billion euros, according to press reports.

The WSJ reports that the project is "stalled indefinitely" at the moment.