Kazakhstan Says Higher Oil Stake Not Key Goal

Thursday, 27 Sep 2007 | 7:47 AM ET

Kazakhstan said on Thursday that securing a bigger stake in the huge Kashagan oilfield was not its main goal in a row with the project's Italian-led consortium of Western oil majors.

Kazakhstan raised its bargaining power in the oil dispute earlier in the day when the upper house of parliament approved legislation empowering the government to unilaterally break contracts with foreign investors.

But Energy Minister Sauat Mynbayev, speaking after the bill was passed, sought to strike a more conciliatory tone by saying talks with the Eni-led group were "friendly."

"It's not essential for us to raise the share. That's not the main question," he said. "What is essential is to approve or disapprove of Kashagan's development plan and budget."

Last month Kazakhstan halted work at Kashagan, the world's biggest oil find in three decades, in a dispute over spiraling costs and delays.

Eni's role as the main operator of Kashagan also appeared under question after Kazakhstan demanded a leading role for its state oil and gas company in the project earlier this month.

KazMunaiGas, the state company, has 8.3% in Kashagan.

The amendments, which have yet to be signed into law by President Nursultan Nazarbayev, alarmed investors because they allow the government to change or break contracts with domestic and foreign firms if it saw a threat to national security.

"We believe that we cannot approve (the project) as it is," the energy minister said. "The essence of the talks is in finding a way to restore the balance of interests."

Kashagan's start of production has been delayed to the second half of 2010, slipping from an initial 2005 target. Its cost has escalated from $57 billion to $136 billion, according to the Kazakh energy ministry.

Other participants in the consortium are Royal Dutch Shell, Exxon Mobil, Total, ConocoPhillips and Japan's Inpex Holdings.

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