October 7, 2008 / 1:27 PM / 10 years ago

Kashagan's new operator to include all companies

ALMATY, Oct 7 (Reuters) - All companies developing the huge Kashagan oilfield in Kazakhstan will get stakes in an operating company that will oversee the project once it starts pumping oil by 2013, a source close to negotiations said on Tuesday.

Kazakhstan and a group of Western oil companies led by Italy’s Eni (ENI.MI) are due to finalise details on Kashagan’s future by Oct. 25 but the talks have been secret.

Shedding some light on the content of the negotiations, the source said each of the companies involved would have a stake in the new operating company, due to be formed before the deadline.

“The new operator will be all the companies together. How big each company’s stake is will be decided according to other factors,” said the source, who spoke on condition of anonymity.

Industry sources said earlier that individual companies would control separate parts of the operation, such as production or shipping. But the source said all the divisions would report to an umbrella operating company.

Besides Eni, the group unites Royal Dutch Shell Plc (RDSa.L), Exxon Mobil Corp (XOM.N), Total (TOTF.PA), ConocoPhillips (COP.N), Kazakhstan’s state-run energy company KazMunaiGas [KMG.UL] and Japan’s Inpex Holdings Inc (1605.T).

As part of an earlier deal, KazMunaiGas is to double its stake to 16.81 percent for $1.78 billion, with other shareholders agreeing to cut their stakes on a pro-rata basis.

Some industry sources have said KazMunaiGas would replace Eni as operator. Officials from Total, Eni and KazMunaiGas declined comment at an energy conference in Almaty on Tuesday.

Kazakhstan is betting on Kashagan, which holds an estimated 7 billion to 9 billion barrels of recoverable reserves, to help it join the global league of top oil producers.

The country’s tougher stance on Kashagan, which lies in shallow waters in the northern part of the Caspian Sea, has been interpreted by analysts as part of a growing trend of resource nationalism seen in other countries like neighbouring Russia.

The companies are expected to finalise a production schedule by the end of this month for the $136 billion project, which has suffered severe delays and cost overruns.

Eni said last month it aimed to start producing 150,000 barrels per day in 2012, although Kazakh officials have said 2013 or 2014 was more likely.

Joint ventures and groupings amongst the firms involved will be key to the future structure of Kashagan, the source said.

“The consortium of all the companies, the new operator, will be a sort of blanket at the top of the project,” he said, referring to plans to set up sub-companies under the operator. “They (the sub-companies) will be the pillars of the project.”

Reporting by Amie Ferris-Rotman and Olzhas Auyezov, editing by Anthony Barker

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