The setback came as the consortium, led by the Italian oil company Eni, and Kazakh officials are negotiating new terms for the $20 billion development contract, suggesting the companies are being put under pressure during this process to cede a larger share of the profits to the Kazakh government.
Because of the field's vast reserves, the stakes are high. The Kashagan field is a centerpiece of Western efforts to diversify oil supplies away from the Middle East to other regions, like the Caspian Sea basin, though the suspension of environmental permits announced Monday was not seen as a significant long-term threat.
The minister of ecology of Kazakhstan, Nurlan Iskakov, speaking Monday after a meeting of ministers in Astana, the country's capital, said that "operations" would be suspended at the field for three months. "The environmental protection requirements are not being observed today," he said.
Yet a deputy minister, Zeinulla Sarsembayev, said by telephone that the consortium could continue drilling during the period that the permits were suspended, if it paid fines to do so.
"The company itself will decide," he said. "We have given this right to the company." He did not specify the size of the fines.
Still, the suspension of environmental permits seemed to intensify a dispute that began this month when Eni announced cost overruns and a delay in bringing the field online.
Kazakhstan's prime minister, Karim Masimov, responded by demanding a sweeping renegotiation of the contract terms with the companies, which are Eni, the U.S. groups Exxon Mobil and ConocoPhillips, the Anglo-Dutch company Royal Dutch Shell, France's Total and Japan's Inpex Holdings.
The Kazakh state oil company, KazMunaiGaz, also a member of the consortium, is seeking to increase its holding to 40 percent from 10 percent to provide the government with a larger share of profits.
Also Monday, Kazakh fire inspectors said they had uncovered safety violations at an oil-processing plant near the field and would seek to halt construction, while the ministry of finance said that it had opened a criminal investigation into a contractor, Agip, for violating customs rules while importing two helicopters. And President Nursultan Nazarbayev fired his energy minister who had overseen the project.
The regulatory assault recalled methods used by the Russian government against Shell in the Sakhalin II project last autumn. After a lengthy campaign charging environmental damage, Shell eventually agreed to cede control to Gazprom, the Russian state-owned energy company.
Eni released a subdued statement Monday saying only that the company had "received a letter in the last few days with an offer for friendly rediscussion of the contract."
Kazakhstan, the largest country in former Soviet Central Asia, now produces roughly one million barrels of oil per day, or about one-tenth of the output of Saudi Arabia, but is expected to triple production within 10 years as Kashagan and other projects come online.
The field lies under shallow water in the northeastern corner of the Caspian Sea and is technically challenging. The companies are drilling in freezing winter temperatures amid ice flows in a habitat for marine life that includes sturgeon, the source of black caviar.
The oil companies estimate they can recover up to 13 billion barrels of oil from Kashagan, using drilling rigs built on artificial islands. Eni says Kashagan is expected to produce roughly 1.5 million barrels of oil per day.
The Rompetrol Group has sold 75 percent of its shares to Kazakhstan's state-owned energy company, KazMunaiGaz, a move the Romanian oil company's chairman said Monday would increase Europe's alternatives to Russian supplies, The Associated Press reported from Bucharest.
The deal, signed Friday in the Kazakh city of Almaty, would double the Kazakh company's refinery capacity and give it 630 gas stations in seven countries including Romania, Georgia, Bulgaria, Spain, Moldova and France - boosting its presence within the European Union, the Rompetrol Group said.
Rompetrol did not give a sale figure, but the oil company is worth $3.6 billion, suggesting the price of the deal was around $2.7 billion.
The sale, which still needs European Union approval, will offer Europe "an energy bridge that does not depend on Russia," Rompetrol's chief executive, Dinu Patriciu, told the news agency NewsIn.
Via: International Herald Tribune
Andrew E. Kramer
