What was supposed to be a decisive meeting scheduled for Friday to resolve the long-running dispute between the government of Kazakhstan and a consortium of foreign oil companies developing the massive Kashagan field has been postponed, according to people close to the negotiations.
The heads of six foreign oil companies are now expected to meet with Kazakh President Nursultan Nazarbayev and Prime Minister Karim Massimov no sooner than Sunday. The reasons for the delay weren't immediately clear. Already, the foreign oil companies and the Kazakh government have blown through three previous deadlines. Authorities have been feuding with the oil companies over how Kazakhstan should be compensated from the Kashagan field, which holds more than 13 billion barrels of recoverable reserves and is one of the largest new finds of the past 30 years.
The decision of the powerful Kazakh president, who called the meeting, to get directly involved in the negotiations was hailed as a watershed moment that would lead to a speedy resolution. It's unclear whether this latest delay, of only two days, is an indication that hurdles remain. Costs on the Kashagan project, which is operated by Italian oil and gas giant Eni SpA (ENI.MI), have soared beyond initial expectations, and oil, which was initially predicted to begin flowing by 2005, is now not expected before 2011.
Kazakh authorities had demanded that the foreign oil companies sell a portion of their stakes to KazMunaiGaz, the state oil and gas company, which already holds an 8.3% interest in Kashagan. However, ExxonMobil Co. (XOM), which holds 18.5% of the project, had resisted those efforts, according to people involved in the negotiations.
Exxon's unwillingness to sell has made negotiations difficult. Other members of the consortium don't want to cede their share of the project as long as Exxon is holding fast, according to a person close to the negotiations. Exxon could not be reached immediately for comment.
In addition to Exxon, Royal Dutch Shell PLC (RDSA), Eni and Total SA (TOT) also hold 18.5% stakes each, while ConocoPhillips (COP) has 9.3%, and Inpex has 8.3%.