ASTANA, Kazakhstan (Dow Jones)--Kazakhstan's Energy and Natural Resources Ministry is examining the possibility of severing the North Caspian project production-sharing agreement with the international Agip KCO consortium, news agency Interfax reported Friday.
"The ministry, together with KazMunaiGas, are examining the issue and are drafting the documents necessary to dissolve the North Caspian PSA with the Agip KCO consortium," Interfax reported, quoting a source familiar with the talks. "I think the government will address this issue during the coming week."
Interfax quoted the source as saying the decision was based on the fact that the proposals by the Agip KCO consortium members "did not meet the requirements of the Kazakh side due to the absence of a unified approach by all consortium members."
An earlier report said that what was supposed to be a decisive meeting scheduled for Jan. 11 to resolve the long-running dispute between the Kazakh government and the consortium developing the massive Kashagan field under the PSA has been postponed. The heads of the six foreign oil companies involved are now expected to meet with Kazakh President Nursultan Nazarbayev and Prime Minister Karim Masimov no sooner than Jan. 13, Interfax reported.
The six companies and officials from Kazakhstan have been in talks since August. The talks have been extended until Jan. 15.
Last summer the Kazakh side protested the slow pace of the Kashagan project and an increase in projected costs to $136 billion from $57 billion previously. It threatened to strip Italy's Eni SpA (E) of its status as project operator. Kazakhstan also demanded a bigger role in the project for KazMunaiGas, the national oil and gas corporation.
Kazakh Energy and Mineral Resources Minister Sauat Mynbayev said a few days ago that agreement had been reached to increase the KazMunaiGas stake in the project to 16.8%, although an understanding on the price with one of the companies, Exxon Mobil Corp. (XOM), had yet to be reached, Interfax reported.
The Agip KCO consortium was formed shortly after the Kashagan PSA was signed in 1997.
The Kashagan PSA includes three other structures: Kalamkas, Aktote and Kairan. The four structures consist of 11 offshore blocks covering 5,600 square kilometers. Kashagan's recoverable reserves are estimated at no less than 7 billion-9 billion barrels, while oil-in-place may total as much as 38 billion barrels, according to Agip KCO.
KazMunaiGas currently holds an 8.33% share in Agip KCO. Project operator Eni holds an 18.52% stake, as do Total SAO (TOT), ExxonMobil and Royal Dutch Shell PLC (RDSA). ConocoPhillips (COP) has 9.26%, and Inpex 8.33%.