Royal Dutch Shell PLC (RDSB.LN) and Kazakhstan state oil company KazMunaiGas, or KMG, will operate the big Kashagan oilfield project once most of the work for the field's development is complete in four years, Italy's Eni SpA (E) said Monday.
Eni is the operator of the long-delayed Kashagan project and will continue working with Shell and Exxon Mobil Corp. (XOM) in getting different areas of the project completed. Eni will do onshore development work, Shell will deal with offshore elements and Exxon will conduct drilling operations, according to a presentation Eni gave analysts late last week.
But once the project is ready for first production, in late 2012, KazMunaiGas and Shell will takeover Kashagan's production. "Shell together with KMG will be in charge of production operations," an Eni official confirmed Monday.
Until now, it has been unclear which Western oil company would replace Eni as the operator once the field is ready for production.
A Shell official also told Dow Jones Newswires it was in talks with the Kazakhstan government about creating a joint venture with KazMunaiGas. "The arrangement would be for a minority stake with KMG in a venture, but there are many details being worked out," the official said.
Kazakhstan and the Eni-led consortium have been at odds for over a year about Kashagan's delayed production and ballooning costs. Production was supposed to start in 2005.
Those differences opened the way for KazMunaiGas to double its stake in Kashagan to 16.81%, with other shareholders - which include Total SA (TOT), ConocoPhillips (COP) - agreeing to lower their stakes on a pro-rata basis.
Kazakh Energy Minister Sauat Mynbayev said Friday in a statement that the government and Shell would set up a joint-venture and said KazMunaiGas would take a lead role operating Kazakhstan's output.
Kashagan was the world's largest oil find in 30 years discovered when it was found in 2000 in Kazakhstan's area of the Caspian. Production from the field is expected to reach 1.5 million barrels of crude a day, more than the output of established producers like Qatar, by 2019.