Kazakhstan Ups Share in Kashagan

ASTANA, Kazakhstan -- The Kazakh government said Monday that it would double its stake in the giant Kashagan oil field, paying just $1.78 billion and stripping Italy's Eni of its leading role in the project, which will be further delayed to the end of 2011.

Analysts have interpreted Kazakhstan's tougher stance on Kashagan, the world's biggest oil discovery in 30 years, as part of the growing trend of resource nationalism in other countries, such as Venezuela, spurred by soaring prices for oil.

"Strictly speaking, the operator will change and there will be a new operating company. Eni will be responsible for conducting the exploration and production phase until it is over. But it will be controlled by the group," Kazakh Energy Minister Sauat Mynbayev said.

"We now believe [the production start-up] will happen at the end of 2011 because we have spent around half a year on the dispute," he told reporters in the capital, Astana.

Kazakhstan had demanded an increased stake in the project, and compensation for cost overruns and the delay in the start of oil output at the field from the initial target of 2005 to the previous latest estimate of 2010.

State-owned KazMunaiGaz said late Sunday that it had agreed with the consortium to increase its stake in a move to help solve the dispute.

Mynbayev said KazMunaiGaz would pay $1.78 billion to raise its stake to 16.81 percent from the previous 8.33 percent, equaling that of the biggest investors in the project.

The shareholders in the project would reduce their stakes on a pro-rata basis to bring their holdings in line with that of KazMunaiGaz.