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. Last Updated: 07/27/2016

Kazakhs Await Plan for Kashagan Field

ASTANA, Kazakhstan -- Kazakhstan is still waiting for an Eni-led group of international oil companies to make an offer of compensation to the state for delays and cost overruns at the offshore Kashagan oil field, a senior official said Friday.

The feud has halted work at the Caspian Sea site, the biggest oil discovery in the last three decades and one that represents the country's entry ticket to the club of top 10 global oil producers.

"We are waiting for them to make a proposal," Kazakh Deputy Finance Minister Daulet Yergozhin said. "No proposal was made on Sept. 5," he said in reference to an earlier deadline announced by the government.

His comments came one day after Kazakh Prime Minister Karim Masimov demanded a leading role for state energy company KazMunaiGaz in running Kashagan. The government is also seeking more than $10 billion in compensation for the delays.

The dispute has dealt a blow to investor confidence in Kazakhstan, but Masimov denied that the government had fallen victim to "resource nationalism," a trend among producer nations to seek more cash and control from foreign firms tapping their oil.

Eni said Thursday that it was prepared to discuss all proposals and was setting up a meeting between its CEO, Paolo Scaroni, and Masimov.

Kazakh Energy Minister Sauat Mynbayev said the negotiations could take a long time, complicated by the need for all seven consortium members to agree on a common position.

Kashagan was originally scheduled to start production in 2005, but the date has repeatedly slipped -- the oil is now forecast to flow in 2010 -- and costs have soared.

Yergozhin also welcomed comments from consortium member Total this week about the need to speed up negotiations. Work at Kashagan has been suspended as part of the feud, which includes Kazakh accusations of environmental damage.

"It's good that they are proposing to speed up the process," Yergozhin said. "We are open to dialogue."

The other participants in the Kashagan consortium are Shell, ExxonMobil, ConocoPhillips and Japan's Inpex.

Mynbayev said there was no obvious limit on how long negotiations might last.

"This could actually last a long time. It depends on what positions the two sides take," he said following a government meeting in the capital, Astana.

KazMunaiGaz, which has an 8.3 percent stake in the oil field, has not commented on Masimov's proposal that it become a co-operator of Kashagan, and Mynbayev said no final decision had yet been made.

"You speak as if the decision on KMG had been made to take up operatorship," he said. "This is a very long process of negotiation."

He added that any of the consortium members could, in theory, be an operator. Some analysts have expressed doubt that KazMunaiGaz has the necessary expertise to run such a complex project.

Freezing winters, poisonous hydrogen sulfide gas and very high pressure make exploiting Kashagan a technical challenge and solving such problems has contributed to the delays.