The Eni SpA (E)-led consortium developing the giant Kashagan oil field Monday signed a memorandum of understanding with the Kazakh authorities committing to continuing talks beyond today’s deadline.
“Both parties agreed to continue negotiations beyond the 22nd of October in a spirit of positive and constructive cooperation,” said a statement issued by Kazakhstan’s Energy Ministry and state-owned oil company KazMunaiGas.
The statement added that: “the parties also agreed the framework within which negotiations will be held.”
A spokeswoman for French oil major Total SA (TOT), which is part of the consortium, confirmed the signing of the MOU and said it “shows negotiations are ongoing in a good atmosphere.”
Total’s spokeswoman qualified the memorandum as an “important agreement” and “good news” but declined to give details.
A person familiar with the matter, who asked not to be identified, had earlier Monday given confirmation of the memorandum but didn’t provide details.
The memorandum of understanding is “a step forward but financial markets eagerly await (financial) details,” said Roberto Mascarello an analyst with Kepler Equities. He said it was difficult to judge it until a final agreement is reached.
The Eni-led group is in a dispute with the Kazakh authorities amid cost overruns and continued delays for start of output at Kashagan.
The Kazakh government had set Monday as a deadline to reach an amicable accord. However, Kazakh officials had said in recent weeks the deadline could be modified, while Eni’s Chief Executive Paolo Scaroni earlier in October had said he expects an agreement by the end of the year.
Other members of the consortium are Exxon Mobil Corp. (XOM), Royal Dutch Shell PLC (RDSB.LN), Total, ConocoPhillips (COP), Inpex Holdings Inc. (1605.TO) and KazMunaiGas.
Kazakh officials have proposed remedies for Kashagan’s soaring costs and repeated delays, including seeking compensation for damages possibly totaling billions of dollars, boosting oil-profit taxes, installing Kazakh national oil company KazMunaiGas as joint operator of the field, as well as increasing the 8.3% stake held by the state-owned oil company in the consortium.
Kashagan, discovered in 2000 in Kazakhstan’s sector of the Caspian, was the world’s largest oil find in 30 years. In 2019, production there is expected to plateau at 1.5 million barrels of crude a day.
At 1324 GMT Eni shares down 1.9% at EUR24.85 in an overall lower market.