Accumulating Shoes
We now have a better understanding of why the consortium developing the biggest new oilfield on the planet has expeled its boss, Italy's Eni -- yet another two-year delay has been announced in first oil from the offshore Kazakhstan field. From a contractual startup of 2005, the Eni-led consortium now says it will produce its first barrels from Kashagan as late as 2013, according to a statement by Kazakhstan Energy Minister Sauat Mynbayev.So yet another shoe drops in Kazakhstan. This pearl of a field -- depending how technology advances, Kashagan contains anywhere from 15 billion barrels of recoverable reserves and up. That's fifteen elephants, the industry term for a monster oilfield -- has been beset by so many delays that one wonders when it truly will come on line.
Mostly at fault are the problems bedeviling the entire industry -- spiraling production costs, and a shortage of equipment and labor (Note to college-age O and G readers: if you study engineering or geology, you are all-but guaranteed a well-paying job).
Yet Eni has long seemed far over-stretched. From a tiny state-run oil company in the early 1990s, it has grown into a hugely successful heir to the Seven Sisters, the most successful of the West's Big Oil companies at finding comfort with the world's autocrats. Where its brethren bicker with Hugo Chavez and Vladimir Putin, Eni has found a comfortable embrace.
But that's resulted in an embarrassment of riches. Eni has too much on its plate. A few months ago, Eni lost its operatorship of Kashagan. Publicly that act was attributed to Kazakhstan's new assertiveness and demand for an equal share of Kashagan. But it's clear that Eni's partners in the field themselves would have acted sooner or later.
The problem with banks: My former colleagues at The Wall Street Journal published a scoop yesterday on the ongoing saga of some $80 million in Swiss deposits belonging to Kazakhstan President Nursultan Nazarbayev and a couple of associates (since a subscription is required to view, I found this link to another site). It's written by Glenn Simpson, Susan Schmidt and Mary Jacoby.
Some nine years after the money was frozen in a money-laundering investigation (the cash came from U.S. oil companies that got deals in the 1990s in Kazakhstan, including at Kashagan), the Kazakhs have said they are willing to give up the money for charitable purposes. Yet the money remains frozen, according to the piece, in part because the U.S. says the charities that the Kazakhs have in mind are too closely linked to the Kazakh government.
Photo: Joe Shlabotnik
Rights: Creative Commons
Labels: $125 oil, Caspian, ENI, Exxon, kashagan, Kazakhastan
5 Comments:
While Eni has found a way to get deals done in the era of increased resource nationalism and has definitely increased its profile in the industry, it still lacks the quality that differentiates the supermajors, the ability to manage complex projects and get them producing on-time and on-budget (though this is becoming increasingly difficult). We can only wonder how different the global oil market would be if XOM or RDS had been the operator from the beginning. The gov’t of Kazakhstan should take some of the blame as well for choosing Eni as the operator.
In what other industries do companies put 30 or 40 percent of their capital in projects that their competitors operate? For those majors that claim their operational excellence is a key competitive advantage (re: XOM), it seems to me that they are saying we have the money to invest in projects, but we don’t have the people to run them.
FT has a great section on careers in oil and gas.
http://www.ft.com/reports/workoil&gasmay2008
Hi Black Swan. Yes, the mail today is not hugely complimetary of Eni as a project leader, to say the least. If there are contrarians out there who wish to take up Eni's side, we'd love to hear from you. Best Steve
Why wouldn't the Kazakh gov't replace Eni with some other member of the consortium as the lead operator? With a member that has more and better engineers? Would that be feasible at all? I understand that all oil major lack engineers at the moment. But some have been forced out of projects in Venezuela and Russia. That might have freed up some engineers.
This is among the emails I received from Kashagan insiders. I received permission from this person to post it anonymously.
Here is the full text:
ENI failed because they are criminally inept, they were never going to deliver with the sycophantic Mussolini business model and an organisational structure akin to the latter stages of brain syphillis. At the Hague HQ of Agip KCO (a veritable rotten borough), you will find a paucity of project managers and engineers, instead dishonourable lip serving plattitudes of irresolute scoundrels and cocaine heads who would be lucky to get a job cleaning the urinals for a reputable EPC contractor, let alone an operating company.
Yet Agip KCO has taken it upon themselves to promote these Bengal Lancers and secretaries to the elevated status as engineers, senior engineers and section heads. There are ex-nannies and PA's who have no experience or concept of oil and gas wandering around in a state of bewildered enchantment who after 6-12months have been promoted to engineers and senior engineers not long after. And, being paid the same day rate as respected engineers with 20-30 years plus experience.
I know of one Dept head, a British chap who is an ex-heroin addict of very limited technical ability, who the Italian management being in the most part half-witted believe is a shining light and high flyer of the industry. 7 years ago this guy was a bum in Thailand working on lay barges as an eddy current tester on a local rate. This same guy with a large cocaine monkey on his back, has recently ensured one of his friend's is now employed as a senior engineer, who has recently been released from a Bangkok jail after serving several years for attempting to smuggle meta-amphetamine from Thailand to Switzerland.
The enterprise deserved better than this, yet somehow, as if preordained or planned, the Italians have took it upon themselves to create the most ineffectual organisation imaginable. And the sad thing is, they really don't care, locked in their well protected jobs for life.
The latest delay is not surprising, I've been predicting this for quite some time. Don't think this is the end, 2015 is feasible - ENI through Agip KCO do not have the ability to deliver first oil. I assume when the new organisation is finally announced, Agip KCO will be left with just enough left on their plate to expose ENI as the banana and spaghetti republic it truly is.
Goldman Sachs said "buy ENI" in another 3 years ENI's cosying up in the former Soviet Union will be exposed as the hollow promises of someone living on his wits and pure Italian machismo, rather than the work ethic and technical engineering capacity of the Anglo-Saxon style companies. In the end you have to deliver, that's the big mistake ENI has made, the old fascistic triumph of will philosophy, as if this was ever enough.
"Note to college-age O and G readers: if you study engineering or geology, you are all-but guaranteed a well-paying job"
Tell me about it! I wish I actually majored in something useful in college.
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