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