ASTANA, (Reuters) -- Kazakhstan and a group of Western oil majors developing the huge Kashagan oilfield have signed the final agreement on the future of the long-delayed project, capping months of hard negotiations.
The stand-off over the Eni-led field started in August 2007 when the government accused its shareholders of allowing costs to spiral to $136 billion from $57 billion and missing the original 2005 target to start production.
The row has spilled over into international politics, unnerving foreign investors and prompting talk of resource nationalism in Kazakhstan -- a Caspian country seen by Europe as a new alternative to Russia as a source of energy.
The final deal, although largely in line with prior preliminary agreements, draws a line under the disagreements.
It offers relief to other consortium members including Royal Dutch Shell Plc, Exxon Mobil Corp, Total, ConocoPhillips, Kazakh state-run oil company KazMunaiGas, and Japan's Inpex Holdings Inc.
KazMunaiGas is to double its stake to 16.81 percent in Kashagan -- a move analysts have interpreted as part of Kazakhstan's push to raise its weight in the strategic energy sector currently dominated by Western oil companies.
Other members would cut their stakes on a pro-rata basis.
Italy's Eni will pass its lead role as the project operator to the new North Caspian Operating Company (NCOC) in January 2009. Shell and KazMunaiGas are due to manage production operations after the start up of the first phase.
Respect For Kazakhstan
Kashagan -- the world's biggest oil discovery in 30 years -- will now start pumping oil in late 2012 at 75,000 barrels per day and raise output to 450,000 bpd within two or three years.
"Output will reach 1.5 million barrels per day in nine years [after 2012]," Aman Maksimov, a senior official at Kazakh state oil company KazMunaiGas, told reporters after the signing.
The government and the oil companies had earlier agreed to fix 2013 as the deadline for the start of commercial output.
At the signing ceremony in the Kazakh capital Astana, the atmosphere appeared cordial as top Kazakh and consortium officials signed the package of agreements to applause from dozens of negotiators from both sides.
Kazakhstan said the deal was fair for both sides.
"I would not say it's a victory [for Kazakhstan] but it shows respect for the Republic of Kazakhstan and its resources," said Maksat Idenov, Kazakhstan's main Kashagan negotiator.
The consortium, in a separate statement, described the deal as a "new way forward for the development of the Kashagan project."
Kashagan, which holds an estimated 7 billion to 9 billion barrels of recoverable reserves, is central to Kazakhstan's ambition to join the global league of top oil producers over the next decade and become a big source of non-OPEC oil.