Total says Kashagan field production faces delay as costs rise

The project's design will have to be changed because existing plans don't meet adequate safety standards, Philippe Rochoux, general director of Total Exploration and Production in Kazakhstan, said today in Almaty, Kazakhstan's financial capital. A decision on new designs and the timetable for starting operations will be made by year's end.

"It could be delayed by several years, 2008 is not possible," Rochoux said today on the sidelines of a conference in Almaty. "Costs are going to be higher."

Kashagan is a key part of Kazakhstan's plans to almost triple oil production to 3.6 million barrels a day by 2015. The field in the Caspian Sea off Kazakhstan is the biggest oil discovery in the past 30 years.

Eni, Europe's fourth-largest oil and gas company, in March said developing the field in Kazakhstan would cost between $4 billion and $5 billion more than forecast due to a weaker U.S. dollar and the higher cost of equipment. The company in 2004 put the development cost at $29 billion over 15 years.

The Kazakh government had planned for Kashagan to start in 2008.

Agip, Eni's oil unit, leads a group of partners, which include Exxon Mobil Corp., Royal Dutch Shell Plc, Total and KazMunaiGaz, Kazakhstan's state oil company, in developing Kashagan.

Paris-based Total is developing plans to export crude from Kashagan to the Mediterranean via a BP Plc-led pipeline that links the Azeri capital of Baku to the Turkish port of Ceyhan. A decision on the $4 billion investment to allow oil to be shipped from Kashagan to Baku and onwards will be made by the end of 2008, Rochoux said today.

Total is interested in expanding in Kazakhstan and is examining everything "on the market," Rochoux said.

The company still wants to acquire a stake in the Caspian Sea's Kurmangazy field, which is being developed by KazMunaiGaz and OAO Rosneft, the Russian state-owned oil company. There are no negotiations at the moment, after the first well drilled at the field came up dry.

"Of course it raises some question marks," Rochoux said. "We're trying to understand whether there are still some hopes to find some oil." Bloomberg