Kazakhstan's prime minister, Karim Massimov, has warned that a dispute between KazMunaigas, his country's state-controlled oil producer, and foreign oil producers looking to produce at the Kashagan oilfield could hamper the country's plans to boost oil output and become a major player on the global energy stage.
The central Asian country is looking to double its output to 1.6 million barrels per day and become a major non-OPEC supplier and Kashagan is critical to meeting those goals, the Financial Times reported. Disputes have already set the project back by seven years, according to the FT.
Kashagan is one of only three fields in the world that have the potential to produce more than 1 million barrels per day. The project is operated by Exxon Mobil (XOM) and ConocoPhillips (COP), the largest and third-largest U.S. oil companies, and Royal Dutch Shell (RDS-A) and Total (TOT), Europe's largest and third-largest oil companies.
Italy's Eni SpA (E) and Japan's Inpex are also part of the consortium. The first phase of the project is slated to come online next year, but new arguments have arisen regarding Phase II, which would aim to boost production to 1 million barrels per day 2015. At issue are escalating costs, which threaten increased production at Kashagan.
It was originally expected that it would cost $10 billion to extract the first barrels from Kashagan, but that estimate has surged to at least $30 billion with a price tag of $137 billion to see the project through two more phases, FT reported. That would make Kashagan one of the most expensive oil projects ever.