Just days after Kazakhstan's prime minister Karim Massimov warned that disputes threatened the Kashagan oil project, Royal Dutch Shell, Europe's largest oil company and a major stakeholder in Kashagan, said it is closing its Caspian office devoted to the project, a move that could represent a significant blow to Kashagan's near-term fortunes.
The move by Shell (RDS-A) to close the office could set the project back at least two years, the Telegraph reported. Massimov said the project, which has the potential to produce 1 million barrels per day, could not move forward until cost disputes were overcome. Only two other oilfields in the world produce 1 million barrels per day or more.
Shell's move could push first production at Kashagan back into the next decade, making it all but impossible for Shell and its partners to make an acceptable profit before the contract expires in 2037, the Telegraph reported.
Other stakeholders at Kashagan include Exxon Mobil (XOM) and ConocoPhillips (COP), the largest and third-largest U.S. oil companies, and France's Total (TOT) and Italy's Eni SpA (E).