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Kashagan agreement to assist in lowering of political risks around the project - Fitch Ratings

London/Milan. January 21. Kazakhstan Today - Fitch Ratings stated that the agreement between the Kazakhstan government and the consortium on development of Kashagan deposit headed by Eni Spa (rating AA-(AA a minus) the forecast Stable), should assist in lowering of political risks around the project. "Unlike common negative perception of state intervention, we consider that stabilization of the situation around the project of such a scale, its importance and the decision on distribution of large scale of duties between all participants of the project is a more favorable result than it was forecasted. It is especially true in the view of others justified by the state decisions accepted in the international oil-and-gas market," Francheska Fraulo from the energy groups Fitch said. According to Fitch, the reached agreement can financially influence economic parameters of Kashagan project, however, at the given stage it is hard to estimate the scales of such influence as the structure of compensatory payments is dependent on the prices for oil at the moment of the beginning of commercial operation at the deposit. Besides, the project originally stipulated in the conditions much lower price conjuncture; therefore, any changes of the economic parameters of the project can be compensated due to higher prices for oil. According to the agreement, KazMunaiGas share in Kashagan consortium increases from 8.33 % up to 16.81 % in exchange for payment at the rate of $1.78 billion. The consortium agreed to pay compensation (which, predictably, will average $3.5 billion, depending on the price for oil at the moment of the beginning of commercial operations) to the government of Kazakhstan in case of over expenditure of the assets and delay of the terms. Eni will keep individual responsibility for operation of the deposit prior to the finishing stage of exploration in the end of 2011. The joint operators of the deposit will be four international partners, including ExxonMobil Corporation (rating AAA the/forecast Stable), Royal Dutch Shell plc (rating AA the/forecast Stable) and Total SA (rating AA the/forecast Positive).

Resourse: Kazakhstan Today

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