Eni hit by cost over-runs at Kashagan

World Oil, Oct, 2005 by Kurt S. Abraham

According to details leaked by analysts in London, Italy's Eni will suffer a $5 billion increase in development costs at 13-billion-bbl Kashagan oil field. Eni (18.52%) operates Kashagan, the largest discovery since 1991, offshore Kazakhstan in the Caspian Sea for partners ExxonMobil (18.52%), Shell (18.52%), Total (18.52%), ConocoPhillips (9.26%), KazMunaiGaz (8.33%) and Inpex (8.33%).

If the rumor proves accurate, then Eni will see its original project estimate of $29 billion rise by 17%. Eni's new chairman, Paulo Scaroni, was expected to confirm the cost boost during a presentation to investors on Sept. 21. A week earlier, Total Chairman Thierry Desmarest had fueled speculation that Kashagan could go over budget, when he told analysts that the target date for first production from Kashagan had slipped into 2009 from 2008. If Eni continues to have problems, it could embolden ExxonMobil and ConocoPhillips, both of which have coveted the field's operatorship.