Texas folds ‘em

14 January 2008 By Cyrus Sanati

The oil major has been the most reluctant to submit to rising oil nationalism around the globe. Now it has followed Italy’s Eni in accepting tough terms for its stake in the huge Kashagan field. Exxon can no long afford to just walk away. Other harsh compromises will follow.

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The Kazakhstan state oil and gas company, KMG, said it has reached an agreement with its Western oil company partners over the fate of the Kashagan oil project. KMG would become a larger partner in the project and the Kazakh government would get a greater portion of the profits, according to The Wall Street Journal.

Last summer, the Kazakh state shut down development in the field to renegotiate terms with its Western oil partners led by Italy's Eni. The project has suffered from delays and rising costs which the Kazakh government estimates cost them over $10bn in lost revenue.

The Kashagan oil field has 13bn barrels of proven reserves and is scheduled to start production in late 2010. Eni is the lead foreign oil company involved in the project and before the realignment had an 18.52% stake in the project. ExxonMobil, Shell, and Total also held an 18.52% stake in the project followed by ConocoPhillps with a 9.26% stake. Japan's Inpex and the Kazakh national oil company, KMG, both held 8.33% stakes.

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