Kashagan oil group appeals $737 mln ecological fine

by Reuters
Tuesday, 18 March 2014 14:25 GMT

By Dmitry Solovyov

ALMATY, March 18 (Reuters) - A consortium developing Kazakhstan's huge Kashagan oilfield said it had appealed a 134.2 billion tenge ($737 million) fine by a regional Kazakh authority for ecological damage at the site in the Caspian Sea.

The fine adds to the woes of the multinational group, which has already spent about $50 billion after numerous delays.

Kashagan, the world's biggest oil find in 35 years, launched operations in September 2013 after 13 years of development. Output was then halted in October after gas leaks were detected in the group's pipeline network.

While output was stopped, residual sour gas was burnt in flares at the project's processing plants, polluting the environment, Kazakhstan's Environment Protection Ministry said this month..

"We ... appealed the ecological fines," an official for the North Caspian Operating Company (NCOC), the venture developing the oilfield, said on Tuesday.

The appeal was filed at the regional environmental department of the Atyrau Region in western Kazakhstan, where Kashagan is located.

"Whether we appeal also at national level will be decided at a later stage," the NCOC official said.

Checks showed that the volume of gas flared last September and October was 2.8 million cubic metres, exceeding legal limits, the ministry said at the time.

The consortium, led by Exxon Mobil, Royal Dutch Shell, Total, Eni and Kazakh state oil firm KazMunaiGas, also faces a bigger risk that Kazakhstan could seize a bigger stake in Kashagan or refuse to reimburse a big chunk of the money spent to bring it on stream.

Before the gas leaks brought Kashagan output to a halt, the consortium had failed to achieve so-called "commercial output" at the field by Oct. 1 as stipulated in its contract.

This means NCOC members will not be reimbursed for costs between then and the date when they finally achieve commercial output, KazMunaiGas head Sauat Mynbayev said this month.

Other NCOC members include Japan's Inpex with 7.56 percent and China National Petroleum Corp (CNPC) with 8.33 percent, which it bought from ConocoPhillips last year.

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