Kazakhstan halts Kashagan oilfield, pressures Eni

ASTANA, Aug 27 (Reuters) Kazakhstan suspended work at the huge Kashagan oilfield today, putting pressure on the field's Western operators led by Eni over delays and cost overruns at one of the world's biggest oil projects.

The move by Kazakhstan, mainly citing ecology issues, echoed Russia's row with Royal Dutch Shell, which ended with the oil firm losing control of a major oilfield to the Russian state gas monopoly last year.

Kazakh officials accused the group of a host of violations, including environmental issues and fire safety, but analysts said the key impetus was Kazakhstan's pursuit of higher revenues from the project.

Outlining ecological violations, Ecology Minister Nurlan Iskakov said Kazakhstan was suspending Kashagan, the world's biggest oil find in decades, for at least three months.

''The permit for 2007 has been suspended. That is, we are suspending work for three months on our part,'' he said.

Kashagan's start-up delays and cost overruns have long irked Kazakhstan. In a related development, President Nursultan Nazarbayev fired his energy minister -- a key figure overseeing Kashagan.

A senior government source said the mission of a new minister, Sauat Mynbayev, was to ''solve the Kashagan question as quickly as possible.'' Under his predecessor the consortium announced its latest two-year start-up delay to 2010.

''He is known as a tough manager,'' the source said. ''It's obvious that the 'Kashagan story' has grown out of an economic confict into a political one.'' An Eni spokeswoman said consortium representatives planned to meet Kazakh officials today to ''analyse the situation''.

Eni shares were down 1.05 per cent at 24.60 euros at 1330 GMT (1900 hrs IST).

Adding fuel to the row, the Kazakh Emergency Ministry said separately it was suing Kashagan operators due to violations of fire safety rules. It said it would seek to halt construction of an oil and gas processing facility there.

The Finance Ministry's customs committee said it had uncovered customs violations at the deposit, concerning imports of two helicopters, and was opening a criminal case against unidentified consortium officials.

''The actions by a number of officials at the AgipKCO branch contain criminal activity ... that is, evasion of significant customs payments,'' it said in a statement, adding that it had found other ''serious violations''.

BETTER TERMS Iskakov did not specify the nature of the environmental problems but a ministry official said earlier it concerned deaths among baby seals and fish in the Caspian Sea.

Laurent Paris, an Oddo-Pinatton analyst, said the move by the Kazakh government was part of its efforts to put ''maximum pressure'' on the Eni-led consortium. ''They are doing everything they can to renegotiate to get better terms,'' he said.

The former energy minister, Baktykozha Izmukhambetov, said in July the government was in talks to revise the share of profit oil for Kazakhstan to 40 per cent from 10 per cent.

Kashagan's AgipKCO consortium on the Caspian Sea also includes Shell, Exxon Mobil Corp, Total, ConocoPhillips, Japan's Inpex Holdings Inc and the Kazakh oil company KazMunaiGas.

Serzhan Duisebayev, acting head of the customs committee, denied the move sought to put pressure on Eni. ''We made this announcement not because we want it to be seen as part of some kind of campaign against the consortium,'' he said. ''All investors are equal for us.'' REUTERS SY HS2145