Official Statements:

Special issue on September 7, 2007

Kazakh PM Makes a Statement on Kashagan

“There have been certain problems revealed in development of the national energy sector. In particular, they relate to some isolated foreign investors that have failed to meet the earlier undertaken obligations; as a result substantial damage is being inflicted on the national interests of Kazakhstan”, Prime-Minister Massimov said at the Eurasian Energy Forum in Astana.

“First of all I am referring to the situation revolving around the Kashagan project. Incomprehensible for us, the actions taken by the members of the consortium in charge of developing the oilfield have become regular in recent years and urge the Kazakhstan Government to call in question their commitment to the Contract terms”, Prime-Minister said.

According to him, the delayed start of the commercial production at Kashagan as well as the more-than-twofold increase in the project costs are menacing Kazakhstan with serious social-economic repercussions; they may also tarnish the reputation of Kazakhstan as a promising, reliable international partner which contributes to the global energy security. Thus, actions of the consortium members have resulted in protraction of the payback period and substantial reduction of Kazakhstan’s share in production sharing. This translates in failures to build the [anticipated] schools, hospitals and roads, and large-scaled economic and infrastructure projects will be implemented with delays. “Kazakhstan does not agree to that and won’t be carrying the economic burden caused by huge costs overruns brought about by inadequate management on the part of the contractors. The Government of Kazakhstan is ready to dialogue openly so that to settle the project-related issues within a reasonably shortest time”, Karim Massimov said.

Via the media present at the Forum Head of Government invited Eni’s head Mr. Scaroni to visit Kazakhstan to discuss the issue concerned with Kashagan project. “Furthermore, I learned from the media that Energy Commissioner Andris Piebalgs had voiced a certain stance over the Kashagan issue. Taking the advantage of the EU Ambassador’s being here today Therefore, I am kindly inviting the Commissioner to come to Kazakhstan if he has any question and want to discuss about Kashagan”, Karim Massimov said.

The Kazakhstan Government will only adjust its stance towards those companies that have failed to meet their obligations, Mr. Massimov said at the Energy Forum in Astana.

He stated that “those trying to breach the Kazakhstan legislation and neglect the national interests of Kazakhstan will be held fully liable in accordance with the applicable legislation and international standards for their actions”.

“We regard the Kashagan dispute as a single/isolated case. Irregardless of how it will be resolved, lawful interests of potential and existing investors in Kazakhstan won’t come to harm. I officially state that”, Karim Massimov said. He reminded that starting from the day of declaring its independence, Kazakhstan has been offering the best possible terms for investors; and we will be further on ensuring stability, predictability and long-term nature of interests of our international partners. “Thus, Kazakhstan remains a reliable and stable partner which respects its contractual obligations and advocates contract stability. The Kazakhstani Government will only adjust its stance towards those that have failed to meet their obligations”, Prime-Minister emphasized.

He reminded about the five points that Agip KCO undertook to fulfill under Kashagan project.

I want to bring back the five points emphasized by Kazakhstan President before the consortium members back in 2001. First – to produce first oil in 2005. Second – to ensure environment safety of the project. Third – to secure a method of putting the gas to use. Fourth – to purchase Kazakhstan-produced equipment and services. And the fifth – to make the national oil company a co-operator. Look at these five point and compare it to what is happening now”, Head of Government said.